Covira Surgical

Early Stage

Revolutionizing Surgical Infection Prevention

Analytics

Raised to Date: Raised: $187,161

Aggregate Commitments $

Platform

StartEngine

Start Date

06/29/2021

Close Date

12/28/2021

Min. Goal

$10,000

Max. Goal

$1,070,000

Min. Investment

$250

Security Type

Equity - Common

Funding Type

RegCF

Series

Pre-Seed

Pre-Money Valuation

$9,987,500

Rolling Commitments $

Status

Active

Reporting Date

09/22/2021

Days Remaining

97

% of Min. Goal

1,872%

% of Max. Goal

17%

Likelihood of Max
unlikely
Avg. Daily Raise

$2,202

Momentum
cool
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Location

North Chicago, Illinois

Industry

Healthcare & Pharmaceuticals

Tech Sector

Biotech

Distribution Model

B2B

Margin

Medium

Capital Intensity

Low

Business Type

Growth

Covira Surgical, with a pre-money valuation of $9.99 million, is raising crowdfunding on StartEngine. The biotech company is focused on novel therapeutic alternatives to reduce post-surgical infections. The procedures of Covira Surgical leverage the power of the gut microbiome to increase immunity, and improve the health risk against infection. Dr. John Alverdy founded Covira Surgical in September 2018. The current crowdfunding round has a minimum raise of $10,000 and a maximum raise of $1,070,000, and the proceeds to promote future applications. Covira Surgical’s anti-virulence agent, Pi-PEG, is administered orally to prevent post-operative infections and progression to sepsis.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$0

$0

COGS

$0

$0

Tax

$0

$0

 

 

Net Income

$-38,932

$-52,678

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$118,858

$4,132

Accounts Receivable

$0

$0

Total Assets

$118,858

$4,132

Short-Term Debt

$212,017

$58,814

Long-Term Debt

$0

$0

Total Liabilities

$212,017

$58,814

Financials as of: 06/29/2021
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Ratings

Analyst Report

Synopsis

Surgical site infections remain an occurrence despite advancements in modern medicine. According to one source, between 2% and 4% of all inpatient surgical procedures result in infection. These infections lead to more than one million additional inpatient days spent in the hospital per year in the US. The annual cost of complications related to surgical infection, as estimated by the CDC, comes out to $3.3 billion. In addition, there are patients who get sepsis or anastomotic leaks.  At worst, surgical infection could lead to death, especially in an already weak patient.

Covira Surgical has developed a new therapeutic that can reduce the probability of patients getting a surgical site infection, sepsis, and anastomotic leaks. This product is known as Pi-PEG and is described as a phosphate covalently bonded to polyethylene glycol.Once mixed with water, a patient who is either about to receive a medical procedure or is post-operation ingests it orally.

Once inside the intestinal tract, the product serves as a coating that helps to inhibit bacterial infection while balancing out the gut’s microbiome. Covira’s product helps to boost or maintain the normal bacteria that exist within a person’s digestive tract, helping patient’s stay healthier than if they were only given antibiotics. Simultaneously, it reduces the chance that harmful viruses or bacteria will grow. The key component to boosting or maintaining normal bacteria is the phosphate within the product. Management also claims that the product can be used with or without antibiotics.

Covira Surgical’s current StartEngine raise has been rated a Deal to Watch by the KingsCrowd investment team.

Price

Covira Surgical is valued at $9.99 million. Though the valuation is reasonable when compared to other early stage startups, the company is still pre-revenue. Globally, the average revenue multiple for healthcare companies is 3x-to-6x. Once Covira Surgical begins to take in revenue, this will be an important benchmark to keep in mind. For now, Covira Surgical receives a slightly below average price rating.

Market

According to Mordor Intelligence, the incidence of surgical site infections in the United States “ranges from 160,000 to 300,000, and the estimated annual cost ranges from USD 3.5 billion to USD 10 billion.” In 2021, the surgical site infection control market is estimated to be around $4.7 billion. These numbers assume 2%-to-5% of all surgeries result in infection, which is in line with several other sources. Annually, the surgical site infection control market is growing at around 6%. It should be noted, however, that this market includes products such as surgical gloves, scrubs, and disinfectants. Covira Surgical will be targeting a smaller niche within this already limited market. As a result, the company’s market score is around average.

