“We are very pleased to have the support of these esteemed institutional and individual investors as we continue to pioneer and bring the advantages of high levels of automation to complex cardiac ablation procedures,” said William C. Mills, Stereotaxis CEO and chairman. “Moreover, we are excited to work closely with each of the new board members, who bring with them a fresh perspective and a proven ability to build strong businesses and clinically meaningful technologies that create value for patients, clinicians and shareholders. The confidence each of these investors has demonstrated through significant commitments further validates the potential we see for Stereotaxis to become the standard of care in an expanding market of procedures that can be improved by our technology.”
Stereotaxis will receive a $24 million upfront investment upon the issuance of convertible preferred stock with a conversion price of $0.65, a 10 percent premium to the Sept. 26 closing price and a 6 percent premium to the 10-day volume-weighted average price. The company will have the opportunity to receive up to an additional $25.8 million in the future upon the exercise of warrants. The private placement was expected to close by the end of September subject to standard closing conditions.
The investment is co-led by DAFNA Capital Management LLC and Joe Kiani. DAFNA Capital is a U.S. Securities and Exchange Commission registered investment advisor with an investment track record of more than 17 years focused on compelling innovations in biotechnology and medical devices. Kiani is the founder, CEO and chairman of Masimo, a global medical device company and developer of noninvasive patient monitoring technologies. He has led Masimo from inception in 1989 to a company with 2015 revenue of $630 million, 2015 operating income of $120 million, and a current market capitalization of near $3 billion.
“We look at hundreds of companies every year, and more specifically have followed the range of innovations in medical robotics and arrhythmia ablation technologies for many years,” said David Fischel, principal at DAFNA Capital. “Stereotaxis stands out in terms of the discrepancy between the value of its technically complex products with proven clinical benefit and its valuation. We are glad that this financing will provide the company the opportunity to execute on its innovation and growth initiatives. I look forward to working with the Stereotaxis team to realize their full potential.”
“When I was introduced to Stereotaxis it reminded me in some ways of Masimo in our early years—a highly sophisticated technology with the potential to significantly improve patient outcomes, but struggling through the difficulties of being a small company commercializing in the complicated healthcare ecosystem,” said Kiani. “I look forward to contributing to the effort to make robotic navigation available to electrophysiologists and arrhythmia patients, and to helping make Stereotaxis a highly successful company.”
Additional investors in the financing include clients of Arbiter Partners Capital Management, Chi-Rho Financial, GLL Investors, Andrew Redleaf, and Stereotaxis incoming board member Dr. Arun Menawat and existing board member Fred Middleton.
Board of Directors
In connection with this investment, Kiani, Menawat, Ph.D., and Fischel will join the Stereotaxis Board of Directors, effective immediately at closing.
Kiani is the founder and CEO of Masimo. In 2010, Kiani and Masimo created the Masimo Foundation for Ethics, Innovation, and Competition in Healthcare, which is dedicated to encouraging and promoting activities that improve patient safety and deliver advanced healthcare worldwide. Kiani earned both his bachelor's and master's degrees in electrical engineering from San Diego State University in California.
Dr. Menawat is CEO of Profound Medical Inc., a medical device company that is driving commercialization of real-time MRI-guided ablation treatment for prostate cancer. Prior to that, he was CEO of Novadaq Technologies Inc. Under his 13-year tenure at Novadaq, he transformed the company from a small private pre-commercial company into the leader in intraoperative imaging and was instrumental in signing strategic partnerships with companies including Intuitive Surgical, LifeCell, and KCI. Dr. Menawat earned a Ph.D. in chemical engineering from the University of Maryland and an Executive M.B.A. from the J.L. Kellogg School of Management at Northwestern University.
Fischel has served as DAFNA Capital’s primary portfolio manager for medical device investments for more than eight years. Prior to joining DAFNA Capital, he was a research analyst at SCP Vitalife, a healthcare venture capital fund. Fischel completed his B.S. magna cum laude in Applied Mathematics with a minor in accounting at the University of California at Los Angeles and received his M.B.A. from Bar-Ilan University in Tel Aviv, Israel. He is a certified public accountant, chartered financial analyst and chartered alternative investment analyst.
Retirement of Debt
Stereotaxis has agreed with its creditor Healthcare Royalty Partners to satisfy in full its debt obligations for a payment of $13 million. The principal value of that debt stood at $18.4 million as of June 30, 2016, and carried a 16 percent interest rate.
“We intend over the coming months to explore additional debt funding on terms significantly more attractive than our previous royalty-backed debt,” said Mills. “We believe that this funding, combined with our strong new balance sheet resulting from the transactions described today, should provide us with the opportunity to achieve profitability given our global growth initiatives.”
Stereotaxis is a St. Louis, Mo.-based healthcare technology developer of robotic cardiology instrument navigation systems designed to enhance the treatment of arrhythmias and coronary disease, as well as information management solutions for the interventional lab. More than 100 issued patents support the Stereotaxis platform, which helps physicians around the world provide patient care with robotic precision and safety, improved lab efficiency and productivity, and enhanced integration of procedural information. Stereotaxis' core Epoch Solution includes the Niobe ES remote magnetic navigation system, the Odyssey portfolio of lab optimization, networking and patient information management systems, and the Vdrive robotic navigation system and consumables.
The core components of Stereotaxis’ systems have received regulatory clearance in the United States, European Union, Canada, China, Japan, and elsewhere. The V-Sono ICE catheter manipulator, V-Loop variable loop catheter manipulator, and V-CAS catheter advancement system have received clearance in the United States, Canada, and the European Union. The V-CAS Deflect catheter advancement system has been CE Marked for sale in the European Union.