Biotech Neothetics pulls off a $65M IPO and promptly takes a tumble

San Diego's Neothetics ($NEOT), developer of a fat-busting treatment, came through on its plans to raise $65 million in an IPO, but, in keeping with a growing trend in biotech, watched its shares slide shortly after its debut.

The company, formerly known as Lithera, priced about 4.7 million units at $14 each. But Neothetics opened at $13.28, and its share value kept slipping in its first day on the market, and it's now trading nearly 20% below its IPO price.

But the biotech still grossed $65 million, and, withi its proceeds, Neothetics plans to bankroll pivotal trials of its top prospect, an injectable therapy designed to reduce belly fat in patients who aren't obese. In Phase II trials, the drug, LIPO-202, demonstrated a statistically significant reduction in what Neothetics calls "central abdominal bulging," and now the company is blueprinting two Phase III studies slated for the first half of next year. If all goes according to plan, Neothetics will have late-stage data by the end of next year and an FDA submission filed by the second half of 2016.

LIPO-202 is an injectable formulation of salmeterol xinafoate, the active ingredient in GlaxoSmithKline's ($GSK) blockbuster respiratory treatment Advair. Because the compound is already well understood, Neothetics can file its drug under the FDA's 505(b)(2) pathway, which will allow it to use existing data to support its application, the company said.

The company closed a $35.6 million C round in February, counting among its investors Alta Partners, Domain Associates and Rusnano.

Meanwhile, the cheers-and-jeers reception for biotech IPOs continues, and Neothetics joins a growing list of companies that have seen their shares drop after making it Wall Street. Last month, Forward Pharma ($FWP) pulled off one of the year's biggest debuts with a $221 million raise only to see its shares drop sharply that very morning. Dermira ($DERM) suffered a similar fate a few weeks before, joining a list of postpricing laggards that includes Foamix ​Pharmaceuticals ($FOMX) and Auris Medical ($EARS).

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