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Spartan Bioscience is filing for creditor protection and laid off the majority of its staff, almost a year after landing a $74-million contract from the federal government to produce rapid COVID-19 testing kits. Here’s what you need to know about the company’s fall from grace. 

Hollowing out: The Ottawa-based firm has paused all shipments of its COVID-19 rapid tests and laid off 60 out of about 90 employees, plus several students and interns working for the company. The firm also said it is filing for creditor protection, though no CCAA filings were published as of late afternoon Tuesday. PitchBook lists three investors in the firm: Canon, Toronto-based Maple Leaf Angels and Arizona-based family office MooDoos Investments. 

Spartan’s promise: Less than a month after COVID-19 was deemed a pandemic, Spartan Bioscience received Health Canada approval for its Cube, a rapid and portable device that was lauded as a gamechanger for COVID-19 testing. The approval came through on the federal interim order to fast-track medical devices. The designation gave the Ottawa-based company the green light to immediately start selling its product to health-care providers around the country. Ontario and Alberta placed orders for over 900,000 and 100,000 tests, respectively, and the federal government pledged $74 million to help Spartan ramp up production. 

The recall: Weeks after getting federal approval, Health Canada noted that Spartan’s swabs may not have been collecting enough material to produce accurate test results. The company pulled the product and sent it for more clinical testing. In August 2020, the firm said it had not yet received all full payment for government orders, but noted “that down payments from our partners have been critical in allowing us to scale test manufacturing capacity so that we are ready to mass produce immediately upon receipt of Health Canada approval.”

Take two: The company worked to fix the problems with its swabs and resubmitted its device for Health Canada approval in December; it was finally granted in late January. 

Executive shakeup: While Spartan was working to address problems with its swabs, the company’s longtime CEO Paul Lem stepped down and assumed the role of chief medical officer last summer. The company named Roger Eacock as Lem’s replacement in November 2020. Eacock previously held senior management positions at Sobeys and biopharmaceutical firm TerrAscend. As of Tuesday, Jennifer Ross-Carriere is the company’s interim chief executive officer and will manage the restructuring process, spokesperson Jeffrey Fenton told The Logic. Ross-Carriere joined Spartan’s legal team last April, first as general counsel than as chief legal and administrative officer. 

Persistent inconsistencies: Spartan’s tests continued producing inconclusive test results even after Health Canada’s second approval, Ross-Carriere told BNN Bloomberg on Tuesday. Fenton told The Logic the firm has stopped all shipments of its tests. “As a result of this pause in shipment, Spartan is seeking protection from creditors working to restructure the company and refine the performance of the COVID-19 test in the field,” he said.