GI Dynamics Lines Up $52M For Key U.S. Study

7/3/13Follow @benthefidler

GI Dynamics may be based in Lexington, MA, but its device that combats Type 2 diabetes and obesity by slipping a lining into the small intestine isn’t sold here just yet. Today, GI Dynamics took one step closer to that goal by raising enough cash to support a big clinical trial in the U.S.

GI Dynamics is raising $57.5 million in Australian dollars (A$), or about $52.2 million in U.S. dollars, through a private placement of Chess Depository Interests, or CDIs, a type of security that enables international companies to trade on the Australian exchange. GI, which trades publicly in Australia, said that it sold 108.5 million CDIs at A$0.53 apiece to investors in Australia, the U.S., and other jurisdictions. The company will ask its shareholders to approve the capital raise at a meeting “on or around” July 29, it said in a statement.

Shares of GI Dynamics currently trade at A$0.63 apiece. GI is also offering shareholders in Australia or New Zealand the chance to buy another A$2.5 million in stock without brokerage or transaction fees at A$0.53 per share.

GI Dynamics will use the cash to march the EndoBarrier, the name for its intestinal liner, through a pivotal clinical trial in the U.S.—the last study it needs to carry out before it can win FDA approval.

The EndoBarrier is a two-foot-long, tube-shaped, flexible liner inserted into the GI tract that is meant to block a portion of the intestine from absorbing the nutrients and calories in food. A doctor inserts the tube into a patient’s mouth via an endoscopic procedure designed to be less invasive than gastric bypass surgery, in which the GI tract is rearranged.

GI Dynamics already sells the EndoBarrier in several countries outside the U.S., such as Chile, the Netherlands, the U.K, Germany, Austria, Australia, and Israel. But the company is looking to bring the device home, and began ramping up a 500-patient, 25-site pivotal clinical trial in the U.S. in January. GI is enrolling patients between the ages of 21 and 65 who have a body mass index of between 30 and 50, have uncontrolled type 2 diabetes, and currently use either metformin or sulfonylurea or a combination of the two but can’t keep their blood sugar levels in check. Two-thirds of the patients will randomly get the EndoBarrier, while the remaining third will get a simulated procedure that doesn’t include the device.

GI Dynamics is following the patients for up to 12 months. Its primary goal in the trial is to improve patients’ HbA1c—a key measure of blood-glucose control. It is also tracking patients’ weight loss and cardiovascular risk factors such as cholesterol levels.

As of its March 28 annual report, GI Dynamics’ largest shareholders were M&G Investment Funds and certain affiliates (13.9 percent), Medtronic (12.3 percent), Johnson & Johnson Development (11.8 percent), Advanced Technology Ventures and certain affiliates (11.7 percent), Domain Associates and affiliates (10.3 percent), and Polaris Venture Partners (8.7 percent).

The company raised A$80 million in an initial public offering in Australia in August 2011.

Ben Fidler is Xconomy's Deputy Biotechnology Editor. You can e-mail him at bfidler@xconomy.com Follow @benthefidler

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