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CombiMatrix Corporation Reports Second Quarter 2016 Financial and Operating Results

20:00 EDT 2 Aug 2016 | Globe Newswire

Revenue growth, gross margin expansion and strong cash reimbursement support progress toward goal of profitability

Conference Call Begins Today at 4:30 p.m. Eastern Time

IRVINE, Calif., Aug. 03, 2016 (GLOBE NEWSWIRE) -- CombiMatrix Corporation (NASDAQ:CBMX), a family health molecular diagnostics company specializing in DNA-based reproductive health and pediatric testing services, today reported financial results for the three and six months ended June 30, 2016, and provided a business update.

“During the second quarter we made excellent progress toward our goal of achieving profitability with revenue growth, expanded gross margin, improved cash collections and a narrowed operating loss,” said Mark McDonough, CombiMatrix President and CEO.  “Diagnostic services revenues grew 21%, driven by a 32% increase in reproductive health revenues reflecting increased average revenue per test for miscarriage analysis and prenatal testing.

“We are prudently managing expenses while focusing on our commercial organization to support continued growth,” Mr. McDonough added.  “Our operating expenses increased by 5% on 22% total revenue growth and we achieved record cash reimbursement of $3 million, representing 95% of total revenues.  We also are reporting an 840 basis point improvement in gross margin to 53%, our second consecutive quarter of gross margin above 50%.

“We expect improved financial and operational performance throughout 2016 and 2017 with continued growth in revenue and test volume, along with consistent cash reimbursement and prudent expense management,” added Mr. McDonough.  “Given our current outlook, we expect to reach positive cash flow from operations by the fourth quarter of 2017.”

Second Quarter Financial and Operating Highlights (all comparisons are with the second quarter of 2015)

  • Total revenues of $3.1 million, up 22%
  • Reproductive health revenues of $2.2 million, up 32%
  • Total test volume of 2,780, up 7%
  • Reproductive health test volume of 1,403, up 9%
  • Gross margin of 53.0%, up 840 basis points
  • Number of billable customers of 261, up 16.5%
  • Number of customers sending 50 or more tests reaching 10, up 100%
  • Cash collections of 95% of total revenue to $3.0 million, up 21%
                           
    Volumes   Revenues (in 000's)   Average Revenue / Test  
    Q2 '16   Q2 '15   # Δ  % Δ  Q2 '16   Q2 '15   $ Δ  % Δ  Q2 '16   Q2 '15   $ Δ  % Δ 
 Prenatal    302     340     (38)  (11%) $  472  $  424  $  48   11% $ 1,566.41  $ 1,247.76  $  319   26% 
 Miscarriage analysis    901     916     (15)  (2%)    1,457     1,190     267   22% $ 1,616.72  $ 1,299.32  $  317   24% 
 PGS    200     30     170   567%    252     42     210   500% $ 1,258.55  $ 1,389.17  $  (131)  (9%) 
 Subtotal - reproductive health    1,403     1,286     117   9%    2,181     1,656     525   32% $ 1,554.84  $ 1,287.78  $  267   21% 
 Pediatric    497     581     (84)  (14%)    558     630     (72)  (11%) $ 1,121.83  $ 1,083.59  $  38   4% 
 Subtotal - all arrays    1,900     1,867     33   2%    2,739     2,286     453   20% $ 1,441.57  $ 1,224.24  $  217   18% 
 Non-array tests    880     732     148   20%    310     238     72   30% $  352.27  $  325.14  $  27   8% 
 Total - all tests    2,780     2,599     181   7%    3,049     2,524     525   21% $ 1,096.90  $  971.23  $  126   13% 
 Royalties   58     25     33   132%         
 Total revenues$  3,107  $  2,549  $  558   22%         
                           
  Percentage of arrays   68.3%  71.8%      89.8%  90.6%             
                           
                           
    Volumes   Revenues (in 000's)   Average Revenue / Test  
    6 Mo's. '16   6 Mo's. '15   # Δ  % Δ  6 Mo's. '16   6 Mo's. '15   $ Δ  % Δ  6 Mo's. '16   6 Mo's. '15   $ Δ  % Δ 
 Prenatal    566     664     (98)  (15%) $  794  $  847  $  (53)  (6%) $ 1,403.13  $ 1,274.86  $  128   10% 
 Miscarriage analysis    1,896     1,798     98   5%    3,079     2,322     757   33% $ 1,623.76  $ 1,291.57  $  332   26% 
 PGS    367     30     337   1123%    473     40     433   1083% $ 1,290.67  $ 1,324.00  $  (33)  (3%) 
 Subtotal - reproductive health    2,829     2,492     337   14%    4,346     3,209     1,137   35% $ 1,536.41  $ 1,287.50  $  249   19% 
 Pediatric    949     1,048     (99)  (9%)    1,058     1,128     (70)  (6%) $ 1,114.41  $ 1,076.74  $  38   3% 
 Subtotal - all arrays    3,778     3,540     238   7%    5,404     4,337     1,067   25% $ 1,430.41  $ 1,225.11  $  205   17% 
 Non-array tests    1,650     1,404     246   18%    575     474     101   21% $  348.48  $  337.61  $  11   3% 
 Total - all tests    5,428     4,944     484   10%    5,979     4,811     1,168   24% $ 1,101.52  $  973.19  $  128   13% 
 Royalties   100     67     33   49%         
 Total revenues$  6,079  $  4,878  $ 1,201   25%         
  Percentage of arrays   69.6%  71.6%      90.4%  90.1%             
                           

