Eargo, which makes tech-enabled hearing aids, announced Tuesday that healthcare investment firm Patient Square Capital is the new majority owner of the company.

Patient Square now holds approximately 76.3% of Eargo stock through the conversion of senior secured convertible notes it had purchased this summer and following a recent rights offering of common stock.

Eargo said the offering brought in about $32.3 million, including another $5.5 million investment from Patient Square. 

"Eargo's innovative technology, established telecare infrastructure and direct-to-consumer experience position the company well for future growth, particularly now that the new FDA rules are increasing patient access and that the company has a strengthened balance sheet," Justin Sabet-Peyman, managing director at Patient Square, said in a statement. "We are excited to partner with Eargo’s talented team as the majority owner in the company to continue executing on Eargo’s mission of improving the lives of people with hearing loss."

THE LARGER TREND

Founded in 2010, Eargo went public about 10 years later. It released its sixth-generation hearing aid early this year, which includes a sound-adjust algorithm designed to change volume based on surrounding noise and a "mask mode" feature. 

In 2021, the hearing tech company revealed it was the subject of an investigation by the U.S. Department of Justice regarding insurance reimbursement claims it had submitted for customers covered by federal employee health plans. 

The company agreed to pay $34.37 million to resolve allegations that it had submitted claims with unsupported hearing loss diagnosis codes. 

Eargo reported net revenue of $7.9 million for the third quarter of this year, compared with a loss of $22.9 million for the third quarter of 2021. The company noted it had recorded the DOJ settlement during Q3 last year, and it estimated many customers with unsubmitted or denied insurance claims would return their products.

Eargo posted a gross profit of $1.9 million for the third quarter in 2022 compared with a gross loss of $30.4 million in the prior-year period.