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Neothetics' Fat Reduction Candidate Fails in Phase II Study

Neothetics, Inc.’s NEOT shares dropped almost 24% after the company announced disappointing top line results from a phase II proof-of-concept study, LIPO-202-CL-31, evaluating its lead candidate, LIPO-202, for reduction of submental subcutaneous fat.

Neothetics’ share price has plunged 51.8% so far this year, significantly underperforming the Zacks classified Medical-Drugs industry which has witnessed an increase of 8% in the same time frame.

The multi-center, double-blind, placebo-controlled phase II study was initiated in Dec 2016. It was designed to evaluate the safety and efficacy of two doses of LIPO-202 in comparison to placebo for the reduction of submental bulging due to subcutaneous fat.

The study enrolled 162 patients at 12 sites across the U.S., who received up to 30 subcutaneous injections of LIPO-202 (either 0.3 mcg or 3.0 mcg dose) or placebo once a week for eight weeks.

Follow up visits to access safety and efficacy occurred one week and four weeks following the last treatment. The study endpoints which included both safety and efficacy measurements did not demonstrate improvement on any efficacy in the lessening of submental fat.

We remind investors that in 2015, the company had conducted two pivotal phase III studies, evaluating LIPO-202 for the decrease of central abdominal bulging due to subcutaneous fat. These studies also failed to meet their co-primary composite or secondary endpoints and showed near identical results compared to placebo with no bias in sites or subgroups. However, the company said that it is diligent in deciding next steps and will share their future plans shortly.

Per the company, there is currently an established regulatory pathway for injectable drugs for the reduction of submental fat. The market of submental fat reduction is anticipated to grow bigger than the $2.5 billion U.S. toxin and filler market.

With no approved product in Neothetics’ portfolio yet, successful development and subsequent approval of LIPO-202 will be a huge boost to the company.

Zacks Rank & Key Picks

Few top-ranked stocks in the healthcare sector are VIVUS, Inc. VVUS, Bayer AG BAYRY and Regeneron Pharmaceuticals, Inc. REGN. Each stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

VIVUS’s loss per share estimates narrowed from 50 cents to 39 cents for 2017 in the last 60 days. The company delvered positive earnings surprises in all four trailing quarters with an average beat of 233.69%.

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Bayer’s earnings per share estimates have inched up from $8.36 to $8.85 for 2017 and from $8.88 to $9.52 for 2018, over the last 60 days. The company has delivered positive earnings surprises in three of the four trailing quarters with an average beat of 10.25%. Shares of Bayer have rallied 31.9% so far this year.

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