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With Dx Pros on Board, New CombiMatrix Biz to Enter Homebrew Game as CLIA Shop


Diving headlong into pharmacogenomics, CombiMatrix has formed a diagnostic subsidiary to begin developing and performing microarray-based tests as a homebrew lab.

"Our real goal is to become the leading molecular diagnostics company in the US," Matt Watson, incoming CEO of the new CombiMatrix Molecular Diagnostics unit, said during a conference call with investors this week. "We intend to leverage the CombiMatrix technology to create these [homebrew] tests; that really is our core focus for the company."

CombiMatrix and CMD think that now is the time to exploit an opening they see in the diagnostics market. Their plan is to temporarily bypass the US Food and Drug Administration's in vitro device clearance process by making and using microarrays in a new CLIA-approved lab, then performing on-site testing.

It seems that CMD's expression arrays will compete only against Arcturus Bioscience as it tackles its first disease state — tumors of unknown origin. CMD might have an advantage if it pursues US Labs as a client, according to Watson and Amit Kumar, president and CEO of CombiMatrix. Arcturus has licensed its array data to US Labs in the past, and Watson and incoming CMD chief operating officer Dave Baunoch both left US Labs to head CombiMatrix's new firm. Watson was vice president of operations and Baunoch was vice president of research and development.

CMD has no interest in taking on the field's battle axes — LabCorp, Quest, and other large reference labs — but rather sees them as customers. "Our goal is to obtain our CLIA certification as a laboratory and then to offer these microarray testing services to the larger national laboratories, such as LabCorp, Quest, those types of laboratories," Watson said during the conference call.

The subsidiary will form partnerships with its parent company, CombiMatrix, but it will produce all its own microarrays and reagents. It expects to begin performing homebrew tests as soon as it acquires CLIA certification for lab facilities it will begin leasing from US Labs on June 15, Bret Undem, CombiMatrix vice president, told Pharmacogenomics Reporter. He said the subsidiary hopes to obtain this certification between one and nine months after they start the lease in June.

Kumar told BioArray News, a Pharmacogenomics Reporter sister publication, that CombiMatrix would initially pay CMD's expenses while seeking independent investors. Kumar said that as more investors came in, CMD would gradually become more independent from its parent company.

"The plan is to take this company and finance this independently," Kumar said. "As that happens, CombiMatrix' ownership position will get diluted."

With a CLIA lab, CMD would be able to test samples on-site without obtaining IVD clearance for its devices with the hope that its new tests will make a name for themselves early on, Kumar told investors during the call. He said this will also enable the company eventually to submit the arrays for IVD clearance. It remained unclear whether Kumar planned to spin off CMD at a later date.

Upshot for CombiMatrix?

Why launch the business now? Although CombiMatrix will gain some revenue from CMD's sales [see BioArray News, 5/11/2005], it isn't like CombiMatrix desperately needs the money [see accompanying chart]. During the CMD conference call, Kumar offered several answers for the timing of the launch: the accumulating knowledge resulting from the Human Genome Project; the development of several new drugs for "sub-segments of the disease population;" the addition of "key members of the team," including Watson and Baunoch; and the recent release of the FDA's pharmacogenomics guidance [see Pharmacogenomics Reporter 3/24/2005].

The last reason may be the most interesting. According to Undem, clinical laboratories began calling CombiMatrix after the FDA's guidance was released, each with the request to begin using the company's desktop array synthesizer to produce diagnostics in-house.

CombiMatrix will start offering the synthesizer for sale in the fourth quarter, Undem said.

Dipping its TUO in the Water

Tumors of unknown origin represent almost 15 percent of all cancer in the United States, and are collectively the eighth-most commonly diagnosed cancer, according to Baunoch. In 2003, the United States experienced 1.3 million new cancer diagnoses, a number that is expected to rise as baby boomers age, said Watson.

With its first offering in molecular diagnostics, CombiMatrix will likely be trying to supplant TUO-identifying tests made by Arcturus and its partners, which enjoy a head start in the market. Netherlands-based Agendia said in February that it obtained an exclusive European license to a gene-expression profile from Arcturus [see BioArray News, 2/9/05] in order to create its CupPrint microarray diagnostic, which is now available in Europe. Bernhard Sixt, Agendia CEO, told BioArray News that while Agendia is focused on the European market now, it is definitely interested in licensing the US rights to the gene-expression profile.

In December 2003, US Labs said it was using Arcturus' profile in an expression-profiling microarray test it called the TUO test, but the company used the diagnostic only for research purposes. Although the "Advanced Technologies" product section of US Labs' website listed the TUO test as recently as February, it no longer appears there. Its cost was $2,000 [see Pharmacogenomics Reporter 2/24/2005].

In February, Greg Milosevich, an Arcturus spokesperson, told BioArray News that the US rights to the profile were still available. "Arcturus is in discussions with potential collaborators in the United States that are interested in our profile," he said.

Paul Billings, LabCorp's senior geneticist and vice president for biotechnology and healthcare strategy, told Pharmacogenomics Reporter that the diagnostics giant was currently "evaluating Arcturus' and similar products" for use by its subsidiaries US Labs and Esoterix, as well as through its North Carolina operations. When asked whether he knew that two CMD officers were former US Labs executives, and that the new company was working on a TUO-style test, Billings said, "I'm sure we'll hear from them soon."

CMD has no "formal relationship" with LabCorp or US Labs, although it would like to "some day," said Watson, the incoming CEO. CMD officials were unwilling to say when the company would be ready to provide tumor-identification services, but the company expects to receive CLIA certification of its new lab between one and nine months after June 15, said Undem. Within that period, certification would probably be awarded "fairly soon," he said. The company will then be free to launch a tumor-identification test, and it will elaborate further on other plans, he said.

click for larger image

Other identification applications ripe for development involve adenocarcinomas and squamous cell carcinomas, leukemia lymphoma diagnosis, and melanoma diagnosis, Kumar said during the conference call. Vague descriptions of CMD's additional diagnostic areas offered by Kumar and others during the conference call involved cancer patient treatment management, including during treatment of mild dysplastic syndrome, and cancer-drug response diagnostics.

Watson and Baunoch maintain a network of connections within the clinical laboratory field, and they will continue to build the business they worked with at US Labs under the roof of the new CMD, said Undem. For these tests, Watson and Baunoch will support and develop non-microarray diagnostics, including PCR tests, Undem added. He declined to specify the tests.

— Chris Womack ([email protected])

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