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Enlarged Sales Team Helps CombiMatrix Post 21-Percent Jump in Q4 Revenue

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By Justin Petrone

Having made "significant changes in sales force and sales leadership," CombiMatrix is now poised for growth, according to its CEO.

Judd Jessup credited the firm's new sales team with CombiMatrix's financial performance in the fourth quarter, during which revenues increased 21 percent year over year atop a 38-percent spike in demand for subsidiary CombiMatrix Molecular Diagnostics' genetic-testing services.

During the quarter's earnings call last week, Jessup noted that the Daniel Forche joined the firm as senior vice president of sales and marketing in October after holding a similar position at Dutch molecular diagnostics firm Agendia.

He also said that Courtney Tate last month joined CombiMatrix as marketing director. She joins CombiMatrix from GenMark Diagnostics, where she was senior marketing manager.

Jessup added that the firm has added four new sales reps, including an executive who will focus solely on the oncology market. His goal will be to "forge relationships with other labs that don't have capability to perform [array comparative genomic hybridization] on hematology specimens as well as solid tumors."

According to Jessup, CombiMatrix has created an incentive program that it hopes will motivate its new sales force to bring in new business. He attributed the firm's increase in Q4 sales to its sales and marketing efforts, specifically citing "increased customer adoption" and "improved third-party reimbursement" for CMDs' test menu.

CombiMatrix restructured last year, shedding its array tools and services business in order to focus exclusively on diagnostics. Since then, its array research tools business has been re-launched as CustomArray (BAN 1/25/2011).

At the time of the restructuring, longtime President and CEO Amit Kumar resigned and was replaced by interim-CEO Mark McGowan before Jessup was tapped in August to lead the firm.

While Kumar no longer serves in any managerial role at CombiMatrix, he continues to hold a seat on its board of directors.

During the call last week, Bill Vlahos, the founder of Odyssey Value Advisors, a San Francisco-based venture fund, accused Kumar of "destroying a lot of shareholder value" and asked why he remains on CombiMatrix's board.

Vlahos said that Kumar "talked at length of a great transformative transaction" involving CombiMatrix that never materialized. "It would be unusual if Kumar would add value at this point," Vlahos said.

Jessup responded that Kumar still adds value to the company's legacy business, and retains institutional knowledge of the company. He also is knowledgeable about the market and the investment community, as well as potential transactions that CombiMatrix may enter into.

While at the helm of CombiMatrix, Kumar in 2009 contracted RW Baird to advise the firm on potential business combinations or acquisitions. As late as May 2010, a month before his departure, he called CombiMatrix an "attractive acquisition prospect," though no deal ever took place. It is unclear if it was this activity to which Vlahos referred (BAN 5/11/2010).

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Q4 in Full

For the three months ended Dec. 31, 2010, CombiMatrix's total revenues rose to $804,000 from $637,000 a year ago. Service revenues increased to $791,000 from $575,000 during the year-ago period, which made up for a 79-percent drop in product revenues, consisting of CombiMatrix's CGH array sales, in 2009.

The firm said in November that diagnostic kit sales will continue to decline, largely due to the loss of an undisclosed primary customer in Asia (BAN 11/16/2010).

During the call, Chief Financial Officer Scott Burell said CMD ran 912 billable diagnostic tests in Q4 2010, a 60-percent increase over 567 billable tests in Q4 2009. For the full year, the firm ran 3,279 tests, a 22-percent increase over 2,678 tests it ran in FY '09.

During the quarter, CombiMatrix reduced its R&D costs by 55 percent to $334,000 from $743,000 a year ago. Meantime, SG&A costs increased 29 percent to $1.8 million from $1.4 million one year ago.

Net loss narrowed 58 percent to $1.5 million from $3.6 million during the fourth quarter of 2009.

For full-year 2010, CombiMatrix's 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.

R&D spending in 2010 fell 29 percent to just over $2 million from $2.8 million a year ago, while SG&A spending increased 18 percent to $7.7 million from $6.5 million.

CombiMatrix's net loss for the year narrowed 26 percent to $13.1 million from $17.6 million in 2009.

As of Dec. 31, CombiMatrix said it had about $6.6 million in cash and cash equivalents.

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