By Pallavi Ail and Zeba Siddiqui
Feb 7 (Reuters) - EnteroMedics Inc said its experimental
device to treat obesity did not meet pre-defined efficacy
targets in a late-stage study, sending its shares down 52
percent in extended trade on Thursday.
The device, VBLOC, involves implantation of leads on the
vagus nerve that controls digestive functions. The therapy aims
to block the nerves using high-frequency, low-energy electrical
impulses affecting perception of hunger and fullness.
Despite the trial failure, EnteroMedics Chief Executive Mark
Knudson said the company is confident of the data collected in
the study and plans to file for a marketing approval for the
device in the United States in the second quarter of 2013
without conducting any further studies on it.
However, Morningstar analyst Debbie Wang said the company
would need to raise capital.
"From an investor standpoint, the trial results raise
questions about how limited this therapy will be," she added.
EnteroMedics Chief Financial Officer Greg Lea said the
company had a cash balance of $27.4 million at the end of
September which makes it "sufficiently capitalized for now."
In the study conducted on 239 patients, those treated with
EnteroMedics's VBLOC device lost 8.5 percent more excess weight
compared with the "sham" group or people who were treated with a
device with no attachments to the nerve, missing the main goal
of 10 percent set for the study.
"I think what you're seeing now is that there is a huge
placebo effect from having the sham therapy ... it also
underscores that perhaps this device does not have as much
efficacy as management would hope," Morningstar's Wang said.
There were no adverse cardiovascular incidents recorded in
the trial and a reduction in blood pressure and heart rate was
also observed in the treatment arm.
Shares of the St. Paul, Minnesota-based company were at
$1.25 in extended trade, after closing at $2.84 on the Nasdaq on
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