CombiMatrix Corporation Reports Third Quarter 2009 Financial Results

November 11, 2009 4:00 PM EST

MUKILTEO, Wash., Nov. 11, 2009 (GLOBE NEWSWIRE) -- CombiMatrix Corporation (Nasdaq: CBMX) today reported financial results for the three and nine months ended September 30, 2009. Key highlights for the third quarter and through the date of this release include:

 * 30% increase in diagnostic lab revenues from Q3-2008 to Q3-2009
 * Progress in litigation regarding $36 million verdict to
   CombiMatrix
 * Sequentially flat diagnostic lab product and service revenues
   from Q2-2009 to Q3-2009
 * Leuchemix clinical trials progressing well
 * Continued progress in company's Comprehensive Cancer Array test
   currently in development

"CombiMatrix continued to solidify its position as an emerging leader in molecular diagnostics, also known as personalized medicine, during the quarter," stated Dr. Amit Kumar, President and CEO of CombiMatrix Corporation. "We remain upbeat about the progress of our Comprehensive Cancer Array test development effort and believe this project, coupled with our stable diagnostic lab business, will strengthen our leadership position in this emerging industry. We are not alone in our view that molecular diagnostics is the most exciting emerging field in the life sciences. As this industry develops, CombiMatrix seeks to continue to be at the forefront."

Dr. Kumar continued, "Although revenues were flat on a sequential basis, we demonstrated strong growth of our diagnostic lab business year-over-year. While economic difficulties and other factors have slowed our diagnostics growth over the last two quarters, we feel that the third quarter of 2009 was the bottom. We are looking forward to getting back onto our growth trajectory beginning with the next quarter. Also, we recently announced that the U.S. 9th Circuit Court of Appeals had scheduled an oral hearing for November 2, 2009 regarding our $36 million verdict against National Union Fire Insurance Company of Pittsburg, PA. National Union was granted a delay and we are waiting for a revised hearing date to be set by the Court. We are pleased that this case is nearing final resolution, and while we cannot predict the timing of a verdict, we hope it will be soon after the hearing."

"Additionally, the strategic discussions we have initiated with RW Baird, our financial advisor, are progressing. Although I am not able to provide specific information about companies contacted or the content of related discussions, I would like to give a general update. We have been in contact with a number of companies and have made, and will continue to make, management presentations to those who express interest. Some potential suitors who have signed non-disclosure agreements have initiated due diligence. 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. Some companies appear interested in acquiring our whole company, while others seem interested in components that are a strategic fit for them. In time, we expect to be able to evaluate offers, if any, from interested parties. As already noted, the content of our discussions and the identity of contacted parties are confidential, so I cannot provide additional information at this time; however, we intend to provide further updates when we conclude that circumstances are appropriate. I also note that at this time, there is no assurance that we will receive any firm offers from interested parties, or that our management would deem any offers acceptable," concluded Dr. Kumar.

Operating Results - Three Months Ended September 30, 2009 and 2008

Revenues for the third quarter of 2009 were $970,000 versus $1.2 million for the second quarter of 2009 and $1.0 million in the third quarter of 2008. Third quarter 2009 revenues were comprised of $133,000 in government contact revenues, $234,000 in CustomArray(TM) product, equipment and service revenues, and $603,000 in diagnostic lab revenues. Third quarter 2008 revenues were comprised of $343,000 in government contract revenues, $205,000 in CustomArray product, equipment and service revenues and $463,000 in diagnostic lab revenues. Government contract revenues have decreased due to fewer active contracts with the U.S. Department of Defense ("DoD") in the current reporting period than in the comparable historical period. CustomArray product revenues have increased due to slightly higher instrument sales in the current reporting period than in the comparable historical period. Diagnostic laboratory revenues increased during the third quarter of 2009 versus the comparable period in 2008 by 30% due primarily to expanded sales and marketing efforts as well as a larger suite of diagnostic test offerings in the current reporting period than in the comparable 2008 period. The flattening of diagnostic laboratory revenues from the second quarter of 2009 was due primarily to macroscopic factors as well as company specific factors such as the loss of New York business, which we hope to regain soon once our licensure with the state of New York is approved.

Operating expenses for the third quarter of 2009 were $4.7 million versus $4.9 million in the comparable 2008 period. Operating expenses included research and development and marketing, general and administrative expenses of $1.4 million and $2.3 million, respectively, versus $1.3 million and $2.3 million, respectively, in the comparable 2008 period. Included in these amounts were non-cash stock compensation charges totaling $876,000 in the third quarter of 2009 versus $775,000 in the comparable 2008 period.

