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Sunshine Heart Raises $3.8 Million

Company switching gears to focus on new acquisition.

Eden Prairie-based Sunshine Heart Inc. landed an infusion of $3.8 million from a “health care dedicated institutional investor” in exchange for convertible preferred stock in the company. The company announced a similar deal in July when it raised $3.5 million from a “single investor” in exchange for convertible preferred stock.
 
Sunshine Heart clearly needs capital. For 2015, the medical device company posted only $59,000 in revenue with a net loss of $26.6 million.
 
In its latest annual filing with the U.S. Securities and Exchange Commission, the company noted: “Our ability to continue as a going concern is dependent on our ability to raise additional capital based on the achievement of existing development, clinical and regulatory milestones as and when required. Our directors, after due consideration, believe that we will be able to raise new capital as required to fund our business plan.”
 
It has been a year of transition for Sunshine Heart. In March, the company named John Erb as its new CEO and president. Erb previously held both titles on an interim basis for three months.
 
In late September, Sunshine Heart announced a “strategic realignment” focused on the Aquadex FlexFlow System, which the company acquired in August. The company also outlined plans to decrease its monthly cash burn rate while continuing an “ongoing review of potential partnerships, strategic alliances, and the pursuit of financing alternatives.”
 
The Aquadex system is used to remove salt and water from patients who are suffering from fluid overload and for whom diuretic therapy has not worked.
 
According to a statement from the company, its latest financing will be used for “working capital needs for our recently-acquired Aquadex product line and for general corporate purposes.”
 
The company was previously centered on its C-Pulse Heart Assist System, aimed at improving cardiac function and quality of life for heart failure patients. The concept called for stabilizing patients by applying a cuff wrapped around the outside of the aorta to provide a “secondary pulse” to bolster heart function. But the C-Pulse system does not have approval from the U.S. Food and Drug Administration for sale in the U.S.
 
At the end of 2015, the company had $23.1 million in cash. By the end of June, the company was down to $12 million in cash.
 
Sunshine Heart was founded in Australia in 1999 before relocating to Minnesota. The company’s stock began trading on the NASDAQ stock exchange in 2012.
 
On Tuesday the company’s stock closed at 21 cents per share.
 
In September, the company disclosed that NASDAQ regulatory staff told the company that it did not meet listing standards for the exchange. Stocks that consistently trade below $1 per share are at risk for being delisted. The company indicated that it would request a chance to make its case for regaining compliance to a NASDAQ hearing panel, which stays any delisting action.
 
Another Minnesota medical company, Eagan-based Skyline Medical Inc., is also facing the prospect of being potentially delisted.

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