Dive Brief:
- Outset Medical expects to receive $168.8 million in financing through a private placement of convertible preferred stock, the company said Monday. The agreement with mutual funds and institutional investors prices 843,908 shares of preferred stock at $200 per share.
- Outset also secured up to $125 million in new debt financing. The maker of portable dialysis systems plans to retire $200 million in prior debt.
- The fundraising, and preliminary fourth-quarter sales release, “augur well for the company’s ability to penetrate the US dialysis market, drive more-consistent commercial execution, and return to generating top-line growth,” Stifel analyst Rick Wise wrote in a note to clients.
Dive Insight:
Outset’s Tablo hemodialysis device functions as an artificial kidney system for patients with acute or chronic kidney failure and is intended to simplify dialysis. The system can be used in both healthcare facilities and at home.
The company gained U.S. clearance for Tablo in 2020. Tablo became the first device to receive an add-on payment from the Centers for Medicare and Medicaid Services the following year under a new program to expand access to innovative technologies for patients with end-stage renal disease.
Since Tablo’s introduction, however, Outset has faced several regulatory setbacks and struggled to become profitable. In June 2022, the San Jose, California-based company said it placed a shipment hold on Tablo systems for home use until it could obtain 510(k) clearance for changes it made to the device. Shipments resumed several weeks later.
Outset then received a warning letter from the Food and Drug Administration in July 2023 that required the company to get 510(k) authorization to resume shipping its TabloCart accessory with prefiltration. FDA granted the clearance in May 2024.
In March 2024, Outset also recalled certain Tablo systems due to a risk that patients could be exposed to higher than allowable levels of a toxic compound.
Stifel’s Wise, who called Tablo a “game-changing” technology, said the new financing cuts Outset’s debt in half, lowers its interest expense and pushes the debt maturity timeline out three years to 2030. “This removes a meaningful overhang by providing additional capital to bridge [Outset] to cashflow breakeven,” the analyst wrote.
Outset’s shares closed Monday at $1.27 on Nasdaq. The company received a delisting notice from the stock exchange in September due to its fallen share price but has since regained compliance with the $1 minimum bid price requirement.
