Three Key Points Markets Overlooked From The EnteroMedics Inc (NASDAQ:ETRM) Conference Call

EnteroMedics Inc (NASDAQ:ETRM) just put out its latest earnings and management hosted a conference call to discuss the results. Alongside the pre-prepared remarks, the team also fielded questions. Deriving from both the call itself and the question-and-answer session, we picked up on a few points that we think are worth highlighting as key inputs for the company and its associated attractiveness as an investment going forward.Here is what we are looking at.First, for those not familiar with this company, it is a biotechnology entity that has developed a weight loss solution called vBloc. It's an implantable device that uses electrical stimulation to make a patient feel full. If a person feels full they eat less and, by proxy, lose weight. The device is approved in the US but – and this is a key point – doesn't yet have general insurance coverage. This latter fact dramatically limits its sales potential, and a lack of progress towards commercial coverage has weighed heavily on EnteroMedics' market capitalization since the device's approval.So that is a bit of background, what did we learn from the call that's important?First, that sales came in pretty weak at $40,000 for the period, but that this weakness is primarily a symptom of the company's cutting of its marketing budget late last year. Enteromedics runs radio and online ads to generate leads but didn't run any such ads for pretty much the entire fourth quarter of 2016. This limited lead generation, which in turn, limited revenue collection. According to management, the marketing efforts have now restarted, and we should see this filter through to higher numbers from the second quarter onwards.Second, we learned where the company's type II diabetes trial fits into the strategic picture going forward. As per this May 2 filing, the company is sponsoring an investigator-initiated study with Kaiser Permanente, designed to study vBloc therapy as a treatment for Type 2 diabetic patients with obesity. The study is going to cost $3.4 million and will almost certainly necessitate a dilutive raise; something that has caused a bit of upset among shareholders. However, as management outlined on the call, Kaiser has basically said that it's looking for an alternative to the type 2 diabetes drugs it covers and that it might be interested in vBloc if the company can prove that the device is comparable to the drugs (in terms of helping patients avoid moving from pre-diabetic to diabetic). The drugs are costly. If the company can prove the just mentioned comparability, vBloc could save Kaiser some money as a first line option in this population. The trial, then, is set up to meet Kaiser's request. Data from a smaller Australian study demonstrates comparability, and the company is now trying to replicate that with a larger US study.Third, that management is about to put out three year data from a study designed to demonstrate the long term impact of the device. Losing weight is the core priority for a device like this, but keeping the weight off is almost as important. Things like gastric balloons don’t have good results when it comes to weight loss maintenance. Two year data released last year demonstrated that vBloc is superior to current alternatives in this regard (i.e. patients lose weight and then keep it off) and if the about-to-be-released three year data shows supports a similar beneficial comparability, it gives the company a very strong differentiator on which its sales and marketing efforts can pivot.The release of this data, then, is a major near term catalyst that could get the company running into the latter half of 2017.Bottom line is that this company isn’t out of the woods – it still needs to pick up approval from a major insurer if it's going to survive – but it is moving very much in the right direction and the three points highlighted above are supportive of this statement.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.