Neothetics (NEOT) is on the road now to fund the continued development of their injection-based approach to fat loss.  It’s a smallish deal of $4.3M shares with a $13-15 price range. Three mid-market banks – Piper Jaffray, Guggenheim, and Needham – are on the cover. Post-IPO there will be ~14M shares outstanding for a market capitalization of ~$200M at the mid-point of the range. [A transcript of the IPO roadshow is in process but the NEOT IPO roadshow slides are available.]

Neothetics MOA

Neothetics aims at the midsection of “thin people who want to be thinner” with a set of 20 injections that stimulate local fat burning. The company sees the first part of their market opportunity among the 750K people in the US already getting some kind of aesthetic therapy by injection. After that they estimate there are 1M more who would consider injections for the first time to deal with stubborn fat deposits.

Pricing is expected to be $1500 from the company and $3000 to the patient – substantially less than liposuction and on par with other device-based treatments. The Phase 3 pivotal study is planned for 2015 with an NDA targeted in 2016 for potential approval and market launch in late 2017. Taking a very cavalier swag at this market one gets to about a $1.5B annual opportunity over the long term. But Neothetics is not the only game in town.

The Power and Pain of the Needle

This isn’t the first needle-based fat loss therapy IPO. Kythera (KYTH) offers an injection-based therapy for fat removal – specifically for the chin area which is difficult to attack via exercise. KYTH completed their IPO in October 2012 and is still pre-revenue. It’s done fairly well though since pricing at a top-of-the-range $16 the stock has been a $30 to $40 range for months.

Going back to the KYTHERA IPO roadshow slides their mechanism of action (MOA) is also different. They actually destroy fat cells instead of just accelerating the metabolic process to shrink them. They present a large body of evidence making it clear that their process does work – as long as you want to go through a regiment of injections, and suffer some “pain/burning, swelling and numbness” as part of the process. These are part of the experience based on the results of their European Phase III trial. In the parlance of the drug industry these are not really considered “adverse events” since they are basically just discomfort. So full speed ahead with the needles.

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