Team

At the helm of Covira Surgical is CEO Peter Farmakis. Farmakis has spent around 20 years working in management roles at medtech or pharmaceutical companies, including Johnson & Johnson and Abbott Laboratories. Particularly notable from that time is that he was part of two successful pharmaceutical startup exits. Farmakis brings ample managerial experience as well as successful entrepreneurial expertise. This combination makes him very qualified to lead Covira Surgical.

The other key individual at Covira Surgical is founder and Chief Scientific Officer Doctor John Alverdy. Alverdy is an accomplished surgeon and a world leader in surgical infection research. His focus has been on the molecular basis of surgical infections and the gut microbiome. Throughout his career, he has been published more than 200 times in peer-reviewed journals and other sources. He is also a professor of surgery and the executive vice chair of surgery at the University of Chicago. However, it does not seem that Alverdy has strong business experience to balance out his medical expertise.

Farmakis and Alverdy make a strong pairing. Between the two of them, medical knowledge, managerial skills, and entrepreneurial experience are all represented. Due to this, Covira Sugical’s team score is above average.

Differentiators

There does not appear to be any other company that offers precisely the same solution as Covira Surgical at this time. There are antibiotics that can be used to treat the same problems. However, many of them appear to be focused on treating existing infections and not on serving as preventative medicine. There’s also evidence that other solutions can work, but those lack the ease of use that something like Pi-PEG offers. 3M Company, for example, offers DuraPrep, a surgical solution to lower infection rates. This technically falls into the same market and is preventative, but it is a much different approach than that of Covira Surgical. Covira Surgical also exists in a highly regulated field and is patented, making for a massive defensibility moat.

In all, Covira Surgical receives a very strong differentiators score. Contributing to this score was the high quality differentiation of the product offering, as well as the patent protection and overall high barriers to entry.

Performance

Covira Surgicalhas been awarded one patent and has two others pending. The science seems to make sense, but the firm has a long way to go before it can commercialize its product. The current estimate is that it will take 14 months for the company to prepare and file its application with the FDA and another five months to engage in Phase 1 testing. 

In the meantime, the business is generating no revenue but still incurring expenses. In 2019, the company generated a loss of $52,678, while in 2020, its loss came out to $38,932. Additionally, Covira has had very little prior funding. Collectively, this resulted in a low performance score for the company.

Risks

Covira Surgical offers an average risk profile. The two main areas of concern are funding and time. Medical technology and pharmaceutical products require high capital commitments in order to develop products. Covira Surgical has not received much outside funding prior to this round, and the company will likely not start generating revenue for a year or more. All of these factors could lead the business to require further funding after this round.

From a timing perspective, Covira is still in the development phase. It must receive FDA approval before entering the market, and that process is very time intensive. Even with approval, Covira will likely be selling its product directly to hospitals. Business-to-business transactions like that create a long sales cycle, further extending the period before the company can begin generating revenue. All in all, there is a long road ahead of Covira which adds risk to this investment opportunity.

Bearish Outlook

Investors should consider that the valuation that management has placed on Covira Surgical looks to be rather high. The market opportunity for the company is small and growing at a slow pace. Financial performance has been discouraging, though that is common for an early stage pharmaceutical startup. In particular, investors should be willing to wait for Covira to finish development, attain FDA approval, and begin to secure customers — a process that will likely take a year or more to complete. 

Bullish Outlook

On the positive side, the Covira Surgical offers an innovative solution that already has one patent approved. It is a low-cost measure that can help save both money and lives in the long run. No other company is offering a preventative for surgical infections that is similar to Covira, putting the company at an advantage in the market. In addition, a strong team is leading the enterprise, particularly the top two executives. While an investment in Covira Surgical comes with a long-term commitment, the company is well-positioned to provide life-saving medical technology to the healthcare industry.

Executive Summary

Covira Surgical has developed a product called Pi-PEG that can be used to prevent infections associated with surgery and save lives. Covira will need to attain FDA approval before it can fully bring its product to market and begin generating revenue. However, there are many strong signs that investors should consider. First, the product is highly differentiated from current competition, and it also has defensibility due to a patent. Hospitals are likely to see the value in Covira’s solution as it will help them save lives and money. In addition, the team is led by a strong founder and CEO with decades of industry expertise. Due to these factors, Covira Surgical is a Deal to Watch at this time. 

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com

Analysis written by Daniel Jones.

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