EnteroMedics acquires ReShape Medical in $38m cash-and-stock deal

EnteroMedics (NSDQ:ETRM) said today that it acquired ReShape Medical in a cash-and-stock deal worth about $38 million.

The deal called for St. Paul, Minn.-based EnteroMedics to pay $5 million in cash, plus 2.4 million shares of stock and nearly 188,000 series C convertible shares. At yesterday’s closing price of $1.79 per ETRM share, the stock shares would be worth about $4.2 million, with the convertible shares worth another $33.6 million after conversion to nearly 18.8 million shares; EnteroMedics said it plans to hold a shareholder vote by the end of the year to approve the series C conversion.

“We are pleased to announce this significant transaction, which adds a new minimally invasive, revenue-generating technology to the EnteroMedics portfolio,” EnteroMedics chairman, president & CEO Dan Gladney said in prepared remarks. “The acquisition of the ReShape dual weight loss balloon, which complements our existing products with a non-surgical weight loss solution, expands our addressable market and gives us yet another touch point along the continuum of care in obesity.

“EnteroMedics and ReShape Medical are two innovative companies that share a strong strategic focus on providing proprietary, patient-friendly technologies to address the global obesity epidemic,” Gladney said. “We look forward to combining the complementary expertise and capabilities of both companies for the benefit of our customers, patients, employees and stockholders.”

In July 2015, San Clemente, Calif.-based ReShape won pre-market approval from the FDA for its dual balloon system, indicated to facilitate weight loss in obese adult patients. The system is designed to be inserted endoscopically into the stomach, where it remains for six months to help patients feel full. The balloon is meant to be temporary and patients with the device undergo supervised diet and exercise plans to maintain weight loss following its removal.

Earlier this year the FDA reiterated a warning about intragastric balloons like ReShape’s and the Orbera device made by Apollo Endosurgery (NSDQ:APEN) after receiving five reports of “unanticipated” deaths since 2016 in patients treated with the balloons.

News of the deal pushed ETRM shares up as much as 17.3% today to a $2.27 high; the stock was trading at $1.97 apiece in mid-morning activity, up 10.1%.

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