This story was originally published on Nov. 12.
CombiMatrix CEO Amit Kumar last week said talks with "potential suitors" for strategic deals — which may include the sale of the company or its businesses — are "progressing," and the firm is ready to evaluate offers from interested parties.
He made his comments during a conference call to discuss the firm’s third-quarter earnings report, which showed that revenues fell slightly and net loss narrowed by a quarter.
The company hired investment bank RW Baird in September to help it consider future strategic options, including alliances, divestitures, and business combinations (see BAN 9/18/2009).
According to Kumar, talks with "potential suitors" for strategic deals that may include the sale of the company or its businesses are "progressing" and the firm is ready to evaluate offers from interested parties.
Kumar said that, since taking on Baird as an advisor, CombiMatrix has had "contact with a number of companies and has made, and will continue to make, management presentations to those who express interest."
The companies that have expressed interest "do not fit a single mold" and "include both large-cap companies and companies in the middle market, as well as financial organizations that have expressed an interest in getting into this space and are seeking a platform," he said.
Kumar said that some companies with which CombiMatrix has held discussions "appear interested in acquiring our whole company, while others seem interested in components that are a strategic fit for them."
In time, the firm "expects to be able to evaluate offers, if any, from interested parties," he said. He did not provide additional information on the discussions, citing the confidentiality of the negotiations. Kumar also noted that "there is no assurance that we will receive any firm offers from interested parties, or that our management would deem any offers acceptable."
According to the company’s financial results, sales for the three months ended Sept. 30 declined 3 percent to $970,000 from the $1 million the Mukilteo, Wash.-based array firm reported for the same period last year. In spite of the dip in receipts, the firm noted that sales from its diagnostics lab business grew 30 percent to $603,000 in Q3, compared with $463,000 in diagnostics lab revenues in the prior-year period.
Sales of CombiMatrix's CustomArray products, equipment, and services rose to $234,000 during the quarter from $205,000 in Q3 '08. The firm took a hit, however, in government contract revenues, which fell more than 60 percent to $133,000 from $343,000 in 2008.
CombiMatrix attributed its growth in diagnostic lab revenues to "expanded sales and marketing efforts as well as a "larger suite" of available tests. Revenue growth has "flattened" as the firm awaits certification from New York State to offer its tests to New York residents. CustomArray sales, meantime, were buoyed by "slightly higher instrument sales," while government contract sales decreased due to "fewer active contracts with the US Department of Defense," a longtime CombiMatrix customer.
Net loss for the quarter narrowed 27 percent to $3.3 million from $4.2 million in the third quarter of 2008. R&D costs were $1.4 million, up slightly from $1.3 million in the year-ago period.
CombiMatrix held $7.9 million in cash, cash equivalents, and available-for-sale investments as of Sept. 30.
Kumar also provided an update on the development of a new test, called the Comprehensive Cancer Array. Through its wholly owned subsidiary, CombiMatrix Molecular Diagnostics, the company currently offers a number of tests, including the BAC and Oligo HDScan tests for identifying congenital chromosomal abnormalities; the Prenatal Scan test for identifying genetic disorders in utero; the ATScan test for identifying copy number variants associated with autism spectrum disorder; the HemeScan test for chronic lymphocytic leukemia; the HERScan test for HER2 analysis in breast cancer patients; and the Prostate Cancer Microarray test to stratify cancer patients according to risk of recurrence and metastasis in patients post-prostatectomy.
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The Comprehensive Cancer Array test measures microRNA expression patterns to detect the presence of cancer and distinguish between cancers. CombiMatrix has said previously that it plans to launch clinical trials for the CCA by mid-2010 and to debut the test by the beginning of Q3 2010 (see BAN 5/12/2009).
Kumar said at the time that CombiMatrix had not decided what content will be available on the array, but said the firm is focused on prostate, lung, colon, breast, and ovarian cancer, because they are the "most prevalent adenocarcinomas."
This week, he said that CombiMatrix "remains upbeat" about the development of the Comprehensive Cancer Array test. During this week's call, Kumar said that the test is reaching the end of its R&D phase. He said the firm continues to anticipate putting the test through clinical validation next year and is on schedule to launch in Q3 2010.
"We feel the market opportunity for this test, if clinical data is good, is in the billions of dollars annually," Kumar said. CombiMatrix is now identifying sites for clinical validation studies, he added.
Kumar said the firm will engage in additional validations after the launch of the CCA to add more cancers to the test, and hopes to have a deal with a marketing partner by that time to support the rollout of the test.
Kumar also commented on ongoing litigation with National Union Fire Insurance Company. CombiMatrix it is expecting around $36 million from National Union, an American International Group member company, related to the outcome of an insurance dispute. National Union has appealed the case (see BAN 6/23/2009).
According to Kumar, the US 9th Circuit Court of Appeals had scheduled an oral hearing for November 2 regarding the $36 million verdict. He said that National Union was granted a delay and the firm is now waiting for a revised hearing date to be set by the court. He said in the call that he hoped the hearing would be rescheduled "within the next few months."