CombiMatrix said this week that it plans to sell almost $6.8 million of newly issued shares of its stock in order to help it meet growing demand for its molecular tests.
Net proceeds from the placement will be used to "fund growth initiatives and for general working capital purposes," the firm said in a statement. CEO Judd Jessup this week declined to discuss details until after the placement closes April 7.
Under the terms of the placement, which will be in the form of a combination of common stock and warrants, CombiMatrix will sell 3.08 million units for about $2.19 apiece, with each unit consisting of one share of common stock and one warrant to purchase .425 shares of common stock at an exercise price of $2.14 per share.
The unit price reflects the market value of CombiMatrix's stock, as determined by Nasdaq rules, plus about $.05 for the warrant component. The warrants are exercisable six months after the closing date and have a term of five years. The company noted it paid no investment bank or advisory fees for the transaction.
This is the first time CombiMatrix has sought to raise funds since it restructured last year and shed its array tools and services business in order to focus exclusively on diagnostics. Since Jessup took over as CEO in August, the company has sought to build its sales and marketing team, and the proceeds from the placement could go to strengthen its sales and marketing resources.
In February during the firm's fourth-quarter earnings call, Jessup noted that in October Daniel Forche joined the firm as senior vice president of sales and marketing after holding a similar position at Agendia. He also said that Courtney Tate in January joined CombiMatrix as marketing director. She joins CombiMatrix from GenMark Diagnostics, where she was senior marketing manager.
In addition, CombiMatrix has added four new sales reps, including an executive who will focus solely on the oncology market. The Irvine, Calif.-based firm has also created an incentive program it said it hopes will motivate its new sales force to bring in new business. Details of the program have not been disclosed.
In spite of a major restructuring and a change in management, CombiMatrix's 2010 performance beat its 2009 numbers. The firm reported in February that it ran 3,279 tests, a 22-percent increase over 2,678 tests it ran in FY '09.
For full-year 2010, revenues rose 38 percent to $3.6 million from $2.6 million in 2009; service revenues increased 43 percent to $3.3 million from $2.3 million a year ago; and product revenues climbed 14 percent to $271,000 from $238,000.
As of Dec. 31, CombiMatrix said it had about $6.6 million in cash and cash equivalents.
In a recent interview with BioArray News, Jessup attributed the firm's improving performance to "increased acceptance" of its tests and better reimbursement rates.
"We are seeing increased acceptance on the oncology side," Jessup said. "We have seen very nice growth in that market in terms of analysis of solid tumors."
He noted that the firm can obtain array data from formalin-fixed, paraffin-embedded tissue samples, and said this capability is giving CombiMatrix "some lift in terms of volume."
In particular, adoption of CombiMatrix's HemeScan test for chronic lymphocytic leukemia has increased over the past year, Jessup said. The company also offers a HERScan test for HER2 analysis in breast cancer patients and an array-based, post-prostatectomy prostate cancer-stratification assay through its CombiMatrix Molecular Diagnostics subsidiary.
"Oncologists are always looking for answers, trying to figure out if there is value in a test," said Jessup. "I think there is and, increasingly, so do they."
CombiMatrix also offers BAC and oligo-based HDScan tests that identify congenital chromosomal abnormalities; a prenatal screen that assays amniotic fluid to identify genetic disorders in utero, and its ATScan test, which identifies copy-number variants associated with autism spectrum disorder.
Jessup said that one particular factor that has helped to boost the company's testing volume was the American College of Medical Genetics' decision last September to recommend array-comparative genomic hybridization as a first-tier diagnostic for genetic abnormalities.
"Array CGH has become the standard of care," he said. "That's another factor" in CombiMatrix's increased sales.
Finally, he noted that CombiMatrix is getting reimbursed more frequently for its tests. "The percentage of carriers continues to improve," said Jessup.
In June 2010, Medicare agreed to reimburse or all of the array-based tests that CombiMatrix offers (BAN 6/15/2010).
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