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CombiMatrix Gets Serious About Potential M&A Options in Wake of $8M Offering


NEW YORK (GenomeWeb) – Having closed an $8 million public offering late last month, CombiMatrix last week announced that it has now commissioned corporate finance advisory firm Torreya Capital to guide it in pursuit of potential mergers and acquisitions, or other business development opportunities.

CombiMatrix CEO Mark McDonough told GenomeWeb this week that with a strengthened balance sheet following the offering, CombiMatrix believes that it is now in a position to more earnestly and transparently start looking for potential M&A opportunities without being in a position of desperation.

"We've been thinking about this for about the last year," McDonough said. "We believe the markets are there for us, but ... as a $4 million market cap company, could we raise the $30 million we need to really dominate the miscarriage market, which we think we can? … With $4 million you are just not going to do it."

In light of this CombiMatrix became more focused on trying to find other companies that might be potential symbiotic partners. However, McDonnough said, before its recent $8 million public offering, the company didn't feel like it was in a strong position to look for these types of opportunities without appearing an easy mark.

"Even though we started thinking about this 12 months ago … you don't want to go and sell your company at your nadir. You don't want to have a fire sale," he said. "So we did the raise and we now have a much stronger balance sheet, so we can continue to go it alone if necessary. We can [more comfortably] wait for the best option."

According to McDonough, CombiMatrix has a lot to offer as a potential acquisition for another firm, but he also didn't discount the possibility of instead buying up another small technology or IP position.

McDonough has said previously that he thinks the firm's array testing can get CombiMatrix to profitability over the next six to eight quarters. "We feel we are in good-sized markets, close to $600 million in the states [and] up to $1 billion internationally. The challenge is that to go after those markets you need a decent amount of capital, and with the nature of the diagnostics space right now, money has been pretty expensive from our perspective."

"It has become apparent that … if we were able to leverage our sales force with another company or bring more tests into the portfolio in the lab, we could expedite the path to profit," he explained.

Though he declined to detail any of CombiMatrix's potential acquisition targets or merger candidates, McDonough said that it has been in discussion with a "handful of companies."

"If we picked someone else up it would have to be a smaller IP deal," he explained, "where we are the commercial engine and buy up some new technology … [potentially] companies that are having a hard time coming out commercially, where we could leverage our expertise on the clinical side and the marketing side. That's what we'd be looking at from the acquisition front."

Possible targets aren't limited to array-based technologies, he said. In fact, the company expects to make announcements in the near future regarding different technology platforms, he said.

In the other direction — eyeing other firms that might want to adopt or absorb CombiMatrix — McDonough said that the company hopes to project flexibility.

"There are lots of other labs not just in the prenatal [space], but also outside, who maybe are looking for a West Coast lab, or looking for expertise we could bring, or entrees into the pathology and [reproductive health] market that we bring," he said. "A lot of our people came from oncology, so even though prenatal is the application we are doing now we could easily read out [in other areas like] liquid biopsy," he added.

McDonough stressed that CombiMatrix is not shooting blindly for partners "We are not casting a wide net and just hoping something gets caught," he said. "And we are not going to let this distract us."

"Our primary goal is to continue to add value and make it happen organically … even if that means going it alone. But if something comes along, we wanted to [let everyone know] that we have engaged a really good firm that are specialists in licensing and M&A, and can find us the right fit."