Net loss for the third quarter of 2009 was $3.3 million versus $4.2 million in the comparable 2008 period. The 2009 results included $531,000 of interest and amortization charges associated with the Company's $8.4 million secured convertible debenture, versus $403,000 in interest charges in the comparable 2008 period. Also, non-cash derivative mark-to-model credits associated with the convertible debenture were $977,000 for the third quarter of 2009 versus $16,000 in the comparable 2008 period.

Operating Results - Nine months Ended September 30, 2009 and 2008

Revenues for the nine months ended September 30, 2009 were $3.7 million versus $5.1 million for the comparable period in 2008. Revenues in 2009 were comprised of $949,000 in government contact revenues, $860,000 in CustomArray product, equipment and service revenues and $1.9 million in diagnostic lab revenues. Revenues in 2008 were comprised of $2.4 million in government contact revenues, $1.6 million in CustomArray product, equipment and service revenues and $1.1 million in diagnostic lab revenues. Government contract revenues have decreased in 2009 due to fewer active DoD contracts than in 2008. CustomArray product revenues have decreased in 2009 due to lower instrument sales than in 2008. Diagnostic laboratory revenues increased during 2009 versus 2008 due primarily to expanded sales and marketing efforts as well as a larger suite of diagnostic test offerings in the current reporting period than in the comparable 2008 period.

Operating expenses for the nine months ended September 30, 2009 were $15.9 million versus $15.7 million in the comparable 2008 period. Operating expenses included research and development and marketing, general and administrative expenses of $3.8 million and $8.0 million, respectively, versus $3.6 million and $6.8 million, respectively, in the comparable 2008 period. Included in these amounts were non-cash stock compensation charges totaling $2.5 million for the nine months ended September 30, 2009 versus $1.5 million in the comparable 2008 period.

Net loss for the nine months ended September 30, 2009 was $14.1 million versus $10.9 million in the comparable 2008 period. The 2009 results included $1.6 million of interest and amortization charges associated with the Company's $8.4 million secured convertible debenture, versus $408,000 in interest charges in the comparable 2008 period. Also, non-cash derivative mark-to-model charges associated with the convertible debenture were $(407,000) for the nine months ended September 30, 2009 versus credits of $16,000 in the comparable 2008 period.

Financial Position and Cash Flows

Total assets were $31.5 million as of September 30, 2009 compared to $34.5 million as of December 31, 2008. Cash, cash equivalents and available-for-sale investments totaled $7.9 million as of September 30, 2009 compared to $9.1 million as of December 31, 2008. On May 1, 2009, the Company executed an $8.3 million registered direct offering of its common stock and warrants, with net proceeds to CombiMatrix after placement agent fees and other costs of $7.6 million.

Operating cash burn for the three and nine months ended September 30, 2009 was $3.1 million and $8.2 million, respectively, versus $2.9 million and $8.1 million, respectively, for the comparable 2008 periods.

Third Quarter Business Highlights and Recent Developments

 Strengthened Leadership Team

 * In October 2009, Mr. Chris Emery and Dr. Lony Lim joined the
   Company's wholly owned subsidiary, Combimatrix Molecular
   Diagnostics ("CMDX"), as Chief Operating Officer and Vice
   President of Operations, respectively. Mr. Emery earned his
   bachelor degree from the University of California, San Diego,
   and his Master in Business Administration from Pepperdine
   University. He started his career in healthcare as a Sales
   Manager with Johnson & Johnson's pharmaceutical division and has
   since spent more than 10 years in the cancer-focused diagnostics
   laboratory industry. Mr. Emery was a Marketing Manager with US
   LABS (a division of LabCorp) and was then promoted to National
   Sales Manager of the Oncology sales division.  Mr. Emery was
   Vice President of Sales & Marketing at Response Genetics, where
   he helped launch the company's portfolio of molecular diagnostic,
   personalized medicine testing. He recently consulted for Agendia,
   a global leader in microarray genomic profiling, as Director of
   Clinical Trials.

