The analyst said, "While we believe ETRM's vBloc therapy can still become a viable 'tool in the toolbox' within the obesity treatment paradigm over the longer-term, we are scaling back our utilization assumptions over the coming years as ETRM works towards securing expanded reimbursement, which will ultimately drive increased adoption and utilization, in our view. As a result, we are shifting to Neutral, from Buy, and will look for expanding reimbursement and more meaningful procedural volumes to gain higher conviction on the name."
The brokerage continued that given the minimal adoption of EnteroMedics since its commercial launch in 2Q15, the analyst is "scaling back" the utilization assumptions going forward, "as ETRM works towards getting expanded reimbursement." Lewis believes such activity would finally drive increased adoption and utilization.
Roth Capital Partners thinks until then, the commercial adoption, procedure volumes and sales "will be controlled," as the company will continue to face a challenging battle in competing with the current alternative options like a gastric sleeve and lap band. The brokerage thinks these devices "have already established reimbursement, clinical acceptance and offer more pronounced efficacy."
Therefore, Lewis is looking for expanding reimbursement coverage and more meaningful procedural volumes and associated growth to gain higher conviction on the name.
At time of writing, EnteroMedics was trading up 4.38 percent in Thursday's pre-market session.
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