- Eargo has raised $32.3 million as it seeks to capitalize on the recent creation of the market for over-the-counter hearing aids.
- The financing, which establishes Patient Square Capital as Eargo’s majority owner, comes as the company tries to compete with new rivals including Sony and Bose-partnered Lexie for the nascent OTC hearing aid market.
- Eargo has made its devices available through around 1,500 Victra Wireless stores across the U.S. and now has additional cash to fund its omni-channel growth strategy.
Eargo hit turbulence in the run up to the liberalization of the hearing aid regulations, with the loss of insurance coverage with the Federal Employee Health Benefits Program and the settlement of a probe by the U.S. Department of Justice overshadowing the opportunity. The stock has fallen by 88% to below $1 this year.
Against that backdrop, the company has sought to stabilize its financial situation. Over the summer, Eargo struck an agreement with Patient Square and Drivetrain Agency Services to issue $100 million in notes. The deal gave the company a chance to raise a further $25 million if it completed a rights offering.
Last month, Eargo completed a rights offering, leading the noteholders to pay an additional $5.5 million. The combination of the offering and the additional note purchase resulted in net proceeds of $32.3 million for Eargo. The company had $88.1 million in the bank at the end of September and expected to burn through $20 million to $25 million over the final three months of the year.
After the financial transactions, Patient Square has a 76.3% stake in Eargo. Patient Square is a healthcare investment firm that lists acute care telemedicine provider Access TeleCare and single-cell spatial biology player Resolve Biosciences among its active investments.