On Tuesday, small cap EnteroMedics Inc (NASDAQ: ETRM) soared 63.5% after reporting new clinical trial data for its Maestro system that is designed to control obesity, meaning it might be time to take a closer look at the stock along with the performance of other small cap obesity drug or treatment players like Arena Pharmaceuticals, Inc (NASDAQ: ARNA), Orexigen Therapeutics, Inc (NASDAQ: OREX) and VIVUS, Inc (NASDAQ: VVUS).
What is EnteroMedics Inc?Samll cap EnteroMedics Inc has developed the VBLOC® vagal blocking therapy as a weight loss treatment for obesity and related co-morbidities. More specifically, the VBLOC Therapy is intended to address the lifelong challenge of obesity through the use of a pacemaker-like device called the Maestro® Rechargeable System that is designed to control both hunger and fullness by blocking the primary nerve which regulates the digestive system.
Yesterday, EnteroMedics Inc reported that patients on its Maestro RC system lost 25% of their excess weight, or 10% of their total body weight, after 18 months while patients who received a sham implant lost 12% of their excess weight, or 4% of their total weight. The system is already approved in Europe and Australia, but its not yet approved in the US.
However, investors should be aware that EnteroMedics Inc said back in September that the FDA was asking additional questions about the Maestro Rechargeable System and that regulators wanted more information about device testing and clinical data, including training programs for users and a study of the device after it is approved. The company was expecting a FDA panel to review the Maestro system late in the fourth quarter or early in the first quarter, then make a decision in the first half of 2014.
Moreover, EnteroMedics sank from the $3 level all the way down to below the $1 level after reporting disappointing clinical trial results when it said that patients who were implanted with the Maestro device lost more weight than patients who received a placebo device, but the weight loss totals were not as good as had been hoped for.
Otherwise and as far as financials go, it should be noted that EnteroMedics Inc has reported revenues of $311k (2012) and nothing for the three years before that along with net losses of $23.46M (2012), $26.00M (2011), $17.35M (2010) and $31.93M (2009) for the past four years. There have also been no revenues this year and net losses of $6.30M (2013-09-30), $6.32M (2013-06-30) and $6.58M (2013-03-31) plus the company had around $21.14M in cash to cover $8.43M worth of current liabilities and $3.83M in long term debt at the end of the last quarter. So the company is not endanger of running out of money soon.
Share Performance: EnteroMedics Inc vs. ARNA, ETRM & OREXOn Tuesday, small cap EnteroMedics Inc soared 63.5% to $2.24 (ETRM has a 52 week trading range of $0.81 to $3.23 a share) for a market cap of $135.96 million plus the stock is down 20% since the start of the year and down 77.4% over the past five years. Here is a look at the long term performance of EnteroMedics Inc verses that of Arena Pharmaceuticals, Orexigen Therapeutics and VIVUS, Inc:
5 Best Small Cap Stocks To Own For 2014
The Bottom Line. The latest news puts investors in small cap obesity treatment stock EnteroMedics Inc near where they started the year at but still far off from where they stood five years ago and below the performance of Arena Pharmaceuticals, Orexigen Therapeutics and VIVUS, Inc. So the real test will come if there is FDA approval for the Maestro system.
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