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EnteroMedics Closes $19M Public Offering Round

It’s the latest fundraising effort from a company that has struggled to turn a profit.

Roseville-based EnteroMedics Inc., maker of obesity treatment devices, closed its latest public offering round on Monday after raising $19 million.
 
The company beat the initial goal it announced last week of $16.5 million after selling over 750,000 shares of common stock at $5.31 and over 12,500 of its preferred stock, which was priced at $1,000 each and is convertible into 188 shares of common stock.
 
Investors were also offered one warrant for each share purchased that would allow them to buy another share for $5.84 anytime in the next five years, no matter the share’s future value.
 
The offering marked the latest effort by EnteroMedics to raise funds as it continues to hemorrhage money.
 
Last May, the company closed a $6.3 million convertible debt tranche and, in July 2015, raised $16 million during another public offering.
 
For most of last year, EnteroMedics had been struggling to regain compliance with the NASDAQ exchange after its stock dropped below the $1 requirement in March. In order to keep its NASDAQ listing, the company performed a 1-for-70 reverse stock split in late December and, at the start of 2017, began trading at around $2 a share.
 
Shares closed at $7.47 on Tuesday.EnteroMedics.jpg

What remains consistent across all of the company’s recent fundraising efforts is the new capital’s purpose. EnteroMedics has been ramping up commercialization and marketing efforts of its flagship vBloc System, which is implanted into a patient’s body. The device uses high-frequency impulses to block messages between the brain and gut, therefore reducing a patient’s hunger level.

Despite proving to be clinically effective, the vBloc System isn't covered by any of the major insurers. For a patient to be fitted with the device, the out-of-pocket expenses can exceed $18,000, Insider Financial reports. Some insurance companies are said to have covered portions of the cost, but never all or the majority of the bill.
 
Without coverage, the device has struggled to take off among consumers, leading EnteroMedics to report an average annual loss of more than $26.8 million from 2007 to 2015.
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