Financial Results

Three Months Ended June 30, 2016 and 2015

Total revenues for the second quarter of 2016 increased 22% to $3.1 million from $2.5 million for the second quarter of 2015.  Revenues for the second quarter of 2016 were comprised of $3.05 million of diagnostic services revenue and $58,000 in royalties.  Reproductive health diagnostic test revenue, which includes prenatal microarrays, miscarriage analysis and PGS, increased 32% to $2.2 million and related testing volumes increased 9% to 1,403.  The second quarter 2016 revenue increase was driven primarily by higher average revenue per test particularly for miscarriage analysis and prenatal microarray tests, as well as by an increase in the number of billable customers.

Total operating expenses were $4.3 million for the second quarter of 2016 compared with $4.1 for the prior year period. The increase was due primarily to higher general & administrative expenses from increased severance and bonus accruals, an increase in research & development expenses due to development and launch of new diagnostic testing platforms, and higher cost of services as a result of higher test volume.  Gross margin for the second quarter of 2016 improved to 53.0% from 44.6% for the second quarter of 2015.

The net loss attributable to common stockholders for the second quarter of 2016 was $1.2 million, or $0.89 per share, improved by $377,000 from a net loss attributable to common stockholders for the second quarter of 2015 of $1.6 million, or $1.91 per share. 

Six Months Ended June 30, 2016 and 2015

Total revenues for the first six months of 2016 increased 25% to $6.1 million from $4.9 million for the first six months of 2015.  Revenues for the first six months of 2016 included $6.0 million in diagnostic services revenue and $100,000 in royalty revenues.

Operating expenses for the first six months of 2016 were $8.8 million compared with $8.2 million from the prior-year period, with the increase mainly due to higher cost of services resulting from increased testing volumes.  Gross margin improved to 52.3% for the first six months of 2016 from 45.4% for the first six months of 2015.

The net loss attributable to common stockholders for the first six months of 2016 was $4.4 million, or $3.89 per share, compared to $4.3 million, or $5.23 per share in 2015.  The higher net loss attributable to common stockholders in 2016 reflected one-time, non-cash charges of $1.9 million related to deemed dividends from the issuance of Series F convertible preferred stock and warrants in the $8.0 million public offering that closed on March 24, 2016.  This increase was partially offset by the reversal of the $890,000 Series E deemed dividend recognized in 2015 from the repurchase of those securities upon closing of our public offering, partially reduced by the $656,000 deemed dividend paid to the Series E investors in February of 2016. 

The Company reported $5.2 million in cash, cash equivalents and short-term investments as of June 30, 2016, compared with $3.9 million as of December 31, 2015.  The Company used $0.9 million and $2.5 million in cash to fund operating activities during the quarter and six months ended June 30, 2016, respectively, compared with $1.5 million and $2.6 million used to fund operating activities during the comparable 2015 periods, respectively.  The significant decreases in net cash used to fund operating activities for the 2016 periods resulted primarily from improved cash reimbursement of $3.0 million and $5.4 million for the three and six months ended June 30, 2016, respectively, compared with $2.5 million and $4.6 million for the three and six months ended June 30, 2015, respectively.

Conference Call and Webcast

CombiMatrix will hold an investment-community conference call and audio webcast today beginning at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results and answer questions. The conference call dial-in numbers are (866) 634-2258 for domestic callers and (330) 863-3454 for international callers.  A live webcast of the call will be available at http://investor.combimatrix.com/events.cfm.

A recording of the call will be available for seven days beginning approximately two hours after the completion of the call by dialing (855) 859-2056 for domestic callers or (404) 537-3406 for international callers, and entering passcode 53433797. The webcast of the call will be archived for 30 days on the Company’s website at http://investor.combimatrix.com/events.cfm.

