Is Enteromedics doing everything to conserve cash they need to get to a PMA study? Have previous studies improved visibility on the safety, effectiveness, and durability of the VBLOC therapy? Will the small patient and center numbers make it difficult to draw strong conclusions on effectiveness?
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…Last week, the Roseville-based company released the results of a 18-month follow-up study that demonstrated that its VBLOC device, which uses electricity to treat obesity, caused patients to lose weight. But EnteroMedics stock has dropped 27 percent since Jan. 9 to Friday’s close of $1.80 per share.
What gives? Not mentioned in the company’s press release: About a quarter of the study’s patients had dropped out of the trial, making an already small study even smaller. Company executives later told analysts that EnteroMedics enrolled fewer diabetics than it wanted in its pivotal Empower clinical trial. Once Empower is completed, EnteroMedics will file for premarket approval (PMA) from the Food and Drug Administration later this year. Given the company’s tight cash position, any hiccup in getting VBLOC to market is likely to spook investors.
EnteroMedics, which went public in November 2007, has said it has enough money to last into 2010. In addition to the $28.6 million in cash on its balance sheet as of September, the company recently secured a new $20 million loan.
But the company is feeling the financial squeeze. For the first nine months last year, EnteroMedics lost $30.1 million, or $1.79 per share. Last month, the company said it cut 13 employees, 18 percent of its workforce.
Given the company’s limited resources, EnteroMedics has little room for error. The company hopes to release results from a 12-month Empower trial of 294 patients and then promptly submit a PMA application to the FDA by the end of this year.
Speaking to investors at the J.P. Morgan Healthcare Conference in San Francisco last week, EnteroMedics CEO Mark Knudson said the company’s top priority is meeting those deadlines…
A PMA is harder to obtain because the technology must be unique. EnteroMedics’ VBLOC system is an implantable device that shoots electrical pulses into the vagus nerve, which connects the brain to the digestive system. By blocking the signals that run through the nerve, the system can reduce a patient’s feeling of hunger…
Publicly traded medical device companies that are still developing technology and have yet to generate revenue face a tough challenge, analysts say. Should they run out of cash, those companies have few options to raise capital, given the frosty credit markets and economic recession…
Public markets have not been kind to device start-ups. Last year, Restore Medical Inc. in Roseville sold itself to Medtronic Inc. for $29 million, a deal that rescued the cash-starved company from possible insolvency. Cardiovascular Systems Inc. of New Brighton withdrew its initial public offering and instead merged with a publicly traded shell company.
EnteroMedics admits that clinical trials have not gone smoothly. Last week, it released data from a study that showed patients who received the VBLOC therapy lost weight. However, Knudson said 10 of the 38 patients withdrew from the program, which is continuing. Some of those patients decided to undergo gastric bypass surgery instead…
EnteroMedics hopes to prove that its technology can help save money by effectively treating people suffering from complications of obesity such as diabetes and high blood pressure. But despite enrolling fewer diabetics than it wanted in its Empower study, EnteroMedics will push forward, Knudson said. “We’re focused on being an obesity company.”
Analysts say much is riding on the Empower study…