NEW YORK (GenomeWeb) – Avant Diagnostics plans to go public through a reverse merger effective Oct. 1, after which it will begin preparing a US Food and Drug Administration 510(k) submission for its proteomic ovarian cancer test OvaDx, Greg Linn, the company's CFO and COO told ProteoMonitor this week.
Under the plan, Avant will merge with Houston-based oil company American Liberty Petroleum, which announced its acquisition of Avant last week in an 8-K filing with the US Securities and Exchange Commission. The new entity will then change its name to Avant and list on the Over-The-Counter Bulletin Board.
The move satisfies requirements of the settlement of a lawsuit filed March 31 by Avant against its former parent company Arrayit, in which Avant accused Arrayit of breach of contract, fraud, negligent misrepresentation, and other cases of action.
Under the settlement, which the parties reached Aug. 6, Arrayit retained the right to manufacture the OvaDx test, and Avant retained its right to sell and market OvaDx upon US Food and Drug Administration clearance. However, Avant was required to become a publicly traded company within one year of the agreement or else commercialization rights for the test would revert back to Arrayit, which still holds a minority stake in Avant.
"Our business plan called for us to go public upon FDA approval for monitoring of OvaDX," Linn said. "Arrayit wanted us to go public about a year sooner, and so as [part of the] settlement we agreed [to go public earlier]."
ALP CEO Robert Rhodes is a past investor in Avant and Linn has previously done business with him and ALP CFO Steven Plumb, which factored in the decision to use the company as a vehicle for the reverse merger, Linn said.
"My fiduciary responsibility is to the shareholders of Avant, so I wanted to find the best vehicle to complete the reverse merger at the lowest possible cost or dilution to my existing shareholders," he said. "We were able to make a very reasonably priced reverse merger with these folks as opposed to some of the other structures we looked at, and it's always a lot easier to do business with people you have done business with in the past."
ALP has sold its assets to prepare for the merger, Linn said. According to the 8-K filed last week, the deal also stipulates the arrangement of certain consulting contracts, a 1-for-17 reverse split of the shares of American Liberty Petroleum Corp., and the reauthorization of 450 million common stock shares.
Avant shareholders will own 96.5 percent of the new entity while pre-existing ALP shareholders will own 3.5 percent, Linn said. He added that Rhodes and current Avant CEO Steven Scott will resign upon completion of the deal, and that he will take over as CEO with ALP's Plumb joining Avant as CFO.
Avant will then begin preparing an FDA 510(k) submission for use of OvaDx for monitoring in ovarian cancer patients, Linn said, noting that the company was planning a 1,200- to 1,800-patient study to gather data in support of this submission. He said he expected it to take between six to 12 months to complete the study and necessary documentation for a submission.
Ultimately, Linn said, the goal is to develop OvaDx as a screening test for ovarian cancer. However, he said, for this the company aims down the road to partner with an established diagnostics company that has the resources needed for submitting a screening test to FDA, which, he noted, will likely be a much longer and more expensive process than the 510(k) submission for monitoring.
Avant plans to raise around $4 million to support its OvaDx 510(k) submission efforts as well general operating expenses, Linn said.
Based on Arrayit's protein microarray technology, OvaDx detects ovarian cancer by measuring levels of roughly 110 proteins in serum. According to Avant's website, in preclinical studies of 237 women the test performed with sensitivity of 80 percent and specificity of 100 percent. The specificity number was determined using samples from healthy females, females with benign gynecologic diseases, and men, the company said, though it didn't provide a further breakdown of this cohort.
The test's road to the clinic has been a long and circuitous one. In 2009, Arrayit created Arrayit Diagnostics as a subsidiary for commercializing the test, announcing in early 2010 that it planned to file for FDA 510(k) clearance and launch the test as early as Q3 2010.
In August 2010, the company switched gears, saying that it would be seeking FDA pre-market approval for the test – a more stringent process than 510(k) clearance that is typically applied to in vitro devices considered to be high risk.
In December 2011, Arrayit spun out Arrayit Diagnostics as an independent company, which subsequently became Avant Diagnostics. Since then, the company has made little apparent progress in making an FDA submission for the test as Linn said it will begin putting together a Pre-IDE submission for FDA – the first step in the regulatory process – once the reverse merger is completed.
In addition to gathering data for a 510(k) submission, Avant will aim in the upcoming studies to trim the OvaDx panel down from the roughly 110 proteins that currently comprise it, Linn said, noting that that number was somewhat unwieldy, particular for use as a screening test.
Linn said he also hoped to build Avant's pipeline beyond OvaDx and that he had identified several other proteomic diagnostics in early stages of academic development that he will consider licensing or acquiring.
"My goal is to develop over the next year or so a pipeline of two, three, four, different diagnostic tests," he said.
Linn joined Avant as CFO and COO in December 2012. He is also president and managing member of business strategy firm Issuers Capital Advisors, CEO and managing member of Red Rock Advisors, CEO and managing member at sheet metal manufacturer Precision Metal Products, and CEO and managing member at gourmet popcorn company OTPCC.