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Tuesday, Mar 19, 2024

Second Sight Gives Investors a Second Chance

Second Sight Medical Products Inc. has filed for a $20 million equity offering to its current shareholders, which would allow them to purchase common stock at a 15 percent discount. The price per share will be determined on the expiration date and will equal either 85 percent of the stock price on that day or $4.25, whichever is less. The Sylmar biotech, which makes an implant that provides partial vision to some blind patients, plans to use the money to keep the company running, Chief Executive Will McGuire told the Business Journal in an email. “The $20 million that Second Sight expects to raise in the rights offering allows the company to fund its operations through 2017 and maybe a little beyond,” said McGuire. “The rights offering meets the company’s financing needs for the next 12 to 18 months.” The company will use the money for the commercial expansion and ongoing clinical study of its Argus II Retinal Prosthesis System — a device that utilizes an implant and camera to restore some functional vision to the blind — as well as the continued development of the Orion I cortical implant — a visual prosthesis for cortical stimulation that the company believes could have the functionality to treat almost all forms of blindness. Currently, the Argus II is approved by the Food and Drug Administration only to treat patients with severe retinitis pigmentosa, a group of rare, inherited regenerative eye diseases that cause vision impairment. However, the potential capabilities of the Orion I could also expand Second Sight’s customer demographic to include the massive aging population as well as others suffering from more common types of vision impairment. Dilution issue McGuire said the company decided to solicit this offer only to existing shareholders so it would not dilute their ownership positions, and it would let the company avoid underwriting fees paid to banks. He mentioned that the transaction could be completed at a discount as company stock prices typically fall after a deal like this is announced. The subscription rights will be non-transferable. However, if a shareholder exercises his or her basic subscription rights in full and other shareholders do not, he or she will be permitted to an over-subscription privilege to purchase a portion of the unsubscribed stock at the discounted price. The company first announced the offering in late January, but filed an amended prospectus with the Securities and Exchange Commission on April 22. The amended filing indicated the offering would take place this month. In the two weeks following the amended S-1 filing, Second Sight’s stock dropped by nearly 25 percent. During that time, the company also released its first quarter financial results, reporting a net loss of $5.8 million compared to a $5 million net loss for the same quarter a year prior. Furthermore, the company implanted only 10 Argus II devices, which is less than half of what it had implanted in the previous quarter. The company partially attributes this decline to customer concerns that the new Medicare reimbursement rates won’t cover costs associated with the Argus II and its implantation. To combat this issue, the company decided to temporarily discount the Argus II, hoping the rebate will increase volume in upcoming quarters. The device originally cost about $144,000 but after the discount, the price can go down to approximately $95,000 with Medicare, the company said. “Though first-quarter 2016 was weaker than prior quarters due to pricing issues, management appears to have moved its focus to driving implants over the remainder of the year,” Amit Dayal, an analyst for Rodman & Renshaw Research, said in an April 29 report. “We believe this is an appropriate stance and continue to maintain that volume rather than pricing would be a bigger catalyst for the stock.”

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