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EnteroMedics Strengthens Financial Position With $20 Million Debt Agreement and $5.0 Million Equity Offering

Tue, 04/17/2012 - 3:45am
The Associated Press

EnteroMedics Inc. (NASDAQ: ETRM), the developer of medical devices

using neuroblocking technology to treat obesity, metabolic diseases

and other gastrointestinal disorders, today announced that it has

closed on a growth capital term loan for $20 million, amending its

existing debt agreement with Silicon Valley Bank, and entered into a

purchase agreement for a $5 million equity offering.

The new growth capital loan is structured such that $10 million will

be funded immediately, a portion of which will be used to repay in

full the Company's outstanding debt of approximately $4.7 million. An

additional $10 million will become available assuming the Company

meets the primary endpoints of the ReCharge Study as well as certain

financial objectives for 2012. Proceeds from the loan will supplement

the Company's cash, cash equivalents and short-term investments, which

totaled $29.7 million as of December 31, 2011. The loan facility is

structured with an interest-only period until March 2013, followed by

a 30-month amortization period.

The Company also entered into a definitive agreement with a current

significant stockholder of the Company, to sell 2,271,705 shares of

the Company's common stock in a registered direct equity offering, at

a price of $2.22 per share, for gross proceeds of approximately

$5,050,000, before deducting placement agent fees and estimated

offering expenses. Craig-Hallum Capital Group LLC acted as the sole

placement agent for the offering. The offering is expected to close on

or about April 20, 2012, subject to satisfaction of customary closing

conditions.

The Company intends to use the proceeds from the loan and the

registered direct equity offering to fund its work toward regulatory

approval of the Maestro Rechargeable System in the United States, for

international commercialization efforts, for clinical and product

development activities and for other working capital and general

corporate purposes.

"Our current cash, combined with the additional resources added from

these two transactions, solidifies our long range capital plan," said

Senior Vice President and Chief Financial Officer Gregory S. Lea.

"These contemporaneous financings, achieved with continued support

from Silicon Valley Bank and the individual stockholder, allows the

Company to reach well beyond its anticipated submission of the Food

and Drug Administration Premarket Approval application for the Maestro

Rechargeable system in obesity, following positive data from the

ReCharge Study pivotal trial."

A shelf registration statement (file no. 333-166011) relating to the

securities described above was declared effective by the Securities

and Exchange Commission on May 6, 2010. These securities may be

offered only by means of a prospectus, including a prospectus

supplement, forming a part of the effective registration statement.

When available, copies of the final prospectus supplement and

accompanying base prospectus relating to this offering may be obtained

at the Securities and Exchange Commission's website at

http://www.sec.gov(http://www.sec.gov) or from Craig Hallum Capital

Group LLC at 222 South Ninth Street, Suite 350, Minneapolis, MN 55402.

This press release does not constitute an offer to sell or the

solicitation of offers to buy any securities of the Company, and shall

not constitute an offer, solicitation or sale of any security in any

state or jurisdiction in which such offer, solicitation or sale would

be unlawful prior to registration or qualification under the

securities laws of any such state or jurisdiction.

About EnteroMedics Inc.

EnteroMedics is a medical device company focused on the development

and commercialization of its neuroscience based technology to treat

obesity and metabolic diseases. EnteroMedics' proprietary technology,

VBLOC@ vagal blocking therapy, delivered by a pacemaker-like device

called the Maestro@ Rechargeable System, is designed to intermittently

block the vagus nerves using high-frequency, low-energy, electrical

impulses. VBLOC allows people with obesity to take a positive path

towards weight loss, addressing the lifelong challenge of obesity and

its comorbidities without sacrificing wellbeing or comfort.

EnteroMedics has received CE Mark and is listed on the Australian

Register of Therapeutic Goods.

Forward-Looking Safe Harbor Statement:

This press release contains forward-looking statements about

EnteroMedics Inc. Our actual results could differ materially from

those discussed due to known and unknown risks, uncertainties and

other factors including our limited history of operations; our losses

since inception and for the foreseeable future; our lack of commercial

regulatory approval for our Maestro@ System for the treatment of

obesity in the United States or in any foreign market other than

Australia and the European Community; our preliminary findings from

our EMPOWER pivotal trial; our ability to comply with the Nasdaq

continued listing requirements; our ability to commercialize our

Maestro System; our dependence on third parties to initiate and

perform our clinical trials; the need to obtain regulatory approval

for any modifications to our Maestro System; physician adoption of our

Maestro System and VBLOC@ vagal blocking therapy; our ability to

obtain third party coding, coverage or payment levels; ongoing

regulatory compliance; our dependence on third party manufacturers and

suppliers; the successful development of our sales and marketing

capabilities; our ability to raise additional capital when needed;

international commercialization and operation; our ability to attract

and retain management and other personnel and to manage our growth

effectively; potential product liability claims; potential healthcare

fraud and abuse claims; healthcare legislative reform; and our ability

to obtain and maintain intellectual property protection for our

technology and products. These and additional risks and uncertainties

are described more fully in the Company's filings with the Securities

and Exchange Commission, particularly those factors identified as

"risk factors" in the annual report on Form 10-K filed March 15, 2012.

We are providing this information as of the date of this press release

and do not undertake any obligation to update any forward-looking

statements contained in this document as a result of new information,

future events or otherwise.

Caution - Investigational device. Limited by Federal (United States)

law to investigational use.

The implantation procedure and usage of the Maestro@ System carry some

risks, such as the risks generally associated with laparoscopic

procedures and those related to treatment as described in the ReCharge

clinical trial informed consent.

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