 * Dr. Lim received both his B.S. and his Ph.D. from the University
   of Wisconsin-Madison and completed the William McLendon Clinical
   Immunology Fellowship at the University of North Carolina
   Hospitals, Chapel Hill. He served as Director of Scientific
   Affairs, Director of Flow Cytometry and Director of Anatomic
   Pathology at US LABS and Scientific Director - Division of
   Immunology at AmeriPath Specialty Laboratories. He was one of
   the pioneers in the genesis of Luminex Corporation's Multi-
   Analyte Profiling technology (xMAP(R)) and was instrumental in
   delivering the initial clinical acceptance of xMAP(R) technology,
   which is now widely used in both protein and molecular profiling
   applications across numerous clinical laboratories.

 Product and Technology Updates

 * In July 2009, the Company announced that a validation study of
   its HerScan(TM) breast cancer test performed by CMDX, in
   collaboration with the Department of Pathology at the University
   of Texas Health Science Center in San Antonio, Texas was now
   available as an advance online publication in the official
   journal of the United States and Canadian Academy of Pathology,
   Modern Pathology.

 * In October 2009, the Company announced that the Brooke Army
   Medical Center ("BAMC") began using the CombiMatrix
   Influenza-Detection System to analyze influenza cases including
   those involving H1N1 Swine flu.  BAMC is a military hospital
   that is investigating the feasibility of screening all patients
   presenting in its emergency room with symptoms of respiratory
   distress and consenting to nasal swabs, by both electrochemical
   array-based diagnostics and bead-based multiplex fluorescent
   methods.  While there are other flu tests including the
   fluorescent test used at BAMC that can identify the presence or
   absence of H1N1 Swine flu, they do not provide information on
   genetic drift of the virus.  It is important to understand the
   genetic drift of rapidly mutating pathogens in general and of
   Swine flu in particular because of the potential for increased
   pathogenicity of a mutated virus.

 Strategic Partnerships

 * In September 2009, the Company announced that it had received a
   contract from the U.S. Air Force Research Laboratory for $1.5
   million to develop automated instrumentation that uses
   semiconductor microarray technologies for detecting chemical,
   biological and environmental hazards that can impact the health
   of deployed military personnel.

 * Also in September 2009, CombiMatrix hired Robert W. Baird & Co.
   to serve as a financial and strategic advisor to aid CombiMatrix
   in developing and reviewing certain strategies aimed at
   unlocking shareholder value and creating synergistic
   relationships for CombiMatrix.

 Litigation Update

 * In September 2009, the Company announced that the U.S. 9th
   Circuit Court of Appeals (the "Appellate Court") set a date for
   an oral hearing in the ongoing litigation with National Union
   Fire Insurance Company of Pittsburgh, PA, an AIG company
   (NYSE: AIG). This oral hearing is a short session (each side will
   have 15 minutes) for each party to present arguments
   supplementing those in the briefs that were filed with the
   Appellate Court earlier this year.  The original hearing date
   was November 2, 2009.  National Union has subsequently requested
   and was granted a continuance of the oral hearing due to a
   conflict with its attorneys' schedules.  The Company intends to
   announce the date of the revised hearing once determined by the
   Appellate Court.

CombiMatrix will host a conference call at 1:30 p.m. Pacific Time (4:30 p.m. Eastern) today to discuss third quarter 2009 financial results.

To attend the presentation by phone, dial 1-888-299-4099 for domestic callers and 1-302-709-8337 for direct dial or international callers. All callers will need to provide the verbal passcode, "CBMX Earnings Call," to enter the call. To listen to the call via CombiMatrix's website, go to www.combimatrix.com, in the Investor/Events section, (http://investor.combimatrix.com/events.cfm).

A replay of the presentation will be available for 14 days, either via the CombiMatrix website Investor/Events section (http://investor.combimatrix.com/events.cfm) or by dialing 1-800-355-2355 for domestic callers or 1-402-220-2946 for direct dial international callers. When prompted, enter playback passcode 621819#.

The call will also be webcast live and can be accessed at CombiMatrix's website at www.combimatrix.com, in the Investor/Events section, (http://investor.combimatrix.com/events.cfm).

