Roth starts Obalon Therapeutics at buy; PT $6

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Roth Capital Partners initiated coverage of Obalon Therapeutics (NASDAQ:OBLN) with a “buy” rating and $6 price target. The stock closed at $2.91 on Sept. 5.

Obalon offers the Obalon Balloon System, the first and only FDA-approved swallowable, gas-filled balloon system for mild-to-moderate obesity.

“The impetus for our buy rating on Obalon shares is our belief that the company is well-positioned to emerge as the dominant leader in the domestic balloon weight loss market,” writes analyst David Solomon, adding that the Obalon Balloon System appears more appealing to the consumer and physician than current competition.

“We believe that the Obalon Balloon System will continue to capture greater consumer interest than its FDA-approved liquid-filled competitors (Apollo Endosurgery's Orbera and ReShape Lifesciences' ReShape Dual Balloon) due to its safety (0.5% rate of serious adverse events versus about 10%), tolerability, durable efficacy and easy cost-effective placement,” he added.

In addition, Mr. Solomon said the Obalon system offers a higher return on investment proposition to physicians interested in cash-pay procedures, with potentially a lower likelihood of either late-night calls for patient intolerance or malpractice lawsuits than its competition.

Stephen Kilmer