Avisa Pharma Inc. is about to go public on the TSX Venture Exchange in Toronto through a reverse merger with the Canadian “capital pool company” Panorama Capital Corp.
Santa Fe-based Avisa, which launched in 2010, has developed a rapid breath test for bacterial pneumonia and other pulmonary infections based on technology it originally licensed from the University of New Mexico. It’s already raised about $16 million in private equity to date. And in January, it signed an agreement with the alternative investment group Global Emerging Markets Limited that provides access to a $40 million line of equity over the next three years to finance further product development and clinical trials to win U.S. Food and Drug Administration approval for its technology.
However, the financial deal with GEM, a $3.4 billion global investment firm, requires Avisa to go public outside the U.S., said Avisa president and CEO David Joseph.
“We can draw down as little or as much as we need of the $40 million over three years, but to access it, we need to do an initial public offering outside the U.S.,” Joseph said.
To do that, Avisa signed agreements with Panorama Capital Corp. in May for a reverse merger that would allow Avisa to start trading on the Toronto exchange while keeping majority control of the company in the hands of existing shareholders, Joseph said. The public listing will take place this summer.
“We’ll be listed on the TSXV, which gives us the ability to access the (GEM) facility,” Joseph said. “Together with the public offering in Canada, we’ll have substantial capital to finance two pivotal FDA trials over the next two and a half years, and additional funds for product development.”
The public listing through Panorama is made possible by Canada’s capital pool company system, which allows investors there to form a shell company with between $500,000 and $5 million in seed capital, but no commercial operations, for listing on the TSXV. The shell firm then seeks an emerging small capital company like Avisa to invest in, or merge with, through an IPO that ends up fully listed for trading on the exchange.
“It’s an innovative structure that allows investors to participate in public markets through shell companies that are usually populated by financial market experts,” said Avisa Chief Financial Officer Matt Culler. “After listing, they go out and find interesting investment opportunities. That allows a private company like Avisa Pharma to connect with them to support company growth going forward.”
In the U.S., such structures are generally called “special purpose acquisition companies,” Culler said.
“In Canada, investors can set up a capital pool company with less than $1 million, allowing them to connect with small companies that offer the right size and opportunity for their investment level,” Culler said.
Panorama, which became a publicly traded capital pool company in June 2019, expects the IPO to fully close in September. At that point, Avisa will be listed on the TSXV as Avisa Diagnostics Inc. (ticker symbol AVSA), with about 77% of shares still controlled by existing investors, according to a May 13 announcement by Panorama.
The New Mexico State Investment Council has a significant stake in Avisa through Santa Fe-based Sun Mountain Capital, which manages the SIC’s Co-Investment Fund for investments in local startups. Sun Mountain previously committed several million dollars to the company.
Avisa says its technology can determine if a patient is infected with bacterial pneumonia, tuberculosis or other virulent pulmonary diseases in less than 10 minutes with a simple breath test. The original technology was developed by Graham Timmons, a UNM professor of medical chemistry and toxicology, and Vojo Deretic, chair of the Molecular Genetics and Microbiology Department.
They repurposed and nebulized a urea-based drug that turns to carbon dioxide when it comes in contact with bacteria. That happens because a lot of bacteria in the lungs contain an enzyme that breaks down urea to absorb the nitrogen and other elements in it, leaving carbon dioxide behind.
The drug acts as a biomarker for the enzyme. Patients breathe the compound in, and when they exhale, the carbon dioxide levels are measured with a small, laptop-sized device that Avisa has developed for immediate point-of-care testing in emergency rooms, clinics or remote areas.
That can cut testing time for bacterial infections down from days for a sputum-based culture, allowing doctors to immediately assess infections and adequately prescribe medication.
The company is focused now on applying its technology for bacterial pneumonia detection in emergency rooms, and for respiratory illness in patients on ventilators, to help doctors rapidly and accurately diagnose disease at point of care. That could reduce overuse of antibiotics and decrease hospital stays, Joseph said.
Many patients in emergency rooms can be treated with lower doses of medication without hospitalization, rather than the broad-spectrum antibiotics that doctors are often forced to immediately prescribe as they await sputum test results.
“No one else has a breath test to rapidly detect respiratory infections like bacterial pneumonia,” Joseph said. “We can tell in 10 minutes what a patient has and needs. And only about 15% of patients actually need broad-spectrum antibiotics.”
The system would allow doctors to immediately detect infection, offer guidance on how to treat it, and then monitor treatment results through continued testing, Joseph said.
The company provided its technology for a year-long study in 2018-2019 to detect bacterial pneumonia in 75 emergency room visitors and hospitalized patients at UNM, and at the Henry Ford Hospital in Detroit. That allowed physicians to assess the safety of the urea-based drug and evaluate the effectiveness of Avisa’s measurement device, said Dr. Justin T. Baca, emergency room doctor at UNM Hospital.
“In general, we found the test itself seemed pretty safe,” Baca said. “… We didn’t see problems with tolerability of the inhaled drug that goes with the test.”
The physicians are still analyzing the results of Avisa’s system compared with sputum from patients in the study, Baca said.
But with the new GEM financing and forthcoming public listing, Avisa is now preparing for much larger FDA trials to approve the system for bacterial pneumonia testing in the U.S. Once that’s achieved, the company will focus on testing for tuberculosis and other bacterial diseases.
“I believe we have a unique, novel technology,” Joseph said.
Kevin Robinson-Avila covers technology, energy, venture capital and utilities for the Journal. He can be reached at email@example.com.