EnteroMedics Inc (NASDAQ:ETRM) Improves Its Pitch With Diabetes Data

EnteroMedics Inc (NASDAQ:ETRM) ran up on Thursday, on the company releasing data from a study of its lead asset in diabetes patients. The company closed out Wednesday's session at a little over $7 a share. By the Thursday close, this had risen to $8.15 – a close to 17% gain in 24 hours.With no real news out other than the results of the study, the gains must be primarily rooted in what the study means for EnteroMedics and its prospects. So, what does it mean? In turn, what's next?For those not familiar with this one, the company is a biotechnology entity that focuses on the development of products aimed at helping people lose weight. It's got an approved product on the market and available right now, and the product is called vBloc. We won’t go into the details of how the therapy works and how it compares to similar products in the space in too much detail here, as we've done that on a number of occasions in the past. What we will say, is that it's a nerve stimulant therapy, meaning it doesn’t require patients to undergo any anatomy altering procedures (this is important) and it provides a similar result as things like a gastric band, a sleeve, that sort of product.The problem is, and again, this is something we've mentioned on a number of occasions in the past – it's not got insurance coverage. At least, that is, not from a major insurer, and not that makes it available to the general population.If the company is ever going to bring in revenues that justify a long term value increase, it's going to need said coverage, but coverage takes time and money to acquire. EnteroMedics doesn’t have too much cash, and so it's essentially a race against the bank balance to pick up coverage and start bringing in revenues before the cash runs out, or before the company has to raise again.The latest release details data derived from a study investigating the impact of the therapy in diabetes type 1 sufferers. Results from the study demonstrate that after three years, the average percentage excess weight loss was 21% with reductions in hemoglobin A1c of 0.6 percentage points from a baseline of 7.8%. For reference, this hemoglobin stat is the industry measurement of blood glucose.That’s not the important bit, however. At least not for us.What's really important about the data is that the reduction in blood glucose means that close to 40% of the patients on the study were able to reduce or stop entirely their diabetes medications. Additionally, 71% of study participants were at or below the American Diabetes Association target for HbA1c for people with diabetes of 7%. It's hard to overstate how much of a difference this makes for the drug as a prospect for insurance coverage. Diabetes is a real issue in pretty much all western developed nations, and in the US it's as severe a problem as anywhere in the word. Any therapy that is shown to reduce blood glucose levels to a point at which diabetes sufferers can stop their medication (and even though this is an indirect reduction in blood glucose, in that the therapy reduced appetite, which in turn reduced blood glucose) is a real attractive pitch to main stream insurers. The price is no higher than current SOCs (around $18K per treatment) and the non anatomy altering element of the offering should give it a small edge on SOC when pitching to decision makers at the insurers.Nothing's easy, of course. Some diabetes data isn’t going to underpin blanket coverage overnight. However, in this sort of campaign, every small push helps, and we think this is more than a small push.We will be updating our subscribers as soon as we know more. For the latest updates on ETRM, sign up below!Disclosure: We have no position in ETRM and have not been compensated for this article.