EnteroMedics, the Roseville-based maker of implantable medical devices for weight loss, is moving to California as part of a corporate acquisition intended to expand its market reach and reinvigorate growth prospects.
EnteroMedics on Monday acquired California-based ReShape Medical in a cash-and-stock deal valued at about $61 million. In a conference call with investors, CEO Dan Gladney said EnteroMedics will move its headquarters to a building in San Clemente where ReShape recently signed a five-year lease and has manufacturing operations.
The change will include trimming the combined company's workforce by about 20 percent, to 75 workers. Today, EnteroMedics has about 42 employees and ReShape has about 55, but it's not yet known which employees will stay on and how many will remain in the small "satellite office" that the company plans to maintain in Minnesota.
"What we've told our employees is, if there's job openings in either spot, we will post them just like that and … hopefully hire the best candidate," EnteroMedics Chief Financial Officer Scott Youngstrom said by phone Thursday. "They're two very similar businesses, so there are some synergies in the business that we'll have to go through and evaluate."
EnteroMedics sells a pacemaker-like device called the vBloc System that is intended to make obese patients feel full and eat less by stimulating the vagus nerve electrically. The device is approved for treatment in patients with a body mass index of 35 to 45. EnteroMedics also recently acquired a California company called BarioSurg, which is testing an investigational, surgically implanted device called the Gastric Vest System for morbidly obese patients.
ReShape Medical manufactures an FDA-approved device called the ReShape Dual Weight Loss Balloon, which is nonsurgically placed in the patient's stomach for up to six months to make the person feel full more quickly when eating. The therapy, which includes 12 months of personalized weight-loss counseling, is intended for patients with a BMI of 30 to 40.
"We are now, more than ever, committed to the fight against obesity and we are pleased to be expanding our business and growth opportunities with this acquisition of ReShape Medical and its ability to address lower-BMI patients and a lower-cost medical-device solution for obesity," CEO Gladney said in a conference call with investors this week.
ReShape is expected to generate $4 million in sales in the 2017 calendar year, with a projected growth rate of about 40 percent over the next several years.
Meanwhile, EnteroMedics posted a $6.8 million net loss on $93,000 in sales during the second quarter of 2017, amounting to a 91-cent loss per share, according to securities filings.
Shares of EnteroMedics stock on the NASDAQ exchange have risen 18 percent since the deal was announced, closing at $2.10 on Thursday.