Medical Device Daily Executive Editor
EnteroMedics (St. Paul, Minnesota) reported filing a statement with the Securities and Exchange Commission registering a proposed initial public offering of its common stock to rise up to $86.25. The number of shares and the price range were not disclosed.
Founded by CEO Mark Knudson in 2002, EnteroMedics is a development stage medical device company focused on the design and development of devices that use neuroblocking technology to treat obesity and other gastrointestinal disorders. Its strategy is to "turn off" hunger pangs. Working with the Mayo Foundation (Medical Device Daily, March 31, 2005), EnteroMedics has developed a pacemaker-like device that, when applied to the vagus nerve (which connects the brain with the stomach, pancreas, and esophagus), is designed to provide the feeling of fullness with smaller portions of food.
Its initial product, the Maestro system, uses what the company calls Vagal Blocking for Obesity Control (VBLOC), involving the delivery of high-frequency, low-energy electrical impulses.
EnteroMedics said it will use the net proceeds as follows: $13 million for R&D activities; $23 million for regulatory approval; $20 million to launch sales and marketing; the remainder for working capital and general corporate purposes.
The Maestro includes two small electrodes that are laparoscopically implanted and placed in contact with the trunks of the vagus nerve just above the junction between the esophagus and the stomach, near the diaphragm. The electrodes receive electrical impulses from a neuroregulator implanted under the skin in the abdominal region. The major components of the Maestro system include: a neuroregulator that emits electrical pulses through the lead system; a lead system that delivers the pulses to the vagus nerve; a controller that regulates the rate and intensity of the pulses; and transmit coil that delivers RF energy and therapy control information across the skin into the neuroregulator; and a clinician programmer.
In its SEC statement, EnteroMedics reports that as of April 30, it has implanted the Maestro System in 63 subjects and that, "to date," there have been no observations of "mortality or any medically serious device-related complications that have required surgical attention in these subjects."
The company recently received a conditional investigational device exemption for its U.S. pivotal trial of the system for the treatment of obesity. The EMPOWER trial will seek to enroll and randomize 220 subjects in a double-blind, placebo-controlled, prospective, multi-center study in 3Q07, using the data support a PMA application.
It says it hopes to submit the application in the first half of 2009 and, assuming approval, will seek to begin selling the product in the U.S. the following year.
Since its launch in December 2002, EnteroMedics had a net loss of $40.2 million. In July 2006, the company closed on a $46 million round of venture financing (MDD, July 20, 2006).
Among the pro forma risks listed in its SEC filing, the company says it is aware of other firms developing neurostimulation systems, "including neuroblocking," and related patents and patent applications. "While we believe that none of such patents and patent applications are applicable to our products and technologies under development, third parties who own or control these patents and patent applications in the United States and abroad could bring claims against us . . . ."
J.P. Morgan Securities and Morgan Stanley & Co. are acting as joint book-running managers of the offering, with Cowen and Company acting as co-lead and Leerink Swann & Co. acting as co-manager for the offering.
In other financing activity:
• Omnicell (Mountain View, California), a provider of patient safety technology, reported that the underwriters of its public offering of 3.9 million shares of common stock, priced on May 23 and closed on May 25, exercised the full over-allotment option for another 585,000 shares.
With the over-allotments, Omnicell has issued 4,485,000 additional shares of common stock in the offering and received net proceeds of about $90 million.
Omnicell said it will use the funds for potential licenses and acquisitions of complementary technologies, products and companies, general corporate purposes and working capital.
Omnicell's medication-use product line includes solutions for the central pharmacy, nursing unit, operating room, and patient bedside, ranging from large central pharmacy smart inventory carousels to small handheld devices. From the point at which a medication arrives at the receiving dock to the time it is administered, Omnicell systems store, package, bar code, order, issue, and provide information and controls on product use and reorder.
• Endocare (Irvine, California), a provider of minimally invasive technologies for tissue and tumor ablation, reported selling $7 million of new shares of common stock in a placement to Frazier Healthcare Ventures (Seattle) at $2.15 a share, an 8% premium to the closing price of the stock on the day of the transaction.
Craig Davenport, president/CEO and chairman of Endocare, said the financing will be used "to further the company's efforts in prostate and renal cancer cryoablation and to further expand into the interventional radiology and oncology markets treating cancers of the lung and liver, as well as treatment of pain associated with metastases."
The investment by Frazier was led by Nathan Every, MD, MPH, a general partner. Every said, "We have also been impressed with the fundamental progress that the Endocare business has made with sustained procedure growth and their new business model that has shown substantial growth in gross margins."
In addition to the $7 million increase in cash from the investment by Frazier, the company has about $14.5 million available under its agreement with Fusion Capital, as well as a credit facility with Silicon Valley Bank.
Endocare has concentrated on developing technologies for treating prostate cancer and says that its technologies have applications across a number of markets.
• BioStorage Technologies (BST; Indianapolis), a leader in short-term and long-term biomaterials storage, sample management and cold chain logistics, reported final closing of a Series A round financing led by Radius Ventures (New York). Other investors included Spring Mills Venture Partners, Village Ventures and Twilight Venture Partners.
The amount of the financing was not disclosed.