After laying off most of its staff and announcing plans to wind down operations at the end of March, Second Sight Medical Products lurched in a drastically different direction at the beginning of May with a public offering of 7.5 million shares. Leadership for the 22-year-old Sylmar biotech company, which is focused on developing an implantable medical device to offer sight for blind people, conservatively has six months to decide what it will do with proceeds from the offering, according to Acting Chief Executive Matthew Pfeffer. Pfeffer replaced Gregg Williams, who was appointed interim chief executive just several weeks prior when longtime leader Will McGuire announced his departure from the company mid-March. Pfeffer is no stranger to biotech companies, including those such as Second Sight, which was launched by late billionaire inventor Al Mann. Pfeffer previously held the chief executive position at MannKind Corp. in Westlake Village, another Al Mann company, from January 2016 to May 2017. Paths forward for Second Sight include a partnership, business combination, acquisition or investment, the company said in a statement. Management is in talks with several businesses but were not at liberty to name them with one exception: Alfred Mann Foundation in Valencia. But Pfeffer admitted the nonprofit is known for working with early-stage biotech startups – not struggling public ones. “Whether it’s this new CEO, the company making more of an effort or people catching wind of the fact that Second Sight was struggling, people started coming out of the woodwork and starting thinking about opportunities that maybe they didn’t think existed previously,” said Brent Reinke, partner at Musick Peeler law firm in Thousand Oaks. The firm represents biotech companies in mergers and acquisitions. Reinke is also chairman of the Bioscience Alliance in Conejo Valley. “It’s possible that they announced the winding down of operations to gain leverage in something they’re in the middle of or expecting,” added David Bonrouhie, managing director at investment bank Calabasas Capital. “The other possibility is, winding down a company could cost several millions of dollars with severance payments and terminating leases. That could be what the money’s for, and possibly also they could be looking to utilize their shell, their listing.” Reverse merger? To monetize its listing, Bonrouhie said, Second Sight could complete a reverse merger, in which a functioning company would buy Second Sight to gain its public stock status. After changing the ticker symbol, the other company would become the surviving entity. Alternatively, Second Sight could complete a deal with a special purpose acquisition company, or SPAC, a type of investment fund that goes public with the intention of buying an operating company which then becomes the surviving entity. Net operating losses could also play a role in what Second Sight decides to do too. If the investors in Second Sight buy another company, the surviving entity could have tax-free profits because any gains would be offset by Second Sight’s accumulated losses from previous years. “There is some value in that but that wouldn’t explain why they’re raising money after they announced a wind down, other than they want to keep the lights on until they can find a buyer,” Bonrouhie explained. Any strategic deal “may or may not be related to its current operations,” the company added in its statement. Second Sight was in the middle of developing the Orion Visual Cortical Prosthesis System when the pandemic hit the U.S. The Orion’s predecessor, Argus II, was FDA approved but operations for the device were suspended in May of last year because of the exceedingly small market for such a device. After reworking its business model to focus on Orion, Pfeffer said, the company was burdened with a loss in funding amid the accelerating pandemic. “The company was in a pretty unfortunate circumstance in March, when we lost our primary funding source due to COVID-19 at the worst possible time, which left the company insolvent,” said Pfeffer. “It left us no choice but to take some immediate, very strong actions to reserve the remaining funds for creditors and others. “We talked about winding down, but that didn’t mean we expected the company to go away. That term was chosen by attorneys we work with; I’m not sure it was the best choice because I think it implied more than we intended about the future of the company,” added Pfeffer.
