is a company that focuses on gastrointestinal and metabolic diseases with its flagship product VBLOC®, which is a first-in-class weight loss treatment that prevents obesity by blocking signals in the nerve that controls both hunger and fullness sensations in the human body (the vagal nerve). Unlike Vivus’ (VVUS) recently approved phentermine and topiramate ER weight loss pill Qsymia or Arena’s (ARNA) Belviq (lorcaserin) pill, VBLOC is implanted surgically and acts as a very direct inhibitor of the “hunger signal” that is sent directly to the brain to induce a desire to eat more. It is a more specific product of the Maestro Rechargable System.
The stock never really gained the kind of momentum and investor interest that Vivus or Arena did right around their FDA approvals last year, and what the company did had was severely damaged after the company released the results from their Phase III ReCharge study on February 7th.
The study, which tested the therapy in a randomized double-blind trial with 239 obese patients, failed to meet either of its primary efficacy endpoints. The primary analysis, which was based on achievement of a 10% greater EWL (excess weight loss) in the VBLOC arm based on the BMI scale, was close to its predefined threshold with statistically significant 8.5% improvements across the board.
The safety endpoint, on the other hand, was met successfully. The endpoint required that the serious adverse event rate related to the device, implant/revision, and therapy be less than 15% although this seems incredibly generous. Luckily, the results showed an adverse event rate of 3.1% for the treatment arm. The completion rate was also higher than one might’ve expected, with 93% of patients reaching the one year mark.
These are the data that investors will have to mull over after Enteromedics’ recent pre-PMA meeting with the FDA on May 15th. While the FDA has confirmed that Enteromedics can submit a PMA for VBLOC/Maestro based on the results of ReCharge, and this is expected to be analyzed by an Advisory Committee prior to the FDA decision, probably in H2 2014. Enteromedics expects to submit the PMA some time later this year.
The company has a cash burn rate of roughly $7 million per quarter, which should stay relatively close to that value due to ongoing expenses related to the continuation of the rest of the ReCharge trial. This gives the company enough time to operate well into fiscal year 2014, although we could definitely see a financing early next year prior to any regulatory action.
Investors who go long ETRM are generally expecting the Advisory Committee and the FDA to overlook technically-missed primary endpoints in favor of the somewhat established safety profile of VBLOC/Maestro and the statistically significant improvements that the treatment arm demonstrated versus the placebo arm. Since the ultimate decision is quite arbitrary in the end, ETRM is likely to stay rangebound until we approach the next major catalyst.