A Medical Device Daily
Chad Therapeutics (Chatsworth, California) said it has suspended operations due to its inability to raise additional capital.
Chad sold the assets of its oxygen-conserving business in February to Inovo (Naples, Florida) for about $5.25 million, and a month later sold its transfilling oxygen business for $1.825 million in a separate deal (Medical Device Daily, Feb. 4/March 10, 2008).
Since then, Chad has been seeking additional capital to support the marketing of the products it has been developing for the sleep disorder market, including its FloChannel diagnostic system, which received FDA marketing clearance in July (MDD, July 31, 2008).
Despite current difficult conditions in the capital markets, Chad said it recently reached an agreement in principle for a $2 million investment by a private equity group. Among the terms of the proposed investment, the private equity group required that all back salary and severance obligations to officers and former officers be settled for no more than $250,000 in cash plus stock in the company.
CEO Earl Yager and Chairman Thomas Jones, who together are owed $293,750 in back salary, had agreed to settle this obligation, as well as their severance contracts, for stock in the company. The independent members of Chad's board, who had agreed to defer director fees, would also receive no cash for unpaid director's fees. Three of the four other officers and former officers agreed to receive pro-rata shares of the $250,000 in cash plus stock in the company, but one former officer would not agree. As a result, the private equity group advised Chad that it was unwilling to proceed with the contemplated financing.
Chad said it is exploring other potential funding sources, but "current prospects are not promising and the company can offer no assurance that it will be successful in raising the funds it requires to re-start operations or that it will be able to restore its business operations if funding is secured." The board is considering appropriate actions in light of Chad's current circumstances, including liquidation of the company under Chapter 7 of the federal bankruptcy laws.
In other financing activity:
• DFine (San Jose, California), a developer of minimally invasive solutions for treating vertebral compression fractures (VCFs), has secured a $30 million round of investment in its Series D funding led by BBT Fund LP and Highland Capital Management. Other investors include Prospect Venture Partners and Vanguard Ventures.
Minimally invasive treatment of VCFs, percutaneous vertebral augmentation (also known as vertebroplasty or kyphoplasty), require placement of bone cement into the fractured vertebra. DFine said percutaneous vertebral augmentation offers many benefits compared to a conventional surgical approach including reduced procedure time, shorter hospital stays, shorter recovery period and the elimination of brace usage.
• Response Biomedical (Vancouver, British Columbia) said it has completed an initial closing of the financing it first reported last month, raising gross proceeds of $4.66 million.
The closing involved a brokered and non-brokered private placement of 31,084,435 units at a price of 15 cents a unit. Each unit consisted of one common share and one-half of one common share purchase warrant.
Each full warrant is exercisable for one common share at a price of 20 cents a share. The warrants may be exercised for a period of 36 months from the closing date. Subject to delivery of necessary funds and documents, a further non-brokered financing of roughly $340,000 is expected to close within the next few days on the same terms, bringing the gross proceeds raised by that time to $5 million, Response Biomedical said.
The common shares issued under the initial closing will have a hold period under Canadian law until March 1. The hold period for the additional common shares issued in the subsequent closing, if any, will be four months from the date of the closing.
The company said it would use net proceeds for working capital purposes, in particular toward the launch of the Flu A+B test sold by 3M (St. Paul, Minnesota) and the cardiovascular test line to be marketed by Roche Diagnostics (Basel, Switzerland).
Response Biomedical develops rapid on-site diagnostic tests for use with its RAMP platform for clinical and environmental applications.
In late 2006, the company formed a strategic alliance with 3M to sell rapid infectious disease tests worldwide and in 2008 entered into a strategic alliance with Roche to commercialize rapid cardiovascular tests worldwide.
In the non-clinical market, RAMP tests are provided for the environmental detection of West Nile Virus, and Biodefense applications including the rapid on-site detection of anthrax, smallpox, ricin and botulinum toxin.
• Biosystems (Paris), a developer of monoclonal antibody based diagnostics for cancer, receives venture capital amounting to €3.5 million ($4.6 million) from VC-funds managed by SGAM AI, a pharmaceutical company in Europe, and private investors. The company said it would use the funds to foster R&D of lung, colon and breast cancer diagnostics to be marketed in 2010.
• BrainScope (Washington), developers of a new generation of non-invasive hand-held devices designed to assess a patient's brain function and potentially identify dysfunction, reported that Revolution, Alafi Capital and ZG Ventures have increased their investment in the company. The company also made two appointments to its senior executive team.
Steve Case, co-founder of AOL and founder of Revolution, has increased his investment in BrainScope and joined its board of directors. In addition, Miles Gilburne, the managing partner of ZG Ventures, has been named as BrainScope's co-chairman, along with medical device venture capitalist Phillip Himelstein.
The company also has hired as CEO Michael Singer, who most recently was president of Revolution Health Investments for Revolution.
• X-Rite (Grand Rapids, Michigan), a color science and technology company, said it has completed a $155 million capital raise led by OEPX, a Delaware limited liability company managed by One Equity Partners (OEP), and with Sagard Capital Partners, and Tinicum Capital Partners II, Tinicum Capital Partners II Parallel Fund, and Tinicum Capital Partners II Executive Fund.