According to the CDC, more than half of Americans are overweight or obese, with an estimated annual cost of obesity of ~$150 billion. Because conditions such as heart disease, stroke, and diabetes are related to obesity, the medical costs of an obese person are ~$1,500 higher per year than those of non-obese individuals.To help address this problem, EnteroMedics is commercializing the Maestro Rechargeable System, a solution for people who suffer from obesity but are averse to invasive gastric banding (e.g., Lap-Band®) surgeries. On January 14, 2015, the U.S. Food and Administration announced that it has approved EnteroMedics' device to treat obesity.EnteroMedics' Maestro System controls hunger by targeting the nerve pathway between the brain and the stomach. This vagus nerve blocking (VBLOC) therapy uses electrical pulses to signal to the brain that the stomach feels empty or full. VBLOC decreases feelings of hunger and promotes earlier feelings of fullness (satiety).Conventional obesity management involves lifestyle changes such as diet, exercise, behavioral counseling and adjunctive pharmacotherapy. However, lifestyle changes alone have limited long-term effectiveness due to patient compliance issues. According to Dr. Jon Gould, Professor at the Medical College of Wisconsin, “The results of noninvasive interventions for type 2 diabetes and obesity, such as lifestyle changes and pharmacotherapy, have been disappointing.” Pharmaceutical options exist on the market, but these drugs are associated with undesirable side effects such as insomnia, nausea and even heart conditions.There is a clear unmet need for therapies targeting patients who are obese (but not morbidly so) and have found diet and exercise to be ineffective but do not want to undergo invasive bariatric surgical procedures such as gastric banding. Enteromedics' technology can potentially fill this niche.The Maestro System is a pacemaker-like device that can be implanted with local anesthesia and can be removed if desired. Unlike other surgical alternatives, the device does not alter normal digestive system anatomy and allows for a normal diet and lifestyle.In contrast, bariatric surgery involves surgically inserting a band around the stomach to create a smaller volume in which to hold food. Only a limited proportion of the obese patient population qualifies and/or is willing to undergo this invasive surgery. Potential post-surgical complications can be serious, at times resulting in bowel obstruction, stomach perforation and even death.The Maestro Rechargeable System has been approved for use in Europe since 2009 and in Australia since 2011. Its recent FDA approval now gives the company access to the world's largest obesity market. The system is approved for marketing for obese patients with a Body Mass Index (BMI) of 40 to 45 who have first tried to lose weight by diet or exercise under a supervised program.In the pivotal U.S. clinical trial, patients with the Maestro device lost ~8.5% more weight than those in the control group over 18 months. The benefits of the device outweighed the minimal risks involved with the insertion procedure.EnteroMedics has passed the U.S. regulatory hurdle, making the question of insurance coverage the major remaining market access hurdle. Without favorable coverage, DeciBio does not expect to see significant U.S. product sales in the near future. While pricing data for device is not yet available, similar neuromodulation devices can range from $20,000-100,000. In order for the intervention to gain support from payers, the device will likely need demonstrate a positive health economic benefit compared to its cost and / or be deemed superior to alternative treatment options already on the market.Despite the outstanding issue of insurance coverage, last month's decision gives Enteromedics first mover advantage in the burgeoning U.S. obesity neuromodulation market. Although Medtronic is conducting clinical trials for the use of its deep brain stimulation (DBS) technology in obesity, Medtronic’s technology requires implanting leads in the brain in contrast to VBLOC’s less invasive vagal nerve placement. DeciBio found no publically available evidence of competitors developing comparable vagal nerve products for obesity at this time. EnteroMedics will present the Maestro System at the Annual BIO CEO and Investor Conference next Monday.Disclaimer: Some of the companies listed above may be DeciBio clients or customersAuthor: Ketaki Panse, Analyst at DeciBio Consulting, LLCConnect with Ketaki Panse on Linkedin