Acacia Research Corp. increased its stake in a company that owns the patent on the lucrative V-chip in an effort to boost its cash positions for its core biotechnology business.
In a deal for cash and a share of future licensing revenues, Pasadena-based Acacia raised its stake in Soundview Technologies, which owns the patent on the V-chip, the software package programmed into TV sets allowing viewers to filter content. It already held a 66 percent position in Soundview.
The value of the transaction was not disclosed.
Soundview’s value to Acacia has grown in recent months, as the company has reached settlements with 10 television manufacturers over alleged patent violations.
In light of the litigation, the companies have agreed to pay Soundview for the right to use the V-chip through the patent’s July 2003 expiration. Among the TV makers that were granted v-chip licenses are JVC Americas Corp., Philips Electronics, Daewoo and Thomson Multimedia.
Confidentiality agreements with the TV makers prevent Acacia from disclosing how much it expects to net from the settlements, but as of April Acacia Chief Executive Paul Ryan said the company had earned about $10 million from the licenses.
Acacia could use the cash. It has been focused on research and development, primarily for its majority-owned CombiMatrix Corp.’s biochip technology, which has yet to generate revenues.
While it has no short-term or long-term debt and some $87 million in cash and short-term investments, Acacia has been losing money. It reported a net loss of $9.5 million (55 cents per diluted share) for the first quarter ended March 31, compared with a net loss of $2.7 million (28 cents) for the like year-earlier quarter. Its first quarter revenues, derived mostly from v-chip licensing fees, were $2.6 million, up from just $17,000 in the like year-earlier quarter.
That revenue picture is about to change. CombiMatrix, based outside Seattle, Wash., formed an alliance earlier this month with Swiss drug giant Roche Holding AG to develop genetics-based research and diagnostic tools.
CombiMatrix makes what are called “microarrays,” which are semiconductors on which thousands of genetic tests are performed at the same time.
As part of the 15-year agreement, Roche will market the microarrays and both companies will collaborate on R & D;, Ryan said.
In what could be a much wiser approach than the one TV makers took with Acacia’s technology, Roche will make payments to CombiMatrix over the first three years, including royalties, in exchange for the rights to buy, use and resell the microarrays.
Ryan says it’s a non-exclusive agreement, which allows CombiMatrix to form alliances with other drug companies something Acacia expects to do later this year.
CombiMatrix filed for an initial public offering last November and could be one of the early biotech start-ups out the door this year. Regarding the IPO, Ryan said the company had no timeframe he could comment on.
Acacia stock has been trading in the $17 range this month, up from a tumble it took in April when it dropped to a 52-week low of $5.16 per share. It soared as high as $37 per share last October.
The company reports second quarter earnings July 25.
