Neothetics Inc (NASDAQ:NEOT) Is About To Get Its Development Program Back on Track

Neothetics Inc (NASDAQ:NEOT) offered up a business update back at the beginning of August, and as part of the update, the company gave us some insight into its pipeline timeframes. We've got a couple of major milestones coming up, one very near term and one a little farther down the line, both of which have the potential to inject some upside momentum into the company's market capitalization.When viewed against the wider microcap biotech space year to date, Neothetics hasn’t done too bad, but go back twelve months, and the company is down close to 90%. The decline comes on the back of a data fail in December, whereby the company essentially announced that its lead candidate doesn’t work, and that it was evaluating options.Post disappointment, however, the company regrouped, and is carrying the treatment forward in what will be a fresh round of phase II trials. It is this round of trials that is going to decide the long term future of the company (and least, that is, as it relates to this asset) and – in turn – that make up the lion's share of the near term catalysts.So, what happened, and what's changed?The drug in question is an injectable formulation of a compound called salmeterol xinafoate. The latter is a well-known long-acting ß2-adrenergic receptor agonist used in several FDA-approved drugs, most notably an asthma drug called Advair, which GlaxoSmithKline plc (ADR) (NYSE:GSK) markets right now.Anyway, Neothetics figured out that the compound might work to shrink fat cells, and formulated it into what it calls LIPO-202. A total of six trials demonstrated efficacy, and safety was no issue based on the fact that the compound is essentially unchanged from its already established SOC formulation.Then the company went into phase III, and everything ground to a halt. The active arm in the trial (the trial compared 202 to placebo) performed as well as (or as badly as, depending on which way you look at it) the placebo arm in the phase II on which the phase III protocol was based. Basically, it had no effect.So what's happening now?The company is carrying forward with two phase II trials using what it calls a reformulation of LIPO-202. Detail is thin, but we know that the reformulation is based on a variation of the drug used in a phase IIb called RESET, and a look at the protocol from this trial reveals that three different doses were used – 0.4, 1.0 and 4.0 micrograms (total dose). Neothetics used a total dose of 0.4 micrograms in both of the phase III trials, which as just described, is the lowest of the dose regimens trialed in RESET. While this is speculation (all we know is that it is dose ranging), it's reasonable to conclude that the upcoming phase IIs are going to go with the higher two doses, and try to establish a safety protocol with which to push into a pivotal.Common sense suggests the higher dose should have an improved impact, so as long as the drug can maintain a benign safety profile (which doesn’t look like it should be a problem based on data to date) then moving into a pivotal looks like it’s a given.The catalysts we are watching then, are a phase II initiation during this quarter for a submental (under the chin) fat reduction indication, and a first quarter 2017 initiation for a central abdominal bulging indication (this is the one that failed phase III).Top line from each is set for the second and third quarters of 2017 respectively, meaning we've essentially got one major catalyst a quarter (initiation, initiation, topline, topline) for the next twelve months. Note, the latter of the two trials isn’t dose ranging, so we reckon the company is just going to push forward with the high dose and not take any chances on the efficacy side of the equation.Now, the cost of these trials is going to be a bit of a draw on shareholder value, as the company is essentially set back twelve months (or a little over) and dilution is going to have to fund this setback. That's the only downside, for us, however.At it's current market capitalization there's so much upside on offer if the company can get its program back on track, then we think this one's well worth a look ahead of its catalysts.Subscribe below and we will keep you updated as this development program unfolds, and as more details come in on the protocols involved.Disclosure: We have no position in NEOT and have not been compensated for this article.