Neothetics Inc (NASDAQ:NEOT) Still Has Hope

Shares of Neothetics Inc (NASDAQ:NEOT) got decimated last December after announcing that its two Phase 3 clinical trials, AbCONTOUR1 and AbCONTOUR2, assessing lead product candidate LIPO-202 for reduction of central abdominal bulging due to subcutaneous fat (potbelly), failed to achieve their primary or secondary efficacy endpoints. Investors were left wondering what was going to happen to NEOT. Usually when a company fails Phase 3, management typically burns through its cash trying to salvage the company. Luckily with NEOT, the board of directors took control of the checkbook and showed CEO George Mahaffey the door.Neothetics describes itself as "a clinical-stage specialty pharmaceutical company focused on development and commercialization of therapeutics for the aesthetic market. Our current focus is on localized fat reduction and body contouring. Neothetics product candidate, LIPO-202, is a potential injectable treatment for undesirable, localized areas of fat that requires no pain management before or after treatment, no downtime, and causes no damage to nearby tissues."LIPO-202 is an injectable formulation of salmeterol xinafoate, a well-known long-acting ß2-adrenergic receptor agonist used in several FDA-approved drugs, including ADVAIR for asthma. LIPO-202 is designed to be a locally-injected drug that causes localized shrinking of fat cells without any effect on nearby tissues. LIPO-202 activates ß2-adrenergic receptors on fat cells, triggering the metabolism of triglycerides stored in the fat cells, and thereby shrinking them across the treatment area. LIPO-202 clinical research is focused on reducing undesirable localized areas of fat, including central abdominal fat in non-obese patients (stomach rolls) and submental fat (double chin).Last year, Neothetics was issued U.S. Patent Number 9,198,885 by the United States Patent and Trademark Office (USPTO). This patent is directed to specific methods of using LIPO-202 and other agents for the reduction of fat accumulation and is the fourth issued patent directed to Neothetics' lead product candidate LIPO-202.Last month, shareholders got their answer on what NEOT intends to do next. Neothetics plans to initiate a Phase 2 trial with a modified formulation of LIPO-202 in the third quarter of 2016 for the reduction of central abdominal bulging, which the company anticipates having top-line data from in first quarter of 2017. This Phase 2 study will be a randomized, double-blind, placebo-controlled trial designed to assess the efficacy, safety and tolerability of a modified formulation of LIPO-202. Neothetics also plans to initiate a Phase 2 proof of concept study of LIPO-202 for the reduction of localized fat deposits under the chin (submental fat) in the third quarter of 2016, which the company anticipates having top-line data from by year end 2016.In looking at the Phase 3 trials, NEOT identified a number of potential opportunities to improve upon the effectiveness of LIPO-202. Neothetics engaged expert consultants to review the results and subsequently develop a modified formulation of LIPO-202 primarily based upon the drug product formulation used in the Phase 2 RESET study. Neothetics believes that it should be able to obtain the positive results observed in the Phase 2 RESET clinical trial with the modified formulation.Currently trading with a market cap of just $14 million, there is still hope for shares of Neothetics. The good news is that the company remains well-funded and has reduced its headcount from 17 to 9 full-time employees. The company currently has $37.7 million in cash and $9.9 million in debt. NEOT's current book value per share is $1.73. This gives shareholders some downside protection, or in this case, upside potential. The key for NEOT becoming a big winner again is that the upcoming trials show positive results. We will be updating Insider Financial as soon as we know more. For continuing coverage on NEOT, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in NEOT and have not been compensated for this article.