Azure Health Technology (ASX: AZT) is paving the way for early revenues from its planned acquisition of drug developer Invictus Biopharma, revealing the imminent launch of nutraceutical products in the United States.
Last November, Azure announced its intention to acquire Melbourne-based Invictus in an $8.2 million transaction.
Under a binding, conditional memorandum of understanding, the company agreed to acquire 100% of Invictus’ issued capital in exchange for shares and options in Azure and the assumption of up to $1.2 million of Invictus’ net liability to creditors and lenders.
The takeover will effectively transform Azure into a company involved in the development, production, marketing and sale of nutraceuticals products, as well as the commercialisation of drug platforms for the non-invasive delivery of tocotrienols (T3), a main form of Vitamin E.
Speaking with Small Caps, Azure executive director Steven Yu said the company is “unique” because its ready-to-launch nutraceutical products can “bring in short-term cash flow”, while its longer term drug development programs could add “enormous value” if clinical results are successfully proven.
Products ready for launch
In the short term, Azure will focus on the marketing and sale of its nutraceutical products in the US, Australia and China.
According to Mr Yu, two T3-based dietary supplement products are ready for launch – NE1-Elite and NE1-Heart.
NE1-Elite is designed to alleviate muscle soreness and improve muscle recovery after exercise, while NE1-Heart protects and strengthens heart function.
Both products use a patented “melt then swallow” formulation known as MELT3 that dissolves under the tongue and is absorbed into the bloodstream.
Mr Yu said this differs from the usual delivery of Vitamin Es or T3s, which get absorbed by the liver and gut.
“They will be manufactured out of Florida in the US and we have a team ready to market and sell these products,” he said.
Drugs under development
While the nutraceutical products are anticipated to generate early revenues, Mr Yu said there is the potential for more much more value from Azure’s four drug candidates currently in development.
These candidates target pancreatic cancer and non-alcohol fatty liver disease (NAFLD) – two conditions that are considered to have high unmet clinical needs as “neither have viable treatments which adequately addresses them.
“The traditional method to cure pancreatic cancers will kill the cancer cells, as well as kill your healthy cells. Our method has very low toxic levels and will not damage your healthy cells,” Mr Yu said.
In the case of NAFLD, he said there is currently “no effective cure” so Azure’s drug candidates could be the “only drug that can hopefully find a solution to this disease”.
Two of the company’s drug candidates are at pre-clinical stages and another two are at secondary stages of development.
“We are not at the very early stages – two drugs are already at stage two, meaning we are ready to do clinical trials. We have passed the animal tests, we have passed the toxicity tests and are ready to apply to patients,” Mr Yu said.
He said he expects the value of the company to “go up dramatically” if the clinical trials are proven to be a success.
“We are launching the clinical trials later this year; we expect to have some results in the second half of next year,” Mr Yu said.
As the acquisition involves a significant change in the nature and scale of Azure’s activities, the company (which was known as online media company Moko Social Media prior to delisting in 2017) issued a re-compliance prospectus in February for the purpose of satisfying ASX listing rules and facilitating the reinstatement of trading.
In this prospectus, Azure is seeking to raise up between $7 million to $10 million through a public offer of up to 35-50 million shares priced at $0.20 each.
At the start of this month, the company extended the closing date of its offer to 15 April to capture more investment with the completion of the Invictus acquisition anticipated “immediately after the close of the offer”.
Accordingly, the ASX has granted an extension to Azure’s delisting deadline to 24 April.
Use of funds
If the minimum $7 million is raised, $485,000 has been budgeted to be spent on launching the US nutraceuticals operations in the first year.
Another $1.09 million is budgeted to provide ongoing funding for the NAFLD and pancreatic cancer pre-clinical programs.
The remaining proceeds from the offer are expected to provide working capital, repay creditors and cover offer costs.
Hedging against COVID-19 impacts
Mr Yu also commented on the impact COVID-19 is currently having on many sectors of global markets – bar the health industry.
“By investing in health technology, you are hedging against this challenging environment because people are willing to invest in health-related companies and technologies,” he said.
In the case of traditional investments like property development and the finance sector, Mr Yu said market performance is “really poor”.
“But if you look at all the health-related industries, it’s a boost rather than bringing the market down,” he said.