EnteroMedics (St. Paul, Minnesota), a company focused on thinning us down, has fattened up with a new large infusion of cash.

EnteroMedics, the developer of medical devices for the treatment of obesity and gastrointestinal disorders, yesterday reported the closing of a $45.2 million Series C financing round to push forward its Vagal BLocking for Obesity Control (VBLOC) Therapy.

The new financing brings to more than $64 million the equity thus far raised by the company, with a B round of $16.8 million in 2004 (Medical Device Daily, Nov. 30, 2004), following seed funding of $2 million. And EnteroMedics cited a PricewaterhouseCoopers MoneyTree Report, which said the new funding is the third largest single round among U.S. medical device companies this year.

The VBLOC system is an implantable system under clinical investigation “for its potential to regulate multiple functions involved in the ingestion and digestion of food and calorie uptake” – in other words, to assist in weight loss.

Based on the company's Vagal Smart Modulation (VSM) technology, VBLOC uses tiny pulses of electrical energy to block signals that are carried by the vagus nerve between the brain and the digestive organs.

Mark Knudson, PhD, president/CEO of EnteroMedics, told Medical Device Daily that the new financing would support an ongoing Phase I multicenter trial outside of the U.S. and the launch of a U.S. pivotal trial.

In the international trial, the company has already enrolled about 30 of the 100 patients projected for the study and hopes for CE-marking in late 2007 or early 2008. Knudson projected launch of the U.S. trial later this year or early 2007.

“Given the way the regulatory process works,” he said, FDA approval could come “in three years, plus or minus six months.” The new funding “could carry us through” to that point, he added.

He noted also that the VBLOC system offers a platform for potential applications in a variety of other gastrointestinal applications.

The central goal of the new trials is to test the VBLOC system in terms of how it affects “the feelings of hunger in the brain,” Knudson said. He acknowledged that while the company has been successful in testing the system for safety and efficacy regarding a range of physiological responses in its preclinicals, only human testing in homo sapiens can provide the crucial data concerning this more subjective hunger response.

The company's studies will enroll overweight individuals who have not responded to medically supervised treatments, Knudson said, and want to avoid the highly invasive gastric bypass surgery.

He noted that a key feature of the VBLOC device is its programmability. In-office programming is used to vary the impulses delivered to alter the energy used to block the signals carried by the vagus nerve between the brain and digestive system – with Knudson noting that the energy is delivered continuously but the blocking is intermittent to avoid over-compensation of surrounding nerves.

And he noted that in contrast to the irreversibility of bariatric surgery, the VBLOC system can be turned off after a person loses weight and then turned back on again if the person fails to keep off the weight.

EnteroMedics last year also formed a research consulting relationship with the Mayo Foundation for Medical Education and Research of the Mayo Clinic (Rochester, Minnesota) (MDD, March 31, 2005), and Knudson described that relationship as “going spectacularly – they've been terrific partners.”

He said the partnership involves company consultation with more than 15 gastroenterologists, surgeons and bariologists “on a regular basis” at Mayo to design experiments “and figure out the therapy.” One of these specialists “is involved in some project with us on a weekly basis,” he added.

The C round of funding was led by InterWest Partners, with additional investments from Onset Ventures, Pacific Asset Partners and the Mayo Foundation for Medical Education and Research. In addition, all existing investors participated in this round including MPM Capital, Bay City Capital, Aberdare Ventures and Charter Life Sciences.

“We're very encouraged by the progress EnteroMedics has made in the development and clinical evaluation of VBLOC Therapy,” said Ellen Koskinas, a partner at InterWest Partners, who will join the EnteroMedics board.

In other financing activity:

• Applied DNA Sciences (APDN; Stony Brook, New York), a DNA security solutions company, reported the sale of $3.95 million of its 10% secured convertible promissory notes and warrants. In the first tranche, completed on May 2, the company sold 20 units for gross proceeds of $1 million. In the second tranche, completed on June 15, the company sold 59 units for proceeds of $2.95 million.

Each such unit consists of a $50,000 principal amount 10% secured convertible promissory note an a warrant to purchase 100,000 shares of the company's common stock, exercisable for a period of four years commencing on May 2, 2007, at a price of 50 cents a share.

APDN said it would use the net proceeds for general corporate purposes, capital expenditures, and potential acquisitions of complementary companies or technologies. Arjent Ltd., an affiliate of VC Arjent, served as the placement agent in this offering.

Dr. James Hayward, CEO of Applied DNA, said: “Our technology can be strategically applied to help address the universal problem of counterfeits. From currency to pharmaceutics to luxury goods to fine art, we believe we have a ready-to-implement forensic solution to the counterfeit problem faced by governments, companies and individuals.”

APDN develops solutions that use plant DNA to verify authenticity.

• Seno Medical Instruments (San Antonio, Texas) reported receiving more than $3 million in new funding to launch commercial operations.

The company said the funds would enable it to further develop its optoacoustic breast imaging technology. The platform technology, which fuses light and ultrasound to create contrast between normal and cancerous tissues, has a multitude of possible applications, Seno said, including the diagnosis of ovarian, prostate, colorectal, bladder, and melanoma cancers, plus cardiovascular applications.

The company said it already has received $12 million dollars in funding from the National Institutes of Health, the Department of Defense and the National Cancer Institute. It said NCI recently awarded Seno's development partner, Fairway Medical Technologies (Houston), with a $1.1 million grant to expand the technology for prostate cancer applications. Fairway Medical has been collaborating with the University of Texas Medical Branch (Galveston) to further develop its proof-of-concept.

Janet Campbell, CEO of Seno, said, “Our technology has the ability to detect cancer in its earliest stages without breast compression or exposure to X-ray.”

• American Medical Systems Holdings (Minnetonka, Minnesota), a provider of pelvic solutions, said it expected to close its senior secured credit facility yesterday, with the proceeds to fund a portion of its tender offer to acquire all of the outstanding shares of Laserscope (San Jose, California) for $31 a share.

The offer was to have expired at midnight, CST, yesterday, unless further extended, and the company said it did not anticipate extending the tender offer further.