EnteroMedics Inc. Closes $45.2 Million Series C Financing

ST. PAUL, Minn.--(BUSINESS WIRE)--July 19, 2006--EnteroMedics Inc., a developer of medical devices for the treatment of obesity and gastrointestinal disorders, today announced the closing of a $45.2 million Series C financing round. The company's VBLOC (Vagal BLocking for Obesity Control) Therapy is currently under clinical investigation for its potential to regulate multiple functions involved in the ingestion and digestion of food and calorie uptake. EnteroMedics plans to use the funding to continue its development activities, expand its clinical studies, and initiate commercialization of its technology.

As the third largest single round of financing among U.S. medical device companies this year according to PricewaterhouseCoopers' MoneyTree(TM) Report, EnteroMedics' most recent $45.2 million round 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.

Approximately 30 percent of the U.S. population, or more than 88 million Americans, are afflicted with obesity. EnteroMedics has developed its implantable VBLOC Therapy to address the large unmet need for a weight loss procedure that may minimize the morbidity, mortality and side effects associated with existing surgical treatments such as gastric bypass and laparoscopic banding. VBLOC uses tiny pulses of electrical energy to block signals that are carried by the vagus nerve between the brain and the digestive organs. Physicians may make non-invasive, patient-specific adjustments to the implanted device using wireless communication in an office setting.

"After an in-depth analysis of how the vagus nerve affects food intake, food processing and perception, we've taken a unique, physiologic approach to treating obesity with VBLOC Therapy. As the first implantable system designed to target multiple obesity mechanisms, VBLOC offers the potential for weight loss and a sustainable improvement in quality of life," said Mark Knudson, PhD, Chairman, President and CEO of EnteroMedics. "We are pleased that these leading medical device investors have joined our strong group of current investors, and that we have solid financial backing which will allow us to continue developing EnteroMedics' life-enhancing therapies."

"We're very encouraged by the progress EnteroMedics has made in the development and clinical evaluation of VBLOC Therapy. The company's innovative multi-mechanism approach has the potential to deliver a compelling alternative to the millions who are challenged by obesity," said Ellen Koskinas, a Partner at InterWest Partners, who will join the EnteroMedics board.

VBLOC Therapy is currently undergoing clinical investigation at select centers outside of the United States to assess its potential to both cause weight loss and reduce the complications currently associated with obesity surgery. VBLOC Therapy is not available or approved for use in the United States.

About EnteroMedics Inc.

EnteroMedics Inc. (www.enteromedics.com) develops implantable systems for the treatment of obesity and other gastrointestinal disorders. EnteroMedics' first treatment, VBLOC (Vagal BLocking for Obesity Control) Therapy, is designed to regulate multiple functions involved in the ingestion and digestion of calories by intermittently blocking the vagus nerve. The first and only implantable therapy to target multiple obesity mechanisms, VBLOC can also be non-invasively adjusted via wireless communication in an office setting.

Contact: Lois Paul & Partners Melissa Zipin, 781-782-5726 melissa_zipin@lpp.com

Source: EnteroMedics Inc.

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