CombiMatrix has benefitted from new guidelines that recommend prenatal chromosomal microarray analysis as a first-line test in the case of abnormal ultrasound findings, as well as a preferred test to identify the cause of death in stillbirths.
The American Congress of Obstetricians and Gynecologists (ACOG) and the Society of Maternal Fetal-Medicine (SMFM) — nonprofit professional organizations focused on women's health and prenatal care, respectively — issued a joint committee opinion on the application of prenatal CMA in November.
Though the ACOG and SMFM recommendations became public toward the end of CombiMatrix's fourth quarter, CEO Mark McDonough told investors on a recent earnings call that the new guidelines had led to an increase in demand for the company's prenatal chromosomal microarray tests.
McDonough said that CombiMatrix has seen a "nice uptick in ordering patterns" since ACOG and SFMM issued their joint opinion. He also called the development a "significant indicator that the demand for CMA is going to grow," and argued that CombiMatrix, which recently raised $12 million and is expanding network coverage for its tests, as well as its sales and marketing team, is in an "excellent position" to penetrate the growing market.
"It's just another arrow in the quiver for the maternal-fetal medicine specialists to encourage [CMA]," McDonough said of the committee opinion. "We are seeing receptivity continue to change in the MFM community," he added.
Prenatal CMA is the primary growth driver for Irvine, Calif.-based CombiMatrix, which also offers array-based pediatric constitutional cytogenetic testing, as well as cancer cytogenetic testing, the latter mostly via partners. As CFO Scott Burell noted on the call, revenue growth in the firm's prenatal testing markets rose 57 percent in the fourth quarter to $1 million from $659,000 a year ago, and full year prenatal testing revenues doubled in 2013 to $3.6 million from $1.7 million in 2012. The company's total Q4 revenues grew 18 percent to $1.8 million from $1.5 million a year ago. For the full year, CombiMatrix's revenues rose 19 percent to $6.4 million from $5.4 million last year.
"Granted these are big percentages based on a still-modest base," said McDonough, "but we believe there is no reason why we can't keep this kind of growth going into 2014 and beyond."
One of the reasons that CombiMatrix is betting on prenatal CMA and miscarriage analysis to drive future growth is because it charges more for those tests compared to its other offerings. As Burell noted on the call, for 2013, CombiMatrix's average revenue per prenatal microarray test was $1,600, and its average revenue for miscarriage, or product of conception, analysis was $1,700. In contrast, average revenue for all array-based testing, including pediatric and oncology assays, was $1,278 per test.
"As the trend towards greater concentration of prenatal microarray testing continues, we expect our overall average revenue per test will also increase, resulting in higher average revenue per test billed and improved operating margins in future periods," Burell said.
'Plenty of runway'
McDonough estimated CombiMatrix's prenatal opportunity at $350 million, and described the market as being about a third of the way through a 12-quarter conversion process to CMA from traditional approaches. He said that it is his company's intention to "build a dominant position" in this market by expanding coverage for its tests and bolstering its sales and marketing efforts.
CombiMatrix has announced several agreements with national health providers in recent months, including FedMed, Galaxy Health Network, Three Rivers Provider Network, Blue Cross and Blue Shield of Kansas City, and America's Choice Providers Network, extending its services to millions of people nationwide. "These are all important new extensions of our network and we are already experiencing the benefit and there are more to come," said McDonough.
Since the middle of 2012, CombiMatrix also doubled its sales team to 12 from six sales representatives, and may grow to as many as 15 soon. In December, CombiMatrix raised $12 million in a public offering, and it ended the quarter with $14 million in cash and cash equivalents.
McDonough said that the additional funding "gives us plenty of runway to build the enterprise we need to be successful," by putting "more sales people in place to capitalize on emerging market opportunity, to expand our network, to extend our reach, to build up our reimbursement team and to create new product offerings in the marketplace." He also said that the company's sales efforts would become more varied, with smaller teams focused on specific market segments, such as prenatal testing or miscarriage analysis.