CombiMatrix Corp. announced InVitae Corp. in San Francisco is acquiring it. It’s an all-stock deal expected to close by the end of the year, valued at $33 million to CombiMatrix stock and warrant holders.
CombiMatrix’ Irvine operations, including personnel and manufacturing, will remain unchanged for the near term, according to InVitae Chief Executive Sean George.
The acquisition is part of InVitae’s strategy to expand its genetic information platform offerings to include reproductive and family health capabilities. In addition to CombiMatrix—which specializes in prenatal diagnosis, miscarriage analysis, and pediatric development disorders—InVitae bought Good Start Genetics Inc. in Cambridge, Mass. for $40 million. Good Start provides carrier screening—to test if either partner carries a genetic mutation that could cause a serious inherited disorder in a baby—and preimplantation embryo testing. That deal closed this month.
When the most recent deal closes, it will close the books on an independent CombiMatrix—spun off 10 years ago as a publicly traded entity by Acacia Research, the Newport Beach-based patent-licensing firm. In that time, it’s resorted to three reverse stock splits, a one for 15 the most recent in February 2016. Lately the lab’s business is growing, its losses shrinking.
“We have felt that getting CombiMatrix to critical mass in terms of scale and product offerings was important for a number of years now,” said CombiMatrix Chief Executive Mark McDonough. “This [merger] makes sense now because we have really managed our expenses down while concurrently growing our revenues, so now our business is in really great shape for expansion.”
The company reported revenue of $12.9 million for 2016, up 28% from $10.1 million in 2015. It continued to improve results and testing volume in the first six months of this year, with $8 million in sales for the first six months, up 32% over 2016, and a narrower operating loss of $0.9 million.
The stock recently traded at $7.20 per share for a $21 million market value. Its stock shot up nearly 60% following the announcement.
Growth
InVitae, which trades on the New York Stock Exchange under the symbol NVTA, is also growing, generating $25 million in revenue in 2016, and $25 million in the first six months of this year; shares traded at $9.21 per share for a $395 million market cap.
Preimplantation genetic screening and preimplantation genetic diagnosis are increasingly used with in vitro fertilization pregnancy to explain failures and establish a healthy pregnancy. That’s reflected in reimbursement rates for those tests. CombiMatrix said the majority of its pregnancy-loss tests are reimbursed, and it has seen growing coverage for its microarray-based miscarriage analysis testing.
The market that CombiMatrix and Good Start serve is positioned for growth. Analysts forecast it to grow over 30% over the period of 2014 to 2019, according to a report by ReportsnReports, a collector of market-research reports based in Maharashtra, India.
George said genetic testing as an industry has grown over the last four years and “a lot of companies in the space are becoming [rational] quickly, and in the last six months, the pace of consolidation has really picked up.”
The company intends to increase market penetration with scale, offering more services at lower prices to achieve greater volume.
“Our goal is to invest a lot, to scale and win the race, [acquiring] all [testing for] all conditions in all phases of life,” he said.
