SafeStitch Medical Issues Shares to TransEnterix Investors

TransEnterix shareholders are a little richer today. At least on paper, anyway.

Investors received $160.4 million worth of stock from SafeStitch Medical Inc. as part of a mid-August merger agreement between the two companies. Under terms of the deal, SafeStitch will move its operations from Miami, Fla., to Research Triangle Park, N.C., but  keep its name, stock symbol and place on the OTC exchange.

TransEnterix CEO Todd Pope is leading the new SafeStitch and medtech veteran Paul LaViolette is serving as board chairman. SafeStitch Chairwoman Jane Hsiao and OPKO Health Chairman Phillip Frost also have seats on the new entity’s board.

“We are excited about the breadth of the management team of TransEnterix,” Hsiao said. “There are compelling advantages to flexible technologies and robotics for less invasive surgical interventions, such as our proprietary trans-oral device. This merger will provide greater resources to help bring the pipeline products of the combined company to market and offer our shareholders an excellent opportunity to realize significant value of their investment.”

The merger included a private placement worth about $30.2 million, SafeStitch bigwigs said. To consummate the deal, TransEnterix shareholders received nearly 106 million shares which, at $1.52 apiece, are worth $160.3 million, according to published reports.

“We believe this merger will significantly enhance our ability to bring our innovative robotic surgery platform to market,” Pope said.  “Drs. Frost and Hsiao have a proven track record of driving healthcare innovation while creating significant value for shareholders.  We expect the company will be at the forefront of advancements in minimally invasive surgery.”

Regulatory filings show SafeStitch’s backers include Aisling Capital, which owns a 20.3 percent stake; SV Life Sciences (a 14 percent share); Synergy Life Science Partners (a 10.1 percent stake); and Intersouth Partners (a 10 percent share). Hsiao owns a 9.4 percent share in the company while co-founder and former president/CEO Jeffrey Spragens is keeping a 2.4 percent stake in the firm. Frost holds an 8.5 percent stake.

Under the terms of the merger agreement, current shareholders of SafeStitch Medical and TransEnterix will own approximately 35 percent and 65 percent of the combined company, respectively. The merger is expected to close in the 2013 third quarter.

Perella Weinberg Partners was the financial advisor and Wilson Sonsini Goodrich & Rosati was legal counsel to TransEnterix. Cassel Salpeter was the financial advisor and Greenberg Traurig was legal counsel to SafeStitch Medical.

Founded in 2005 by Dr. Charles Filipi and Spragens, SafeStitch manufactures the Amid hernia fixation device. TransEnterix – founded the following year – made laparoscopic devices including the Spider and Starr instruments. It raised $21 million in “institutional financing” in 2008, according to its website. Another $55 million round followed in 2009 and TransEnterix raised an additional $15 million in venture capital in 2011.