Medtronic Inc. (NYSE:MDT) is deepening its commitment to GI Dynamics Inc. by participating in a private placement concurrent with the Lexington, Mass.-based company’s initial public offering in Australia next week.
The Minneapolis, Minn.-based medical device giant, which has already invested $15 million in the company, has signaled its intention to be a part of a private placement of $19.7 million (AUS), about $20.7 million (USD), according to regulatory documents filed by GI Dynamics. Medtronic will join a number of the company’s existing shareholders in the private placement, by committing to another $5 million, which would make it the company’s largest corporate shareholder, besides venture capital firms.
Besides MDT, GI Dynamics has received investments from the Johnson & Johnson Development Corp., along with big venture capital firms Advanced Technology Ventures, Domain, Polaris Ventures and Cutlass Capital. All but JNJ are expected to participate in the private placement. About $6 million of the private placement will be convertible notes the company floated in the early summer under a bridge loan with current investors.
On Tuesday, GI Dynamics filed a prospectus with Australian regulators for an IPO that could fetch the firm between $80 to $95 million (AUS), which is about $86 million to $102 million (USD). The shares will not be issued until Aug. 11, 2011, according to the filing.
GI Dynamics’ move to file for an IPO in Australia before it has FDA approval in the U.S. is not without precedent. In 2005, Framingham, Mass.-based HeartWare International Inc. (NSDQ:HTWR) filed for an initial public offering on the ASX exchange, raising just over $32 million in the process. The company filed an IPO in the U.S. in 2007 and is traded on Nasdaq and the ASX.
EG Capital’s Howard Leibman told the Australian Lifescientist at the time of the filing that the Australian market made sense for companies still in the early stages of development.
“The US public markets have matured significantly so that in order to achieve a listing in the US you need commercial products — Phase III or beyond, or CE Mark or FDA approval,” Leibman said. “By comparison, the Australian market still has a greater appetite for earlier-stage medical device or biotechnology businesses, and as such provides potentially a valuable interim financing stage for a number of US companies.”
GI Dynamics’ EndoBarrier gastrointestinal sleeve won Australian approval for treatment of type 2 diabetes and obesity just last week. The device won CE Mark in Dec., 2009, for six months of treatment, which prompted a $15 million investment from Medtronic Inc. (NYSE:MDT), which joined other investors in backing the firm as it prepared for commercial launch in the European Union.
The Endobarrier has since been approved for 12 months of treatment in the European Union, and is commercially available in Chile, Germany, the United Kingdom and the Netherlands. The company has also received an investigational device exemption approval to commence a pilot trial of the EndoBarrier in the U.S.
The EndoBarrier is a plastic sleeve inserted endoscopically into the small intestine, where it slows the uptake of nutrients from food to induce weight loss and help control the symptoms of diabetes.
The device can be implanted without surgery, which company president & CEO Stuart Randle views as the next wave for medical devices. "I think the next generation of technologies is going to be combinations of devices, combinations of drugs and combinations of devices and drugs, all focused on effecting multiple mechanisms of action simultaneously — and less invasively than surgery," Randle told MassDevice in a June 2009 interview.
A series of clinical studies in 2009, as well as more recent research, has showed that patients treated with the EndoBarrier reduced their average blood glucose levels and lowered other diabetic factors including fasting blood glucose, and morbidly obese patients lost significant amounts of weight.