Guggenheim Starts Neothetics Inc. (NEOT) at Buy

Guggenheim initiates coverage on Neothetics Inc. (NASDAQ: NEOT) with a Buy rating and a price target of $16.00.

Analyst Louise Chen highlighted the company's two products in development:

• LIPO-202 (Salmeterol Xinafoate for Injection): Injectable designed to produce local, selective fat tissue reduction (pharmaceutical lipoplasty).
• LIPO-102 (Salmeterol Xinafoate and Fluticasone Propionate): Orphan designation for treatment of symptomatic exophthalmos (fat deposits behind the eye leading to protrusion of the eye from the orbit).

Here investment thesis is threefold:

#1. We believe LIPO-202 could be the next Botox (which has sales of $1B+), with peak sales potential of over $1B (note, the expected launch is 2018), but Neothetics’ market cap suggests to us that the Street is underestimating this opportunity.
#2. We believe an investment in Neothetics could provide a good entry point into the body contouring market early in its growth and development. The body contouring market is growing double digits, which is higher than the mid-single-digit growth rate of the overall aesthetics market. Body contouring could be one of the next big growth drivers for the aesthetics market, in our view.
#3. There is a free call option on LIPO-102, which has orphan designation for the treatment of exophthalmos. Neothetics’ valuation ascribes no value for this pipeline product. Furthermore, we think this could be a sizable and long-tailed opportunity for Neothetics because orphan drugs usually have superior pricing and longer brand exclusivity than other brand drugs.

For an analyst ratings summary and ratings history on Neothetics Inc. click here. For more ratings news on Neothetics Inc. click here.

Shares of Neothetics Inc. closed at $7.49 yesterday.

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