Medical devices company Medigus Ltd. (TASE:MDGS), which has developed a minimally invasive treatment for GERD (gastroesophageal reflux disease), raised $7.5 million on Nasdaq late last week. Its current market cap is under NIS 12 million, half the amount it raised.
Medigus issued a package that included an American Depository Share (ADS), a tracking share equivalent to 50 Medigus shares, and a 3.5-year warrant for another ADS for $3.50. Following the offering, the price of Medigus's ADS dropped 24% to $3.25. Medigus's share price fell 29% to NIS 0.39 on the Tel Aviv Stock Exchange (TASE) during the three days preceding the Nasdaq offering, and was down an additional 34% today, making a cumulative 55% drop since the company announced its offering last week.
The money raised will keep Medigus in operation at least another year at the company's current burn rate. The company made substantial cutbacks last year, due to liquidity problems. The company's preceding offering in late 2016 raised only $700,000.
Medigus's liquidity problems are a result of the difficulty it is having in penetrating the market with its MUSE system, a less invasive substitute for surgery in the treatment of GERD. The company's revenue from this system totaled only $500,000 last year, 12% less than in 2015. The company finished 2016 with $3 million in cash, $4 million less than in 2015.
Can Medigus recover from this situation using the money it has now raised? The company is continuing to operate a reduced sales network in the US, after the clinical trial showing the superiority of its products to the existing methods also failed to improve its US sales. The company is now pinning its hopes on Europe, where it has signed a distribution agreement with an Italian company, and on China, where it has signed a distribution with market leader Sinopharm. Medigus is currently conducting a clinical trials for obtaining CFDA certification to market its device in China.
Published by Globes [online], Israel Business News - www.globes-online.com - on March 26, 2017
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