The U.S. FDA’s Advisory Gastroenterology and Urology Devices Panel (GUDP) voted on Tuesday 6 to 2 (one abstention) that the relative benefits of EnteroMedics’ (ETRM) VBLOC vagal blocking therapy, the Maestro System, outweighed the relative risks. ETRM gapped up 23% on the news Wednesday, though the stock is giving up some gains into the late morning The panel also voted 8 to 1 in favor of the safety of VBLOC, and 4 to 5 against a reasonable assurance of efficacy. The panel vote is designed to inform the FDA’s final approval decision later this year, although the FDA is not bound by the recommendation. Trading in ETRM was halted on Tuesday.
In our view, VBLOC is largely irrelevant in the obesity treatment landscape, a market opportunity that Wall Street significantly over-estimated leading up to the launch of prescription drugs from Arena (ARNA) and Vivus (VVUS) in the last two years. If approved, Enteromedics faces a steep uphill battle in gaining reimbursement for a marginally effective treatment that requires surgical implantation and an external charger. If approved later this year, we like the short side of this trade.
Of the emerging obesity players, PropThink was bullish this spring on just one: Orexigen Therapeutics (OREX). The stock returned 30% in less than a month for those who followed our buy/sell recommendations. You can read more here.
