Medigus Ltd. (TASE:MDGS), which develops and sells minimally invasive diagnostic tools, has raised $8 million in a private placement from OrbiMed Israel Partners LP in exchange for an allotment of 31% of the company. Medigus's endoscopic SRS system is an non-surgical treatment for gastroesophageal reflux disease (GERD).
The investment will be at NIS 0.73 per share, or at the average share price in the five trading days before Medigus's board of directors approves the deal, whichever is lower. Medigus's share price rose 14.8% yesterday to NIS 0.89 - 21% above the share price in the deal - giving a market cap of NIS 80.3 million, but corrected downward 6.7% by midday today to NIS 0.83.
OrbiMed will have an option valid for 18 months to increase its stake in Medigus to 47% at a price 25% higher than the price in the current deal, and for a subsequent 18 months at a price 50% higher than the price in the current deal.
The investment reaches Medigus at the right time. Last year, it obtained US Food and Drug Administration (FDA) approval for its GERD treatment, and its pipeline has many more products based on the company's miniature camera.
Many medical devices companies have failed after obtaining FDA approval, because establishing a marketing and distribution network requires heavy investment at once, as well as experience and connections in the US market. In addition to the financing, OrbiMed can advise Medigus on which products in its pipeline it ought to develop further, and where to sell them. OrbiMed Israel managing director Anat Naschitz led the investment in Medigus.
Before OrbiMed's investment, Medigus has NIS 5 million in cash, and in late 2012, it announced that it would have to scale back operations to support the marketing of its flagship product, including steep pay cuts for executives and directors.
Medigus controlling shareholders are CEO Dr. Elazar Sonnenschein, Menashe Sonnenschein, Dr. Aviel Roy-Shapira, Esther and Kfir Luzzatto, and chairman Yair Rabinowitch. Its biggest shareholder is Dan Oren (the owner of Dexxon Pharmaceuticals Ltd.), who quit the controlling core.
OrbiMed Israel is controlled by senior managing director Dr. Nissim Darvish, Naschitz, managing director Erez Chimovits, and OrbiMed Advisors LLC. OrbiMed Advisors is an international investment company which specializes in the life sciences and manages $6 billion in investments.
Published by Globes [online], Israel business news - www.globes-online.com - on January 7, 2013
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