Here's How Our Readers Just Won Big On Neothetics Inc (NASDAQ:NEOT)

Back at the end of June this year, we published this piece on Neothetics Inc (NASDAQ:NEOT).The company had just taken a 70% hit on the back of some disappointing trial data and, as part of our coverage, we asked the question – is there any value in a punt on Neothetics subsequent to its decline? NEOT Daily ChartOur answer was twofold. Well, two-fold in reasoning, singular in suggestion.We said that there was almost certainly some value in picking up a cheap exposure, first because the company was trading far below its own cash balance and second, because it's NASDAQ listing and relatively insubstantial debt (around $1 million at the time) made it a potentially attractive target for a reverse merger.Here was our conclusion in line with this second suggestion:

"There’s also always the potential for a merger, with a private company looking to pick up a NASDAQ listing through the Neothetics shell."

Fast forward to today and we've had our thesis strongly validated.On Tuesday, October 17, Neothetics announced that it has with an agreement that will see it join forces (by way of a reverse merger) with privately held Evofem Biosciences. Additionally, an affiliate of Invesco Asset Management Ltd., which is an existing investor in Evofem, has agreed to acquire an additional $20 million worth of common stock of the combined company.On the news, the company has run up more than 231% on heavy volume and looks set to continue to appreciate heading into the close of the week.That's a big win for our readers, but even we weren't expecting such a strong response.So why have markets reacted so positively to the development?Well, as is almost always the case with the sorts of reverse mergers, current Neothetics shareholders are going to represent a much smaller portion of the combined entity than will Evofem shareholders but, even at a reduced exposure, the asset to which they are gaining an exposure could be vastly more valuable long-term than even Neothetics' failed asset (the one for which disappointing data caused a decline in June) might've been if it had succeeded through to commercialization in the US.We are talking about a female contraceptive asset called Amphora.It's a vaginal administration asset that is self-applied and is use-on-demand, meaning women can administer the gel up to one hour prior to intercourse and don't have to take a regular pill as a preventative measure.This is a big deal in the female contraceptive space, especially among a portion of women that don't have regular sexual intercourse (and, by proxy, don't need the constant protection a daily pill would offer) but require ad-hoc contraceptive for intermittent coverage.It's also, and this is another big deal, hormone free. Many of the side effects associated with current standard of care contraceptives in the space are hormone-based, meaning the Amphora gel could offer women not only a product that can be used as and when desired as opposed to committing to regular administration schedule, but that can also do away with some of the side effects that make the regular administration a problem in the first place.For Neothetics shareholders to now have exposure to this development, albeit a relatively small one, is a dramatically improved outlook when compared to that of the end of last week for this company.So what's next?The asset is in phase 3 pivotal investigation right now that should complete very early 2019. The company expects to submit for regulatory approval almost immediately subsequent to completion (assuming the data is strong), meaning we could see approval before the end of 2019.On the back of the latest transaction, cash position is more than strong enough to carry through to trial completion, removing any near-term dilution risk.Check out our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest updates on NEOT, sign up below!Image courtesy of Mike Mozart via FlickrDisclosure: We have no position in NEOT and have not been compensated for this article.