A Medical Device Daily

EndoGastric Solutions (EGS; Redmond, Washington), a privately held medical device company developing endoluminal reconstructive gastric procedures, reported that it completed a $32 million Series C financing led by Chicago Growth Partners.

The company said it plans to use the proceeds to support ongoing clinical trials, expand the product portfolio and launch its first product, EsophyX, commercially.

In addition to Chicago Growth Partners, the company's existing investors, MPM Capital, Advanced Technology Ventures and Foundation Medical Partners, participated with increased investments over previous rounds as did a new investor, Oakwood Medical Investors.

EndoGastric Solutions' first product is a trans-oral approach to treating gastroesophageal reflux disease (GERD) by creating and/or restoring the gastroesoph-ageal valve, similar to that created by laparoscopic surgery.

This valve prevents reflux of the stomach contents into the esophagus, thus eliminating the root cause and hallmark symptoms of GERD.

EGS said it has completed the Phase I feasibility study enrollment and early follow-up for its GERD product, EsophyX. Phase II trials of the product are ongoing.

The company is preparing to launch EsophyX in Europe and the U.S., and also is broadening its portfolio to include trans-oral endoscopic treatment of obesity.

EGS is developing endoluminal procedures for the treatment of upper gastrointestinal diseases, including GERD and obesity.

StemPath (Ottawa, Ontario), a biotechnology company developing peptide-based pharmaceuticals to stimulate heart and skeletal muscle regeneration, reported that it has entered into definitive agreements for a C$1 million private placement with New Generation Biotechnology Funds.

The company said it expects to use the proceeds of this transaction to bring its first drug candidates, aimed at treating acute myocardial infarction and skeletal muscle myopathies, into the preclinical testing phase.

The financing involves convertible debentures purchased in two tranches. The first tranche debenture is for an aggregate principal amount of C$700,000 and the second tranche, which is conditional upon StemPath meeting performance milestones, is for an aggregate principal amount of C$300,000.

Genesys Capital Partners, manager of the New Generation Biotechnology family of funds, is continuing to support the company in its research efforts.

In other financing news:

• Cepheid (Sunnyvale, California), said it has filed a preliminary prospectus supplement with the Securities and Exchange Commission relating to an underwritten public offering of 10 million primary shares of common stock plus an option to purchase up to an additional 1.5 million shares to cover any over-allotments.

The book-running manager of the proposed offering is UBS Investment Bank and co-managers are William Blair & Co. and Robert W. Baird & Co.

Cepheid is a molecular diagnostics company that develops integrated systems for genetic analysis in the clinical, industrial and biothreat markets. The company's systems are designed to enable rapid, sophisticated genetic testing for organisms and genetic-based diseases by automating otherwise complex manual laboratory procedures.

• HealthSouth (Birmingham, Alabama) said it plans to issue up to $300 million of convertible perpetual preferred stock through an offering to qualified institutional buyers via a private placement exemption under the Securities Act of 1933.

This new offering follows on the heels of the company's proposed $445 million class-action settlement for federal securities and fraud claims (Medical Device Daily, Feb. 24, 2006).

This preferred stock will be convertible into HealthSouth common stock.

The company said that the purpose of the preferred stock issuance is to reduce HealthSouth's outstanding indebtedness.

If the company successfully completes its previously disclosed recapitalization transactions, the amount of senior unsecured interim term loans the company will be permitted to borrow in connection with the recapitalization transactions will be reduced by the amount of gross proceeds that HealthSouth receives from the preferred stock issuance.

If the recapitalization transactions are not completed, the company will use the net proceeds that it receives from the preferred stock issuance to repay a portion of its outstanding senior unsecured indebtedness.

HealthSouth is one of the nation's largest providers of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, operating facilities nationwide.

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