A Medical Device Daily

NxStage Medical (Lawrence, Massachusetts), the manufacturer of the NxStage System One portable kidney dialysis machine, said that the underwriters of its recently reported (Medical Device Daily, June 12, 2006) follow-on offering have exercised their over-allotment option to purchase an additional 825,000 shares of common stock from the company at $8.75 a share.

Upon closing of the offering and exercise of the over-allotment option, a total of 6,325,000 shares of common stock will have been sold by the company, resulting in gross proceeds of $55.3 million and net proceeds of about $51.4 million, and 113,371 shares will have been sold by selling stockholders.

Merrill Lynch & Co. and JPMorgan were joint book-running managers for the offering. Thomas Weisel Partners and JMP Securities were co-managers.

NxStage makes dialysis systems for the treatment of end-stage renal disease and acute kidney failure.

Impulse Monitoring (Columbia, Maryland), a healthcare company that provides intra-operative neurophysiological monitoring (IONM) during invasive surgical procedures, reported completing a $9 million round of financing.

New investor Tullis-Dickerson led the round, with additional participation from existing investors. As a result of this investment, Timothy Buono of Tullis-Dickerson will join the company's board of directors.

The company said it will use this capital to differentiate services and rapidly expand its presence in the U.S.

IONM is the application of electrophysiological and vascular monitoring procedures during surgery. Impulse says that IONM reduces neurological injuries to patients during surgical procedures by detecting early warnings of injury and thus enabling intervention.

In other dealmaking news:

• Phase III Medical (Melville, New York) reported completing a financing of $2,079,000 in gross proceeds.

It said the money was raised to further develop the IP and market its new business, NeoStem (Agoura Hills, California), an adult stem cell collection, processing and storage business acquired by the company earlier in the year (MDD, Jan. 27, 2006).

Phase III entered into a securities purchase agreement with 17 accredited investors, and the company issued to each investor shares of its common stock, par value $.001 per share, at $0.044 a share, along with a five-year warrant to purchase a number of shares of common stock equal to 50% of the number of shares of common stock purchased by the investor.

“With this financing, NeoStem will be positioned for the growth needed to enable adults to store their stem cells for the future so they are available for diagnostic and therapeutic uses that are being developed for the treatment of diabetes, heart disease, and other critical health problems,” said Robin Smith, chairman and CEO of Phase III.

• Elbit Medical Imaging (EMI; Tel Aviv, Israel) said it has agreed with Israeli investors to issue about NIS 68 million aggregate principal amount of unsecured non-convertible Series A debentures to investors in Israel. These debentures would be in addition to the NIS 400 million in principal amount of Series A debentures and NIS 59 million in principal amount of Series B debentures, issued to Israeli investors in February and March.

EMI is a subsidiary of Europe Israel. One of its three subsidiaries is InSightec (Haifa, Israel), doing R&D work in image-guided focused ultrasound.

• Spectral Diagnostics (Toronto), a developer of rapid diagnostic technologies, has signed an agreement with security holders ofIDx to settle $10 million of outstanding convertible notes payable.

The company will issue 4,251,258 common shares of Spectral and a $2.5 million non-interest bearing, unsecured, convertible note payable Dec. 31, 2010, as settlement of all obligations related to the debt. In addition, the existing 500,000 Spectral warrants exercisable at $3 a common share until Nov. 3, 2008, will be cancelled, and 500,000 new warrants at a price of 47 cents a common share, expiring June, 2011, will be issued.

Upon closing, expected at the end of June, the company said it will recognize an accounting gain on settlement of debt of about $5 million.

Anthony Businskas, executive vice-president and CFO of Spectral, said, “Our balance sheet will be significantly improved and any uncertainty around the resolution of the IDx debt obligation will be removed.”

• Systems Xcellence (SXC; Milton, Ontario) has filed an amended and restated preliminary short-form prospectus with Canadian securities regulators and an amended registration statement with the Securities and Exchange Commission in connection with a public offering of its common shares in Canada and an initial public offering of its common shares in the U.S. (MDD, June 7, 2006).

The amended offering documents update SXC's share price and trading information and related information as at June 9, 2006, and SXC has re-filed management discussion and analysis for the year ended Dec. 31, 2005.

The company said it will sell 3.2 million common shares in the U.S. and Canada to raise gross proceeds of more than $50 million. The company said it also intends to grant underwriters an option to purchase up to another 480,000 common shares to cover any over-allotments.

The company said it will use net proceeds to retire its existing credit facility, the remainder to be used for acquisitions, working capital and general corporate purposes.

Systems Xcellence is a provider of healthcare information technology solutions and services.

• HealthSouth (Birmingham, Alabama) reported that it has priced a private offering of $1 billion aggregate principal amount of its senior notes, which includes $375 million in aggregate principal amount of its floating rate senior notes due 2014 at par and $625 million aggregate principal amount of its 10.750% senior notes due 2016 at 98.505% of par. The floating rate notes will bear interest at a per annum rate equal to six-month LIBOR plus 6%.

The company said it intends to use the proceeds from the issue, along with cash on hand, to repay all outstanding borrowings under its interim loan agreement which it entered into on March 10.

HealthSouth is a major provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services.

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