EnteroMedics gets conditional FDA nod for obesity trial

BANGALORE (Reuters) - EnteroMedics Inc said it received conditional approval from the U.S. health regulator for a clinical trial of its device for treating obesity, sending its shares up 52 percent.

Medical device makers need to get Investigational Device Exemption (IDE) approval from the U.S. Food and Drug Administration before conducting trials for collecting data to support their application for marketing approval.

Morningstar analyst Debbie Wang said the company has cleared the first hurdle of getting an FDA approval to start the trial, but they would need money to move forward.

As of June 30, the company had $10 million in cash, cash equivalents and short-term investments.

She said Monday's spike in EnteroMedics' shares suggests that investors are thinking the company would be able to raise cash or get a partner to continue development of the device.

The company also said it plans to commercialize the device Maestro RC System in Australia and expects to file an application for approval and listing with the Australian Therapeutic Goods Administration (TGA) on receiving CE Mark.

EnteroMedics expects to get TGA approval for Maestro RC System during the second half of 2011.

CE Mark approval certifies that a product has met EU consumer safety, health or environmental requirements.

EnteroMedics' device, which is implanted laparoscopically, blocks the vagus nerves periodically using high-frequency, low-energy electrical impulses. It is also considered a less-invasive alternative to existing surgical weight loss procedures, the company said.

The IDE outlines plans for conducting a pivotal trial evaluating the safety and efficacy of vagal blocking therapy delivered through the company's Maestro RC System in the treatment of obesity.

Shares of the company were up 39 percent at $2.55 Monday on Nasdaq. They earlier touched a high of $2.79.

(Reporting by Anand Basu in Bangalore; Editing by Roshni Menon)