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CombiMatrix to cease M&A activities
MUKILTEO, Wash.—Although the company had engaged in discussions with various parties about a possible acquisition of its assets or merger into another company, CombiMatrix Corp. is now putting the brakes on the M&A momentum. As of June 1, the company's investment bankers have been told to cease work on identifying and pursuing potential purchasers of the company or its assets.
Instead, the board of directors has decided that the company should now focus exclusively on building and growing its diagnostics services business, as well as continue to recruit and hire a more commercially focused executive who will replace outgoing top executive Dr. Amit Kumar.
"As we have stated in previous announcements, CombiMatrix is at an inflection point in its development and needs to refocus its efforts on increasing the commercial use of its tests," says Kumar, who is president and CEO of CombiMatrix. "CombiMatrix has been a scientific innovator in the molecular diagnostics field, and now seeks to become a commercial leader, as well. Often for young companies, such a transition is difficult and requires a change in management, strategy, and operations."
In this case, presumably, determining—at least for the moment—that the company is better off forging its own future than handing it to someone else, is one of those difficulties in the transtion.
Kumar says the company is well into implementing its plan, which includes a cost-saving restructuring.
"The goals of this restructuring are to reduce cash burn and accelerate the timeline to sustainable profitability," Kumar said in early May when CombiMatrix announced its first quarter 2010 financial results. "Whenever such cost-cutting measures are enacted, one sacrifices some future opportunities. Therefore, our board and management have identified what segments of our business provide the greatest near-term opportunities to increase revenue and achieve profitability. All other projects that require capital have either been eliminated or have been postponed until operating cash flows can fund them."
It was in that same announcement a month ago that Kumar also noted that during the first quarter of 2010, CombiMatrix's diagnostics business produced its best quarter ever and demonstrated strong growth relative to the previous quarter and the previous year's first quarter—a fact that no doubt plays into the recent announcement to increase the focus on commercial testing.
"We expect to continue this progress in the coming quarters," he said in May, "and hope to build momentum that will drive revenue in a manner that will enable us to achieve cash flow positive operations."
As for the current decision to belay movements in the M&A realm, Kumar says, "We believe that this course of action will eliminate uncertainty and allow the company to focus on its business operations. This decision is based on analysis of a number of factors including what we believe is the best course of action for the company and creation of total shareholder value."
CombiMatrix Corp. is a diversified biotechnology business that primarily operates in the field of genetic analysis and molecular diagnostics through its wholly owned subsidiary, CombiMatrix Diagnostics (CMDX). CMDX operates as a diagnostics reference laboratory that provides genetic and other diagnostics services to physicians, hospitals and clinics.