EnteroMedics (ETRM) Stock: Gaining On Acquisition News

EnteroMedics Inc (NASDAQ: ETRM) is having an overwhelmingly strong start to the trading session this morning, and for good reason. The company announced acquisition news that’s causing excitement among investors and sending the stock skyward. As is normally the case, our partners at Trade Ideas were the first to alert us to the gains. At the moment (9:44), ETRM is trading at $2.16 per share after a gain of $0.37 per share (20.67%) thus far today.

ETRM Gains Big On Acquisition News

As mentioned above, EnteroMedics is having an incredibly strong time in the market this morning after the company announced that it has acquired ReShape Medical, Inc. The company is a privately held medical technology company. ReShape Medical currently manufactures and markets a product known as ReShape Dual Weight Loss Balloon®. The product is FDA approved and a minimally invasive intragastric balloon designed for the treatment of obesity in patients with a BMI of between 30 and 40 that have one or more related comorbid condition.

According to the press release offered by ETRM, the terms of the agreement are as follows… The company agreed to compensate ReShape Medical with 2,356,729 shares of common stock as well as 187,772 shares of series C convertible preferred stock. ETRM has also agreed to pay approximately $5.0 million in cash, the amount which will be used immediately to pay ReShape Medical’s outstanding senior secured indebtedness as well as certain transaction expenses.

However, in order for this deal to actually close, the company needs help from its investors. EnteroMedics will be holding a special meeting of its stockholders on December 31st in an effort to seek the required approval of the conversion of the series C convertible preferred stock into shares of common stock. In a statement, Dan Gladney, President, CEO, and Chairman of the Board at ETRM, had the following to offer:

We are pleased to announce this significant transaction, which adds a new minimally invasive, revenue-generating technology to the EnteroMedics portfolio… 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… We look forward to combining the complementary expertise and capabilities of both companies for the benefit of our customers, patients, employees and stockholders.”

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What We’ll Be Watching For Ahead

Moving forward, the CNA Finance team will be keeping a close eye on ETRM. In particular, we’re interested in following this acquisition through to the vote. While we believe that investors will vote for the acquisition to take place, anything can happen in the market. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!

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