Outset Medical
(Nasdaq: OM)
announced today that it entered into a definitive securities purchase agreement worth proceeds of $168.8 million.
The agreement features a private placement of 843,908 shares of Series A non-voting convertible preferred stock at $200 per share. Subject to stockholder approval, each share automatically converts into 250 shares of common stock. That brings the placement to an aggregate of nearly 211 million shares of common stock.
San Jose, California–based Outset Medical, expects proceeds to total $168.8 million before fees and other expenses. Certain members of the board and management plan to invest an additional $3.9 million for 19,432 shares as well. Those investors include Leslie Trigg, the company’s chair and CEO.
Outset also entered into a credit agreement and guaranty with a fund managed by Perceptive Advisors. This provides a $100 million five-year term loan at closing, plus an additional term loan of up to $25 million at the company’s election, in each case, subject to the satisfaction of customary closing conditions and in the case of the delayed draw term loan, meeting a specified revenue milestone.
At closing, Outset expects to use the proceeds from the initial loan, plus cash on hand, to repay in full all amounts due under existing credit facilities. The company expects to have approximately $210 million in cash, cash equivalents, restricted cash and short-term investments with $100 million in debt.
“Based on our current projections, the funds from this financing are expected to capitalize the company through cashflow breakeven,” said Trigg. “We appreciate the strong support from existing and new investors, which now enables the entire Outset team to focus on prosecuting our mission to catalyze permanent and profound change in where, when and how dialysis is delivered.”
The analysts’ take on the latest Outset Medical update
In addition to the financing news, Outset reported preliminary fourth-quarter revenues of $29 million. Its preliminary full-year 2024 revenue comes in at $113 million, topping prior guidance.
This quarterly may signal a potential upturn for Outset, which previously dealt with two straight down quarters. Along with that performance dip, the company announced cost-reduction steps, including workforce reductions, in May.
BTIG analysts Marie Thibault and Sam Eiber say the company highlighted “strong” treatment utilization. Outset develops dialysis technology, including the Tablo home hemodialysis system.
“With the Q4 beat pointing to performance continuing in the right direction and with near-term concerns about cash runway and debt maturity alleviated by the financing, we expect OM shares to trade higher today,” the analysts wrote.
Shares of OM rose about 5% to $1.47 apiece in midday trading today.
