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Vela Diagnostics Accelerates Entry Into US Microbiology Market With Great Basin Buy

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A previous version of this article misstated Larry Rea's former position at Great Basin as managing director instead of chief engineer.   

NEW YORK (GenomeWeb) – Having acquired Utah-based molecular diagnostics firm Great Basin Scientific in June, Singapore's Vela Diagnostics plans to expand its presence in the US microbiology sector with Great Basin's chip-based analyzer.

Vela CEO Michael Tillmann explained that while Vela currently markets several US Food and Drug Administration-approved virology assays for the US market, it also wants to offer tools to detect bacterial infections in patients. By purchasing Great Basin and its set of medium-multiplexing tools — which complement Vela's low-multiplex PCR and high-multiplex next-generation sequencing tests — Vela will attempt to tackle infectious disease diagnosis at the point of care.

"We see that the point-of-care industry and hospital labs are moving from batch analysis at core labs to the ICU and emergency rooms," Tillmann noted. "Because [these groups] are decentralizing, we believe that they will need a molecular POC instrument for new patient testing."

Great Basin has developed US FDA 510(k)-approved panels for Staphylococcus aureus, stool pathogens, Shiga toxin-producing Escherichia coli, Group B Streptococcus, and Bordetella pertussis. According to its FDA filing for the stool pathogens panel, the company's tests use "hot-start" PCR amplification (except one, which uses isothermal amplification) to amplify specific nucleic acid sequences, which are then detected using hybridization probes on a silicon microchip.

The assays run on Great Basin's Portrait Analyzer System, which conducts automated sample preparation, PCR, and optical-based detection with integrated data analysis in less than two hours.

Meanwhile, Vela currently offers tests for a number of virology and oncology indications based on either real-time PCR or next-generation sequencing workflows comprising its own automated sample prep workstation and reporting software alongside qPCR or sequencing instruments developed in partnership with third parties. In particular, earlier this year Vela's real-time PCR-based herpes simplex virus nucleic acid amplification assay received FDA 510(k) clearance, while its real-time PCR-based Zika virus test received FDA Emergency Use Authorization in September 2016.

While the Great Basin acquisition may appear unexpected, Tillmann explained that Vela had been negotiating with Great Basin as far back as 2016. In the first few months of 2017, however, Vela's investors and Great Basin's shareholders could not come to an agreement that worked for both sides, Tillmann said. He added that Vela then chose to wait until Great Basin "came into distress" and filed for Chapter 7 bankruptcy earlier this year before making its next move. Vela eventually purchased Great Basin's assets for $1.4 million in June.

"This is only a small part of a much larger investment, as we will need to reinvest in the company to recalibrate the technology," Tillmann explained, adding that Great Basin's debts have been handled by the courts and the company's trustees.

Vela seeks to further establish its US presence by reopening Great Basin's Salt Lake City site and rehiring former employees. Integrating the Salt Lake City office into Vela Operations US, the firm will rebuild Great Basin's distribution system while relying on its own current marketing system in the US.

Tillmann highlighted that the new US subsidiary will also allow Vela access to the US West Coast and Bay Area for manufacturing and further research and development. Vela currently has an office in Fairfield, New Jersey, where it focuses on marketing, sales plans, and customer training.  

Tillmann also noted that Vela is "fully committed" to reactivating Great Basin's full infectious disease product portfolio.

"We will need to discuss the R&D pipeline, since it's very rich, but we need to prioritize and see what is best for the firm's future," Tillmann explained. "We will need to constantly review and assess the R&D projects … as we examine all the documents with the FDA."  

Tillmann emphasized that Vela will also fully integrate Great Basin's assays into its existing Asia-Pacific and European markets, aiming to commercialize the technology as soon as possible to diagnose infectious diseases.

Great Basin's Demise

Before it declared bankruptcy in March, Great Basin had been struggling to maintain financial stability for the past two years.

Former Great Basin chief engineer Larry Rea, now chief operating officer of Vela's US operations, explained that the company had been developing its molecular testing system for three to four years before it began to run into financial issues.

In addition, Rea noted that while the Streptococcus diagnostic panel recently received 510(k) clearance, it had not been "introduced to the market in a formal, commercial model" before the firm declared bankruptcy in March.

"We had customers performing validation studies, and the results were very positive, in addition to a lot of customer excitement," Rea said. "But Great Basin did not have the resources in terms of funding to continue with commercialization."

In 2016, Great Basin received multiple warnings for its failure to meet a Nasdaq listing minimum of $35 million market value for its shares, finally delisting in October. Following a shareholder vote that December, Great Basin performed a reverse stock split later that month, reducing the firm's number of common stock shares by about 100 percent.

In order to minimize its annual cash burn by about $10 to $12 million, Great Basin implemented a restructuring and cost reduction plan in February 2017, cutting 50 jobs and streamlining manufacturing and administrating procedures.

In May, the firm announced that it was unable to file its Form 10-Q for the first quarter due to delays in preparing its unaudited quarterly financial statements. However, in August, the firm received a notice from the Securities and Exchange Commission that it was in default of senior notes for $18.3 million. Finally, in October, Great Basin disclosed that the OTC Markets Group had notified the firm that it would be moved from the OTCQB market to the OTC Pink market.

While Rea was involved in the technical portion of Great Basin — developing the assays rather than dealing with the firm's financial and business elements — he believes that the firm had several ambitious goals and "perhaps overreached a little bit" with its limited funding. At the same time, he noted that "the technology was never rejected in the marketplace, and [was] definitely accepted in the marketplace and had good uptake."

Rea suggested that "if there were any issues [with Great Basin], they were primarily on the business or finance end." While he does not know the details behind Vela's acquisition of Great Basin, Rea said that multiple firms had been in contact with Great Basin about purchasing certain assets before it declared bankruptcy earlier this year.

Looking Forward

According to Rea, Vela Dx will not need any further regulatory approvals in the US in order to relaunch Great Basin's infectious diseases assays. Moving forward, he believes that the platform will be "very easy to develop assays on," and with each [assay] that Vela Diagnostics develops, "the commercial hurdles move lower."

Rea highlighted that "under the right circumstances, Great Basin's technology is very easy to use, and I'm excited to bring the [technology] back to life and make it a success for Vela."

In addition to Great Basin, Vela previously acquired LifeCode's interpretation division in May 2016, which it has since integrated into its Vela Genomics subsidiary. As Vela ramps up its efforts to enter the US infectious disease sector, the firm also plans to start clinical trials to receive FDA approval for over 30 of its PCR assays on the Sentosa PCR platform, in addition to sequencing panels in virology and oncology.  

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