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EnteroMedics: Pump Up the Volume

ST. PAUL, Minn. ( TheStreet) -- EnteroMedics (ETRM - Get Report) shares were plunging on a surge in volume Friday after a study of the company's obesity-treatment system did not meet effectiveness goals.

EnteroMedics said the randomized, double-blind, placebo-controlled pivotal study of its Maestro System for the treatment of obesity did not meet primary and secondary efficacy endpoints.

"We are disappointed in the preliminary findings and plan to undertake a thorough analysis of the study data," Mark B. Knudson, Ph.D, president and CEO of EnteroMedics said in a statement. "The analysis will help us to determine the most appropriate path forward for the Maestro System in obesity and other possible indications."

The news dropped EnteroMedics shares on heavy volume. EnteroMedics was falling $3.30, or 73.7%, to $1.18, making it one of the Nasdaq's worst performers Thursday. Earlier in the session, the stock touched an intraday low of $1.03.

More than 20.5 million shares changed hands by 11 a.m. EDT Friday, compared with to the stock's 50-day average daily volume of 114,556, according to the Nasdaq. EnteroMedics has a 13.4 million-share float with a short float of 2.4% as of Sept. 10, according to Yahoo! Finance. More than 40% of the company's shares are held by insiders with another 44% owned by institutions.

Bullish investor posts on Internet message boards argued that the next trial of the Maestro System could bring a pop to shares. A handful of other traders said they sold out of their positions and moved onto other opportunities, arguing it would be foolish to hold shares now.

-- Written by Robert Holmes in New York.

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