ABOUT COMBIMATRIX CORPORATION

CombiMatrix Corporation is a diversified biotechnology business that develops proprietary technologies, including products and services in the areas of drug development, genetic analysis, molecular diagnostics, nanotechnology and defense and homeland security markets, as well as in other potential markets where our products and services could be utilized. The technologies we have developed include a platform technology to rapidly produce user-defined, in-situ synthesized, oligonucleotide arrays for use in identifying and determining the roles of genes, gene mutations and proteins. This technology has a wide range of potential applications in the areas of genomics, proteomics, biosensors, drug discovery, drug development, diagnostics, combinatorial chemistry, material sciences and nanotechnology. Other technologies include proprietary molecular synthesis and screening methods for the discovery of potential new drugs. Combimatrix Molecular Diagnostics, Inc. ("CMDX"), our wholly owned subsidiary located in Irvine, California, has developed capabilities of producing arrays that utilize bacterial artificial chromosomes, which also enable genetic analysis. CMDX functions primarily as a diagnostics reference laboratory. Leuchemix Inc. ("Leuchemix"), a minority owned subsidiary, is developing a series of compounds to address a number of oncology-related diseases. Leuchemix's first compound has entered initial clinical trials.

Additional information about CombiMatrix Corporation is available at www.combimatrix.com or by calling 1-800-985-CBMX (2269). Additional information about CMDX is available at www.cmdiagnostics.com or by calling 1-800-710-0624.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This news release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon our current expectations and speak only as of the date hereof. Our actual results may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, including the recent economic slowdown affecting technology companies, our ability to successfully develop products, rapid technological change in our markets, changes in demand for our future products, legislative, regulatory and competitive developments and general economic conditions. Our Annual Report on Form 10-K, recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports on Forms 8-K and 8-K/A, and other SEC filings discuss some of the important risk factors that may affect our business, results of operations and financial condition. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

                          COMBIMATRIX CORPORATION
                CONSOLIDATED SUMMARY FINANCIAL INFORMATION
          (In thousands, except share and per share information)
                               (Unaudited)

 CONSOLIDATED BALANCE SHEET INFORMATION:

                                                    Sept. 30, Dec. 31,
                                                      2009      2008
                                                    --------  --------

 Total cash, cash equivalents and
  available-for-sale investments                    $  7,905  $  9,105
                                                    ========  ========
 Total assets                                       $ 31,537  $ 34,534
                                                    ========  ========
 Total liabilities                                  $ 10,475  $ 10,488
                                                    ========  ========
 Total shareholders' equity                         $ 21,062  $ 24,046
                                                    ========  ========


 CONSOLIDATED STATEMENTS OF OPERATIONS:

                          Three Months Ended      Nine Months Ended
                             September 30,          September 30,
                        ----------------------  ----------------------
                           2009        2008        2009        2008
                        ----------  ----------  ----------  ----------

 Revenues:
  Government contracts  $      133  $      343  $      949  $    2,380
  Products                     250         158         807       1,356
  Services                     524         448       1,802       1,145
  Collaboration
   agreements                   63          62         188         186
                        ----------  ----------  ----------  ----------
   Total revenues              970       1,011       3,746       5,067
                        ----------  ----------  ----------  ----------

 Operating expenses:
  Cost of government
   contract revenues           125         336         862       2,305
  Cost of products and
   services                    409         370       1,587       1,258
  Research and
   development expenses      1,401       1,336       3,814       3,595
  Marketing, general and
   administrative
   expenses                  2,340       2,301       7,970       6,781
  Patent amortization
   and royalties               337         341       1,016       1,063
  Equity in loss
   of investee                 107         247         618         737
                        ----------  ----------  ----------  ----------
   Total operating
    expenses                 4,719       4,931      15,867      15,739
                        ----------  ----------  ----------  ----------
   Operating loss           (3,749)     (3,920)    (12,121)    (10,672)
                        ----------  ----------  ----------  ----------

 Other income (expense):
  Interest income                2          58          17         183
  Interest expense            (531)       (403)     (1,553)       (408)
  Derivatives credits
   (charges)                   977          16        (407)         16
                        ----------  ----------  ----------  ----------
   Total other income
    (expense)                  448        (329)     (1,943)       (209)
                        ----------  ----------  ----------  ----------

 Net loss               $   (3,301) $   (4,249) $  (14,064) $  (10,881)
                        ==========  ==========  ==========  ==========

 Basic and diluted net
  loss per share        $    (0.44) $    (0.70) $    (2.01) $    (1.80)
                        ==========  ==========  ==========  ==========

 Basic and diluted
  weighted average
  common shares
  outstanding            7,512,401   6,097,086   6,983,157   6,040,214
                        ==========  ==========  ==========  ==========

CONTACT: CombiMatrix Corporation
         Amit Kumar, Ph.D., President & CEO
         (425) 493-2000
         Fax: (425) 493-2010

         Hayden IR
         Investor Relations Contact:
         Jeffrey Stanlis, Partner
         (602) 476-1821
         jeff@haydenir.com

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