Q&A: New CEO has high hopes for Spartan Cube after family trust buys biotech firm's COVID-testing IP

Spartan Cube
Production of Spartan Bioscience's rapid COVID-19 test, called the Spartan Cube, was put on hold earlier this year after more issues were identified with the test. File photo

Spartan Bioscience’s rapid COVID-testing platform will be resuscitated by a new company after the embattled Ottawa biotech firm’s assets were acquired by an Ontario-based family trust earlier this month.

Spartan filed for creditor protection six months ago and laid off two-thirds of its 90 employees after facing continued questions about the reliability of its COVID-detecting lab-in-a-box dubbed the Spartan Cube. 

Following months of legal wrangling, the Ontario Superior Court earlier this month approved the sale of Spartan’s intellectual property to Casa-Dea Finance, which provided $7 million in bridge financing to Spartan last year. Casa-Dea also acquired the Business Development Bank of Canada’s $9-million claim against Spartan.

Under the plan, a new corporate entity – which officially unveiled its name, Genomadix, last week – will now take control of Spartan’s former assets. 

Spartan owed tens of millions of dollars to other creditors, including $16.4-million to Health Canada, $9.8-million to the Ontario Agency for Health Protection and Promotion and $8.7-million to CHU de Quebec-Universite Laval. Those creditors did not receive a dime in the settlement.

The sale marks the end of a turbulent journey for Spartan, which was launched nearly 15 years ago and had long been considered a potential biotech superstar in the making.

The company spent years developing a rapid DNA test for legionella bacteria, a deadly germ that can spread through heating, ventilation and air-conditioning systems. The technology was later adapted to determine whether heart patients will reject certain types of blood thinners due to a genetic mutation.

New leadership

When COVID-19 emerged in Canada early last year, Spartan suddenly found itself in the spotlight after pivoting its coffee-cup-sized device to test for the novel coronavirus. But its plans to sell hundreds of millions of dollars worth of products to governments and other clients were derailed after Health Canada rescinded its approval of the device over concerns about the effectiveness of its proprietary cheek swab.

The test once again got the green light from Health Canada after Spartan did some retooling, but the company halted its production efforts this spring after seeing a “higher-than-expected level of inconclusive results” from the Cube.

Now, Spartan’s technology will carry on under new owners and new leadership. OBJ recently spoke with Genomadix CEO Steve Edgett, who joined Spartan as an executive vice-president in 2019, about the challenges of trying to develop a COVID-19 test on the fly, the Spartan Cube’s future market prospects and other opportunities for the new company.

OBJ: What were the last 18 months like at Spartan?

SE: It’s been a bit of a wild ride. It’s had some very high highs and some low lows, but it’s been a fantastic learning opportunity. We’ve been through the school of hard knocks, but I think we’ve come out of it stronger. Now we’re in a really good position.

We’ve got a lot more experience on the team, we’ve got a lot of infrastructure that we didn’t have before (the pandemic), and we’ve gotten a lot further down the track with commercialization. Now we have a very solid three-legged stool to prop the company up. We have the environmental monitoring that we’re doing in the legionella space, we have the precision medicine that we’re doing with the cardiology test and now we have a play in the infectious disease space with (the rapid COVID test) that can be parlayed into other infectious diseases like influenza, RSV (respiratory syncytial virus), strep, etc. So it’s an exciting opportunity.

OBJ: What’s the situation at Genomadix right now? 

SE: The new company will start with 37 employees, and we’re starting to hire again. We were in limbo while we were going through the creditor protection process. Everybody was kind of stretched to their limits in order to keep the company going. Happily, we’re now in a position where we’re out from under that process and we can start making new investments, including hiring new staff. It’s pretty much a full press of the reset button.

OBJ: Biotech R&D is not a cheap endeavour. How do you plan to pay for it?

SE: A number of investors have come out of the woodwork – angel investors that have supported Spartan traditionally, but we’ve also had a strong outpouring from institutional (investors). We’re in negotiations right now on closing financing for the company with some strategic (investors) in the life sciences space. That’s something that Spartan never had. I think that having that institutional investment is really going to provide (market) confidence in not only the management team but also the technology. We’ve got partners with some deep pockets coming into this, but also people who can provide some very strategic support from a board level and from a commercialization point of view.

OBJ: What can you say to reassure people that the Spartan Cube technology is sound?

SE: We augmented the team with some very good experience. Jeremy Bridge-Cook, who joined as our chief scientific officer (in March), has an incredible background, having come from both the investment sector and having spent many years at (U.S.-based biotech firm) Luminex. He was able to quickly identify some of the causes of the problems and put actions in place to address those problems and ensure that we have a robust development process. We have been in constant communication with Health Canada and sharing updates on modifications that we’ve been doing. We’re now at the beginning of the process to have the test go back through its clinical approvals. We’re now in pre-clinical testing in the United States with two hospitals and gathering all the data before we start our formal clinical trials this fall.

OBJ: Where do you see the biggest markets for the Spartan Cube?

SE: The COVID market is going to remain robust. We’ve seen with the continued mutations … it’s pretty certain that this disease is now endemic and will be circulating in the population for years to come. If you show up at the workplace or you go to school and you have COVID-like symptoms, you are going to be subject to a COVID test. That being said, we’ve taken a step back and have a much more balanced approach of going to market. With COVID, we all of a sudden became very much a one-legged stool. When that one leg got pulled out from under us, we came crashing down. We have a very good, solid foundation with those three different verticals in play – precision medicine, infectious disease and environmental testing.

The big sector for our technology is no doubt in the infectious disease space. Think about applications like being able to have a test at a pharmacy as soon as you have a sore throat, and the pharmacy being able to say is that COVID, or influenza, or RSV or strep throat? That’s a multibillion-dollar marketplace. One of the things that COVID did is it proved that decentralized diagnostics is incredibly valuable. There’s a real benefit of being able to do testing at the point of care and being able to get a highly reliable result. Spartan is uniquely positioned to do very, very well in that space.

OBJ: In hindsight, did Spartan move too fast in trying to get the Spartan Cube to market?

SE: Spartan was definitely punching above its weight class in what it was trying to achieve. Really, we were trying to do some heroics here by developing a test in months for something that typically takes years. We didn’t have the capacity and the financial strength, when we hit a speed bump, to be able to depend on other revenue streams to shore the company up. We were instantly choked out when we ran into problems. We did our best and came up a little bit short. With the luxury of some additional resources and time, we’re now at a place where we feel very confident that we have the answer in hand.

We’re moving forward with gusto. We have a chance to have a great success story in Canadian biotech. It would have been a real shame to have seen this bought for pennies on the dollar and moved to the U.S. or Europe. We’re really pleased with the outcome and optimistic about the future.