EnteroMedics Inc. (NASDAQ: ETRM) is a healthcare company mostly known for developing VBLOC® vagal blocking therapy, a weight loss treatment for obesity and obesity-related risk factors. On January 14, Enteromedics announced it was granted FDA approval of VBLOC delivered via the Maestro® System for patients 18 and older. This is the first treatment to cater to obesity that has been approved by the FDA in over a decade. As a result, Enteromedics shares jumped as high as 74% in trading on Thursday.
The Maestro® System is a device that is surgically implanted in one’s abdomen. Its purpose is to control hunger and feelings of fullness by sending electrical pulses to the nerve pathway between the brain and the stomach.
EnteroMedics' President and Chief Executive Officer Mark B. Knudson, Ph.D., said in a statement, "FDA approval of VBLOC Therapy is a transformational event for not only EnteroMedics and the many supporters who have helped us achieve this milestone but, more importantly, for the people with the disease of obesity that have been waiting for a new option. …The Maestro System fills a significant gap in the currently available treatment options, offering clinically meaningful weight loss without the fear or many of the side effects associated with existing bariatric options.“
However, many are concerned that availability of the treatment will be contingent on health insurers willing to cover it, which analysts estimate could take up to two years.
Analysts weighed in on EnteroMedics following the FDA approval of its obesity treatment.
On January 14 Roth Capital analyst Chris Lewis reiterated a Buy rating on Enteromedics with a $3 price target, according to SmarterAnalyst. Lewis noted, “We view this as a transformative milestone for ETRM as it evolves from a largely regulatory focused company to one of commercialization. We expect FDA approval could potentially accelerate ETRM’s (1) strategic partnership discussions and (2) International reimbursement and commercial developments, particularly in Australia and targeted European markets.”
Overall, Chris Lewis has a 63% success rate recommending stocks and a +6.4% average return per recommendation.
Canaccord Genuity analyst William Plovanic also maintained a Buy rating on Enteromedics with a $4 price target on January 14 following the company’s FDA approval announcement, as reported by SmarterAnalyst. Plovanic wrote, “We believe this is an important milestone for Enteromedics as the company shifts from a pre-approval phase to a commercialization phase. That said, it has been well messaged by management that the U.S. commercialization will be controlled over the next 12-24 months as reimbursement coding and coverage is obtained.”
William Plovanic has an overall success rate of 69% recommending stocks and a +24.0% average return per recommendation.
On average, the top analyst consensus for Enteromedics on TipRanks is Strong Buy.
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