 |
| The Maestro implant--Courtesy of EnteroMedics |
Wall Street remains skeptical of the first obesity device to be approved by the FDA in more than a decade. The agency approved VBLOC Vagal Blocking Therapy via the EnteroMedics ($ETRM) Maestro System in January based on less-than-stellar pivotal data and a mixed panel review. Some investors are backing the company in its follow-on, which has raised $35 million, but at very steep terms.
Shares plummeted almost 30% in early trading on the June 30 news of the fundraising's completion. That gives EnteroMedics a market cap of only about $50 million--scarcely more than the value of its cash--indicating that investors aren't exactly betting on its ability to execute.
In January, the FDA approved the Maestro device, a pacemaker-like implant that uses high-frequency, low-energy electrical impulses to block signals on the vagal nerve thereby creating a feeling of fullness and discouraging overeating.
The company is targeting obese patients who are eligible for bariatric surgery, but may be hesitant to undergo major surgery and a permanent alteration of their gastrointestinal organs with all the risks and rigors that entails.
 |
| EnteroMedics CEO Mark Knudson |
"We believe that by offering a safe reversible option for treating obesity that does not permanently change the anatomy," said EnteroMedics president and CEO Mark Knudson on a February conference call. "VBLOC therapy is an important new choice to help fill these treatment gap not only for patients but for physicians who now have a middle ground to offer their patients. With this regulatory approval we have begun to ramp up our U.S. commercialization strategy."
At that time, the company said it expected to have 20 to 25 VBLOC therapy centers up and running by year end. It hired a marketing director and four regional sales directors right around the January approval.
In a pivotal study, only a bit more than half of patients treated with the VBLOC therapy lost 20% of more of their excess weight. Overall, the treatment group had an average loss of 24.4% of their excess weight at 12 months.
The FDA approved the device to treat patients who have a body mass index (BMI) of at least 40 to 45, or a BMI of at least 35 to 39.9 with a related health condition such as high blood pressure or high cholesterol levels, and who have tried to lose weight in a supervised weight management program within the past 5 years.
EnteroMedics is one of several medical device companies racing to offer obese U.S. patients with better efficacy than existing drugs, but a less invasive option than surgical intervention. ReShape Medical submitted its balloon product to the FDA for review, with an outcome that had been expected during the first half of 2015.
The structure of the financing included the sale of 40.2 million units, each of which contains half of a Series A warrant (exercisable at $1 per share) and half of a Series B warrant (exercisable at $1.09 per share). Each unit was priced at $0.87. Investors also gain an option to buy units with pre-funded Series C warrants.
- here is the release