EnteroMedics Inc. (NSDQ:ETRM) closed its $29.8 million public offering of 17 million shares of common stock and 17 million corresponding warrants.
The St. Paul, Minn.-based anti-obesity device maker plans to use the $27.6 million it netted from the offering to support the regulatory approval of its neuroblocking Maestro RC system.
The stock went for aggregate price of $1.75 per share, which included a corresponding warrant. The warrants have an exercise price of $2.19 per share of common stock, according to the company.
EnteroMedics’ most recent offering seems to reflect its growing confidence in winning approval from the Food & Drug Administration for its Maestro device, which uses electricity to control hunger by blocking nerve signals between the brain and stomach.
That’s a stunning turnaround from a year ago, when the company teetered on the brink of disaster. In October 2009, it reported initial results from the Empower study of more than 400 patients that showed people who used the Maestro device lost just as much weight as patients implanted with a dummy device. EnteroMedics stock plummeted as executives realized they needed to raise more money in a difficult economy and redesign a study to show Maestro works. In August, the FDA approved a new 12-month study dubbed Recharge. That trial will enroll 234 morbidly obese people who will randomly be implanted with the Maestro or a sham device. This time, the dummy device will have no wires connected to the vagus nerve. Patients also will use an updated Maestro device in which the battery pack will be worn around the belt instead of implanted.
Since late August, EnteroMedics stock has climbed about 29 percent. The company recently sold 3.4 million shares of preferred stock to investors (preferred shares carry special dividends and allow investors to receive top priority for payment, should the company file for bankruptcy). In addition, EnteroMedics granted those investors warrants to purchase another 3.4 million shares at $2.15 per share.
EnteroMedics estimates that Bay City Capital’s 22.7 percent ownership stake will be diluted to 10.9 percent by the most recent offering, according to SEC documents. The next two largest investors, MPM Capital and Aberdare Ventures, would see their stakes fall to 7.9 percent and 4.5 percent, from 16.5 percent and 9.5 percent, respectively.
In September, company raised $6.3 million in an offering with top investors, including Bay City Capital, MPM Capital and Aberdare Ventures.
ETRM shares closed down about 3.5 percent yesterday at $2.70 each.