After years of requiring cash infusions to keep its nascent diagnostics business on track, CombiMatrix last week disclosed in a filing with US Securities and Exchange Commission that it has inked a settlement agreement with National Union Fire Insurance Company, under which CombiMatrix will receive $25 million, essentially ending its financing woes.
CEO Amit Kumar told BioArray News this week that the payment will serve as "working capital for all aspects of our business," but declined to comment further on the litigation with National Union or how the firm will spend the proceeds from the recent agreement.
The settlement ends a legal battle that began more than two years ago when CombiMatrix filed a suit claiming that the insurance firm had refused to defend and indemnify CombiMatrix under its director and officer’s insurance policy. In May 2008, the US District Court for the Central District of California entered a final judgment in favor of CombiMatrix for $35.7 million, though National Union later appealed (see BAN 6/23/2009).
Oral arguments before an appeals court were scheduled to be heard this week. However, the settlement will end the case. National Union now has until Feb. 12 to pay the $25 million to settle the dispute.
Founded in 1999, Mukilteo, Wash.-based CombiMatrix initially manufactured instruments and arrays for research use and has worked with the US Department of Defense grants to develop arrays for biothreat detection. In 2005, the company opened a subsidiary called CombiMatrix Molecular Diagnostics in Irvine, Calif., and has focused most of its resources in recent years in building the diagnostics business by investing in new tests and sales and marketing activities (see BAN 3/10/2009, BAN 5/12/2009).
This expansion into the molecular diagnostics market coincided with tight financial conditions for the firm, which had to raise money at least six times in the past five years, most recently through a $8.25 million registered direct offering in April 2009 (see BAN 5/12/2009).
The access to cash will help the company as it prepares its Comprehensive Cancer Array, a test that measures miRNA expression patterns to detect the presence of cancer and distinguish between cancers, for release later this year. CombiMatrix 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.
In recent months, the firm has also renewed its interest in the research market by launching ElectraSense, a palm-sized microarray reader that the firm claims can measure up to 12,000 probes on an array in less than 25 seconds (see BAN 12/22/2009).
Settlement of the suit also could make it easier for CombiMatrix to find the "strategic options" it has sought since September with the help of financial advisers RW Baird, which may include alliances, divestitures, and business combinations (see BAN 9/22/2009).
During the firm's third-quarter conference call in November, President and CEO Amit Kumar said that the firm has contacted a number of undisclosed companies about such options (see BAN 11/17/2009).
"These companies do not fit a single mold – they 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," Kumar said. "Some companies appear interested in acquiring our whole company, while others seem interested in components that are a strategic fit for them."