Obalon Makes Move to Reduce Its Overall Debt

Obalon Therapeutics is enacting a plan to cut down its overall debt and pursue a retail strategy. The obesity-treatment specialist said it would reduce debt under a facility with Pacific Western Bank from $20 million to $5 million.

The reduction in debt is expected to lower San Diego, CA-based Obalon’s annual interest expense burden from about $1.4 million to about $350,000.

The firm added that throughout 2Q19, it has raised about $8.8 million in gross proceeds through a series of financings including a registered direct equity offering with A.G.P./Alliance Global Partners acting as our financial advisor, the sale of common stock through its equity line of credit with Lincoln Park Capital and an at-the-market equity offering through Canaccord Genuity acting as sales agent.

“We are pleased to have been able to utilize our multi-pronged approach to raise capital and improve our balance sheet,” William J. Plovanic, president and CFO of Obalon, said in a release. “We are now focused on driving new strategic initiatives that can more efficiently convert consumer interest in our novel FDA-approved treatment for obesity into patient treatments, including developing a network of company-owned or managed Obalon-branded retail centers. We expect to be able to provide more detail on our revised commercial strategy in the coming weeks.”

Obalon made some significant decisions in April that might have raised eyebrows. To begin with, the company said it was cutting its staff by 50%, which included the elimination of its direct sales force and a reduction in headquarters staff.

The restructuring would allow it to transition to a new retail model intended to efficiently use the existing resources to develop the market and drive revenue. The company would then go on to announce it retained Cowen as an independent financial advisor to assist in exploring financial and strategic alternatives.

And in May, Obalon revealed it had registered a stock offering of more than $17 million. The company developed a gas-filled intragastric balloon system for the treatment of obesity. FDA approved the product in 2016.