June 18 EnteroMedics Inc's shares jumped about 37 percent in premarket trading on Wednesday, a day after an advisory panel to the U.S. Food and Drug Administration voted in favor of the company's device to treat obesity.
The independent panel voted 8 to 1 in favor of the device's safety and 6 to 2, with one abstention, that the device's benefits outweighed its risks.
"The panel reaffirmed our thesis that (the device) offers a less invasive and safer, yet effective, treatment for the large and under-treated obese population," Roth Capital Partners analyst Chris Lewis wrote in a note.
The pacemaker-like device, called Maestro Rechargeable System, blocks certain nerves that regulate digestion and stomach activities using electrical impulses. This neuroblocking technology, called Vbloc, helps to control both hunger and fullness.
Lewis said he expected the FDA to accept the panel's recommendations and approve the use of Maestro in treating morbid obesity in the second half of the year.
EnteroMedics' device could help morbidly obese patients, who have few options other than surgery as drugs are of little help to them.
However, the advisory panel voted against the device's effectiveness, saying 12-month data from a trial did not support its efficacy.
Lewis said the negative efficacy vote was not representative of the panel consensus that Vbloc therapy showed the necessary clinical benefit, but was based on the data from one trial.
"Ultimately, the panel determined that 24 percent and 25 percent excess weight loss in the treatment arm at 12 and 18 months ... was clinically significant and effective enough to recommend for approval, regardless of the fact that the ReCharge trial did not meet its arguably flawed co-primary efficacy endpoints," he said.
Obesity has started assuming epidemic proportions in the United States, with more than a third of Americans reported to be obese. The condition is a serious concern for regulators and policymakers.
With related complications such as diabetes and heart problems, obesity cost the U.S. healthcare system up to $210 billion a year, according to a report by lobby group Trust for America's Health published in 2012.
EnteroMedics' shares closed at $1.52 on Tuesday on the Nasdaq. (Reporting by Esha Dey in Bangalore; Editing by Kirti Pandey)