Medis won't receive any proceeds from the sale.

The stock to be sold will be newly issued shares loaned to an affiliate of Citigroup Global Markets Inc., the sole book-running manager of the offering, under a 5-year share lending agreement. The stock sale will be used by the Citigroup affiliate to facilitate hedging transactions made by purchasers of $50 million Medis Series A preferred shares, which Medis is selling in a private placement.

Medis expects to grant an option to those institutional purchasers to buy up to an additional $7.5 million preferred shares to cover over-allotments. Medis intends to use net proceeds of the private placement for product development and marketing, including to expand production capacity, and for general corporate purposes.

Shares dipped 58 cents, or 2.1 percent, to $26.88 on the Nasdaq.