About CombiMatrix Corporation

CombiMatrix Corporation is a family health focused company that provides valuable molecular diagnostic solutions and comprehensive clinical support to foster the highest quality in patient care. CombiMatrix specializes in pre-implantation genetic diagnostics and screening, miscarriage analysis, prenatal and pediatric diagnostics, offering DNA-based testing for the detection of genetic abnormalities beyond what can be identified through traditional methodologies.  CombiMatrix performs genetic testing utilizing a variety of advanced cytogenomic techniques, including chromosomal microarray, standardized and customized fluorescence in situ hybridization (FISH) and high-resolution karyotyping.  CombiMatrix is dedicated to providing high-level clinical support for healthcare professionals in order to help them incorporate the results of complex genetic testing into patient-centered medical decision making. Additional information about CombiMatrix is available at www.combimatrix.com or by calling (800) 710-0624.

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

This press 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, speak only as of the date hereof and are subject to change. All statements, other than statements of historical fact included in this press release, are forward-looking statements. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "goal," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words and include, but are not limited to, statements regarding projected results of operations, including projected cash flow-positive operating results, management's future business, operational and strategic plans, recruiting efforts and test menu expansion. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. The risks and uncertainties referred to above include, but are not limited to: our ability to grow revenue and improve gross margin; delays in achieving cash flow-positive operating results; the risk that test volumes and reimbursements level off or decline; the risk that payors decide to not cover our tests or to reduce the amounts they are willing to pay for our tests; the risk that we will not be able to grow our business as quickly as we need to; the inability to raise capital; the loss of members of our sales force; our ability to successfully expand the base of our customers, add to the menu of our diagnostic tests, develop and introduce new tests and related reports, expand and improve our current suite of services, optimize the reimbursements received for our microarray testing services, and increase operating margins by improving overall productivity and expanding sales volumes; our ability to successfully accelerate sales, steadily increase the size of our customer rosters in all of our genetic testing markets; our ability to attract and retain a qualified sales force in wider geographies; our ability to ramp production from our sales; rapid technological change in our markets; changes in demand for our future services; legislative, regulatory and competitive developments; general economic conditions; and various other factors. Further information on potential factors that could affect our financial results is included in our Annual Report on Form 10-K, Quarterly Reports of Form 10-Q, and in other filings with the Securities and Exchange Commission. We undertake no obligation to revise or update publicly any forward-looking statements for any reason, except as required by law.

Company Contact: Investor Contact:
Mark McDonough LHA
President & CEO, CombiMatrix Corporation Jody Cain
(949) 753-0624 (310) 691-7100
  jcain@lhai.com

Tables to Follow

COMBIMATRIX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share information)
(Unaudited)

     Three Months Ended   Six Months Ended   
     June 30, 
  June 30,
  
     2016   2015   2016   2015   
             
Revenues:           
Diagnostic services $  3,049  $  2,524  $  5,979  $  4,811   
Royalties    58     25     100     67   
Total revenues    3,107     2,549     6,079     4,878   
             
Operating expenses:          
Cost of services    1,432     1,398     2,851     2,628   
Research and development    149     62     292     219   
Sales and marketing    1,141     1,173     2,477     2,363   
General and administrative    1,586     1,488     3,112     2,963   
Patent amortization and royalties    25     25     50     50   
Total operating expenses    4,333     4,146     8,782     8,223   
Operating loss    (1,226)    (1,597)    (2,703)    (3,345)  
Other income (expense):          
Interest income    8     5     12     8   
Interest expense    (17)    (20)    (35)    (40)  
Total other income (expense)    (9)    (15)    (23)    (32)  
Net loss $  (1,235) $  (1,612) $  (2,726) $  (3,377)  
             
Deemed dividend paid for right to repurchase Series E convertible preferred stock $  -  $  -  $  (656) $  -   
Deemed dividend from issuing Series E convertible preferred stock and warrants    -     -     890     (890)  
Deemed dividend from issuing Series F convertible preferred stock and warrants    -     -     (1,877)    -   
Net loss attributable to common stockholders $  (1,235) $  (1,612) $  (4,369) $  (4,267)  
             
Basic and diluted net loss per share $  (0.89) $  (1.91) $  (2.43) $  (4.14)  
Deemed dividend paid for right to repurchase Series E convertible preferred stock    -     -     (0.58)    -   
Deemed dividend from issuing Series E convertible preferred stock    -     -     0.79     (1.09)  
Deemed dividend from issuing Series F convertible preferred stock    -     -     (1.67)    -   
Basic and diluted net loss per share attributable to common stockholders $  (0.89) $  (1.91) $  (3.89) $  (5.23)  
             
Basic and diluted weighted average common shares outstanding    1,382,019     845,395     1,122,975     816,076   
             

CONSOLIDATED BALANCE SHEET INFORMATION:

 June 30, 2016June 30, 2015
Total cash, cash equivalents and short-term investments $5,227 $3,901  
Total assets  9,753   7,922 
Total liabilities  2,142  2,066  
Total stockholders’ equity  7,611  5,856 
   


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