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CombiMatrix's Q2 Revenues Rise 29 Percent; Shares Drop on Legal Expenses

NEW YORK (GenomeWeb) – CombiMatrix today reported that its second quarter revenues rose 29 percent year over year, driven by 60 percent growth in prenatal microarray testing volumes.

For the three months ended June 30, the Irvine, Calif.-based molecular diagnostics company saw revenues climb to $1.9 million from $1.5 million in the second quarter of 2013. Its revenues were in line with the consensus Wall Street estimate.

CFO Scott Burell said on an earnings call following the release of the results that CombiMatrix ran a total of 1,840 billable tests in the second quarter compared to 1,485 tests in the second quarter of 2013.

Of these, 1,431, or 78 percent, were array-based tests, 872 of which were prenatal tests. CombiMatrix continues to offer other cytogenetic testing services, such as fluorescence in situ hybridization and molecular karyotyping, in addition to its core array-based offering. Burell said the company serviced 177 clients in the quarter compared to 125 clients in Q2 2013.

CEO Mark McDonough noted on the call that CombiMatrix's "mix of business continues to migrate towards our core focus area of higher value prenatal microarray testing."

He said that the increase in revenues and operating costs was due to investments in its commercial team. CombiMatrix has expanded its sales force to include 14 representatives since the beginning of the year.

The company's R&D costs rose 27 percent to $224,000 from $177,000 in Q2 2013, while SG&A expenses jumped 74 percent to $3.3 million from $1.9 million in Q2 2012.

Burell said on the call that CombiMatrix is involved in a lawsuit filed by a former employee that alleges the company "submitted false and fraudulent insurance claims" to National Union Fire Insurance Company. CombiMatrix received $25 million from National Union in 2010 to settle a lawsuit.

Burell said that a trial in the case commenced in the Superior Court in the State of California in June. "Now that the trial is in process, our defense costs have dramatically increased in 2014 compared to prior periods," said Burell. "We expect the defense costs to diminish upon conclusion of the trial."

The increase in expenses caused the firm's net loss to widen to $2.6 million, or $.23 per share, from $1.7 million, or $.48 per share, in Q2 2013.

CombiMatrix held cash, cash equivalents, and short-term investments totaling $10.1 million as of June 30.

In Thursday morning trade on the Nasdaq, shares of CombiMatrix were down 8 percent at $1.98.

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