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Home > News > Stimulating Investor Interest: Setpoint adds $15M to Series C for bioelectronic anti-inflammatory tech

Stimulating Investor Interest: Setpoint adds $15M to Series C for bioelectronic anti-inflammatory tech

2015-09-09

A private company taking a unique approach to treating inflammatory diseases like rheumatoid arthritis (RA) andCrohn's disease has attracted new financial support in the form of a $15 million extension to its Series C financing, bringing the total of the round to $43 million. Setpoint (Valencia, Calif.) said it will use the proceeds for clinical trials of itsbioelectronic therapy in RA and Crohn's, and to help advance the therapy toward commercialization. Setpoint's therapy uses an implanted device to stimulate the vagus nerve, activating the body's inflammatory reflex to provide an anti-inflammatory effect.

The Series C1 round includes a new strategic investor, but the name of that company was not disclosed. Setpoint CEO Anthony Arnold told Medical Device Daily the company already had three major companies heavily invested in Setpoint, making the anonymous new investor the fourth company to show an interest in the therapy, a rare occurrence in the device industry.

Setpoint's current investors include Morgenthaler Ventures, Foundation Medical Partners, Topspin Partners, Covidien Ventures, Action Potential Venture Capital Limited and Boston Scientific.

"The investors really see a tremendous potential," Arnold said, noting that the market for inflammatory drugs is estimated at $30 billion to $40 billion. "[Investors] see a really unique therapy that might offer patients a relatively simple set-it-and-forget-it type treatment for their disease with few side effects. While those claims remain to be proven in the clinic, he said the therapy is differentiated enough to stimulate investor interest.

While Setpoint's technology has been lumped together with neuromodulation, Arnold said the company prefers the term bioelectronic medicine because the device is used much more like a medicine than a neuromodulation system.

"The signals our therapy sends are very similar to a neuromodulation therapy," Arnold said. The difference, he said, is that traditional neuromodulation devices are designed to offer immediate therapy once the system is turned on. The Setpoint device, on the other hand, works more like a drug in the sense that the patient does not receive an immediate benefit. Instead, the device is designed to flip a switch in the inflammatory reflex, allowing the body to do the rest of the work.

"With other stimulators, they're doing the work. With ours, it's a little more like a drug per say than a traditional neuromodulation therapy," Arnold said.

The company launched a small proof-of-study late last year to assess the safety and efficacy of the therapy in up to 15 Crohn's patients at five European centers, after seeing positive results with the technology for RA (Medical Device Daily, Dec. 22, 2014). The trial, which is recruiting patients with moderately-to-severely active Crohn's despite treatment with a tumor necrosis factor antagonist drug, was welcome news in the inflammatory bowel disease community because the disease has traditionally been treated with drugs, dietary changes and surgery and there is currently no standard treatment that works for all patients. But Arnold told MDD the study has been slow to get off the ground because the individual European center approvals took "considerably longer" than Setpoint anticipated. So far only about four patients have been implanted with the device as part of that trial, he said.

"This is really an unusual trial, not something they've ever seen, using a medical device for a disease that has always been treated with surgery or drugs," Arnold said. "They had a lot of questions about why we believe the therapy might work and wanting to really understand the mechanism before they approved it."

The Series C money will be used to develop Setpoint's first-in-human trials. Arnold said earlier proof-of-concept studies actually evaluated an existing device on the market that the company modified to prove the therapy's potential for RA patients, then the company began to develop its own device. He said the firm's goal is to have the device ready for U.S. human trials in the next 30 months.

In other financing activity, Amedica (Salt Lake City), a biomaterial company that makes silicon nitride as a platform for biomedical applications, reported an agreement with institutional investors to raise up to $15 million in a concurrent registered direct offering of common stock and Series B warrants and private placement of Series A warrants and Series C warrants.

Amedica entered a settlement agreement with MG Partners II and amended its loan agreements with Hercules Technology Growth Capital. The settlement with Magna provides for the withdrawal of a default notice and permanent waivers of any contractual rights. As part of the Hercules amended loan agreement, Hercules has also withdrawn its default notice and agreed to reduce the company's financial cash covenant as the loan is paid.

The transaction is expected to execute in three equal tranches. The first tranche is a registered direct offering of 13,123,360 shares of common stock and Series B warrants to purchase 13,123,360 shares of common stock for a price of $0.381 a share and Series B warrant. The Series B and C warrants have an exercise price of 47 cents and are exercisable up to Dec. 30, 2015. The first tranche also includes a concurrent private placement of Series A warrants and Series C warrants, each to purchase 13,123,360 shares of common stock. The Series A warrants have an exercise price of 47 cents and are exercisable for 5.5 years. The company expects proceeds of about $5 million from this first tranche, which is expected to close on Friday.

Ladenburg Thalmann & Co., a subsidiary of Ladenburg Thalmann Financial Services, is acting as exclusive placement agent in connection with the transaction. //

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