It was a short and bitter update out of San Diego’s Neothetics today after it said a phase 2 proof-of-concept study for its fat reduction therapy flopped.
Cue its shares nose-diving this morning by more than 70% premarket and was reported along with a failure from another small cap biotech, Matinas, which saw its shares tank 45%—all bringing a jolt to biotech investors who had been riding high on last week’s bump.
The midstage proof-of-concept test of Neothetics’ LIPO-202 was looking to reduce submental subcutaneous fat, but “did not demonstrate improvement on any efficacy measurements or separation from placebo.”
Dan Piacquadio, head of Neothetics’ Development Committee, did not mince his words: “We are disappointed in these results, which are unambiguous.”
This could prove serious for the biotech, with Kim Kamdar, Ph.D., a member of Neothetics’ board, saying in a statement: “We are determining the path forward for the company. Our primary objective is to maximize value for our shareholders, and we will be expeditious and diligent in deciding next steps. We will share our future plans shortly.”
That has the whiff of cuts, and maybe more.
Neothetics had $9.7 million in cash as of the end of the first fiscal quarter in 2017. It was down as much as 71% premarket, worth around 75 cents a share.