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As New CEO Readies Role, CombiMatrix Posts 51-Percent Rise in Q2 Revenues

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By Justin Petrone

Increased demand for and increased reimbursement for its tests drove CombiMatrix's second-quarter revenues up 51 percent, the firm said this week. The company also announced that it had named a new CEO who will oversee its budding molecular diagnostics business beginning Aug. 23.

The Irvine, Calif.-based firm, which is nearing the completion of its restructuring, brought in total revenues of $916,000 for the three-month period ended June 30, compared to $606,000 for the second quarter of 2009. Of that total, $796,000 came from services and $120,000 from products.

As a result of a goodwill impairment charge of $16.9 million, CombiMatrix posted a net loss for the quarter of $24.8 million compared to a net loss of $4.6 million for Q2 2009.

According to a filing with the US Securities and Exchanges Commission, revenues increased during the quarter "primarily due to test volume increases as well as increases in average revenue recognized per test."

Billable test volumes were 773 for the quarter, compared to 637 for the comparable period in 2009. Average revenue per test was approximately $1,120 in 2010 versus $803 in 2009, the firm noted in the filing, due "primarily to improved reimbursement from non-contracted third-party payors." In June, CombiMatrix announced that Medicare had begun reimbursing its tests (BAN 6/15/2010).

Company officials did not respond to e-mails and phone calls seeking further comment.

In terms of product revenues, the company said it has benefited from selling bacterial artificial chromosome comparative genomic hybridization arrays to an undisclosed customer in Taiwan. The firm sold 660 BAC chips during the quarter versus 120 in Q2 '09.

"Increased volumes were due mainly to increased demand for array CGH services in Asia from our Taiwanese customer," CombiMatrix said.

Cost of services for its diagnostic tests also decreased during the quarter, contributing to the spike in revenues. CombiMatrix attributed the cut in costs to "better pricing from our suppliers, based on our increased test volume."

New CEO and Restructuring

Over the past four months, CombiMatrix has been restructuring its business, which has included shutting down its CustomArray business and closing its Mukilteo, Wash.-based offices; moving its headquarters to Irvine; refocusing the business on its molecular diagnostics services; and replacing its CEO (BAN 4/20/2010).

The firm announced this week that Judd Jessup will serve as its new CEO and as a member of the board of directors, effective Aug. 23. Jessup previously was CEO of cancer diagnostics and genetic testing services firm US Labs. He replaces interim CEO Mark McGowan who had held the position since former CEO Amit Kumar stepped down in June.

CombiMatrix noted in a statement that it had completed its relocation to Irvine a month ahead of schedule, and that its estimate for restructuring costs had dropped to $975,000 from its previous expectations of $1.5 million.

The firm noted in its SEC filing that its business will now focus primarily on its "diagnostics services business, which will include increasing utilization of its existing tests, expanding its test menu, increasing the number of partners and customers, and seeking to improve reimbursement for its testing services."

Due to its increased focus on test-development and sales and marketing activities, R&D expenses rose during Q2 to $725,000 from $699,000 year over year, while its SG&A spending jumped to $2.2 million from $1.7 million.

According to the firm's SEC filing, the R&D expenses include "labor and laboratory supply costs associated with investigating new tests, but primarily consist of development costs to maintain and improve our existing suite of diagnostic tests offered."

The rise in SG&A spending was "due primarily to increased sales and marketing activities as well as higher headcount compared to the prior periods," CombiMatrix said. The company did not disclose how many people it employs.

CombiMatrix finished the quarter with $10.2 million in cash and cash equivalents, which it said is enough capital to support its operations beyond the next 12 months.