Medigus announces $8M private placement by OrbiMed

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Tel Aviv Stock Exhange, Israel - January 7, 2013

Medigus Ltd (TASE: MDGS) announced today that following approval by its audit committee and board of directors, it had signed a Share Purchase Agreement with OrbiMed Israel Partners LP ("OrbiMed") on January 3, 2013, whereby Medigus agreed to issue ordinary shares and issue a warrant to OrbiMed for consideration in the amount of $8 million (the "Consideration").

To Medigus' best knowledge, OrbiMed Israel Partners LP is controlled by Dr. Nissim Darvish, Anat Naschitz, Erez Chimovits and OrbiMed Advisors LLC, a preeminent global investment firm dedicated to the life sciences sector in such fields as medical devices, biotechnology, pharmaceuticals and diagnostics. OrbiMed Advisors LLC manages approximately $6 billion in assets from offices in the USA, Asia and Israel staffed by approximately 60 professionals. OrbiMed Advisors LLC was established some 23 years ago and is active through a variety of funds which manage investments in both private and public companies, including private equity and venture capital funds, hedge funds, and royalty funds. OrbiMed Advisors LLC has an extensive history of PIPE (private equity in public equity) investments.

Principle terms of the Share Purchase Agreement:

1. The quantity of ordinary shares to be issued to OrbiMed will be determined by dividing the Consideration (in NIS per the representative rate of exchange as of the date of the general meeting for approval of the transaction) by the lower of the following prices per share, but in any event not lower than NIS 0.60 (the "PPS"): a. NIS 0.7336; and b. the average closing price of Medigus ordinary shares on the Tel Aviv Stock Exchange (TASE) during the 5 trading days ending on the date of the approval of the transaction by the general meeting of the shareholders.

In the event that the applicable price per share will be determined in accordance with paragraph a. above, and utilizing the currency exchange rates applicable on the date of execution of the agreement, a quantity of 40,730,643 ordinary shares of Medigus will be issued to OrbiMed, which will constitute approximately 31.10% of Medigus' issued and outstanding share capital, and 27.10% of Medigus' fully diluted share capital.

2. Under the Share Purchase Agreement, Medigus will also issue to OrbiMed a warrant to purchase additional ordinary shares in a quantity equal to that of the ordinary shares issuable per paragraph 1 above, upon payment of an exercise price equivalent to the 125% of the PPS, if exercised during the 18 months following closing date, or 150% of the PPS if exercised between the 19th and 36th month following the closing date. The warrant may also be exercised via a "cashless exercise" mechanism whereby shares valued at the payable exercise price will be deducted from the shares issuable upon investment. The warrant is subject to adjustment provisions upon such events as dividend and bonus share distributions, etc.

3. Upon full exercise of the warrant (other than by the cashless exercise mechanism) Medigus will be entitled to payment of an aggregate exercise price in an amount between $10 million to $12 million, and OrbiMed will then hold approximately 47.45% of the issued and outstanding share capital of the company, or 42.64% of the fully diluted share capital (assuming a price per share as determined in paragraph 1.a above).

4. The undertakings made by Medigus and OrbiMed under the Share Purchase Agreement are subject to certain closing conditions, including the following principal conditions: a. Approval by the general meeting of the shareholders of Medigus; and b. Approval of the Tel Aviv Stock Exchange for registration of the ordinary shares and warrant shares issuable to OrbiMed.

5. The current controlling stakeholders of the Company granted  OrbiMed an undertaking letter whereby each stakeholder undertook to vote all of their shares in the manner instructed by OrbiMed, including in favor of the appointment of four directors nominated by OrbiMed, and to refrain from selling such shares during a specific period, all in accordance with the terms and conditions of the undertaking letter. For the avoidance of doubt, the stakeholders of the company did not receive any consideration in return for such undertakings, however in light of the undertaking letter OrbiMed and the stakeholders will be deemed joint holders of Medigus securities following the closing of the transaction.

Shareholders Meeting

Medigus intends to convene a general meeting of the shareholders of the company to approve the transactions contemplated by the Share Purchase Agreement.

Audit Committee and Board Reasoning

In the opinion of the audit committee and the board of directors of Medigus, the company is commencing a new stage in its history – the transition from an R&D company to a commercial company marketing and selling products. This was made possible by receipt of FDA marketing clearance for the company's flagship SRS™ product during 2012. Medigus now plans to commence large-scale commercial distribution of the SRS™ in the US.

The transition from R&D to commercial operations is a critical step in the life of a company. In order to considerably improve the likelihood of the transition's success and to maximize shareholder value, Medigus sought a partner or strategic investor. After considering several alternatives, the company selected OrbiMed as a strategic investor.

In the opinion of the audit committee and the board of directors of Medigus, both OrbiMed's considerable expertise ,and the financial liquidity being placed at the company's disposal, materially improve Medigus' chances for commercial success and for maximizing shareholder value.
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Medigus is a medical device company specializing in developing minimally invasive endosurgical tools and highly innovative imaging solutions. Medigus is a pioneer developer of a unique proprietary endoscopic device, the MUSE™ System, to treat gastroesophageal reflux disease (GERD), one of the most common chronic diseases in the western world. As an expert in micro-endoscopic devices, Medigus has developed a range of micro CMOS (complementary metal-oxide semiconductor) and CCD (charge-coupled device) video cameras, including micro ScoutCam™ 1.2, which to the best of the company's knowledge, is the smallest in the world.
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