IPO Report: Klox Technologies (KLOX)

Francis Gaskins |

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Klox Technologies (KLOX) is a specialty pharmaceutical company focused on developing and commercializing products based on its proprietary BioPhotonic technology platform to address skin and soft tissue disorders. It is based in Quebec, Canada.

Eleven other companies are scheduled to IPO for the week of May 4. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: UBS

Co-managers: Canaccord Genuity, Needham & Company, and National Bank of Canada Financial

End of lockup (180 days): Tuesday, November 3, 2015

End of 25-day quiet period: Monday, June 1, 2015

KLOX scheduled a $67 million IPO with a market capitalization of $353 million at a price range midpoint of $14 for Thursday, May 7, 2015 on Nasdaq.

Klox Technologies (KLOX) IPO Summary

KLOX is a specialty pharmaceutical company focused on developing and commercializing products based on its proprietary BioPhotonic technology platform to address skin and soft tissue disorders.

Initially, KLOX intends to focus on indications in the areas of dermatology, wound care and oral health. LumiCleanse and LumiBel, KLOX’s dermatology treatment systems for acne vulgaris and cosmetic skin care, respectively, are being commercialized with leading global collaborators in Canada and Europe.

Klox Technologies (KLOX) IPO Valuation

Glossary

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Klox Technologies (KLOX)

$353

98.0

-36.0

3.4

6.2

19%

             

Klox Technologies (KLOX) IPO Conclusion

Targets dermatology, wound care and oral health

Neutral

Rev +1256% to $3.6mm

Gross profit of 67%

Loss rate on sales of -269%

P/E of -36 indicating relatively low cash burn rate relative to market cap

Price to book of 3.4, medium range

Shareholders not buying

Has strategic distribution partners, see below

Klox Technologies (KLOX) Business

KLOX is a specialty pharmaceutical company focused on developing and commercializing products based on its proprietary BioPhotonic technology platform to address skin and soft tissue disorders.

Initially, KLOX intends to focus on indications in the areas of dermatology, wound care and oral health. LumiCleanse and LumiBel, KLOX’s dermatology treatment systems for acne vulgaris and cosmetic skin care, respectively, are being commercialized with leading global collaborators in Canada and Europe.

KLOX’s LumiHeal wound healing treatment system consists of its LumiHeal gel and a multi-LED lamp.

Klox Technologies (KLOX) Commercialization

KLOX is commercializing its dermatology franchise, including LumiCleanse and LumiBel, with leading global collaborators.

In July 2014, KLOX entered into a license and joint venture agreement with LEO Pharma A/S, or LEO, pursuant to which KLOX granted LEO the exclusive global right, excluding Canada, to commercialize  current and future BioPhotonic topical formulations and lamps for dermatological conditions, excluding orphan indications (rare diseases as defined by the U.S. Food and Drug Administration, or FDA, and European Medicines Agency, or EMA), and aesthetic rejuvenation procedures.

KLOX anticipates that LEO will begin commercial sales of LumiCleanse and LumiBel in select European countries in 2015, under a new LEO brand and CE mark.

In late 2014, LEO began pursuing regulatory clearance to market LumiCleanse in the United States and KLOX expects LEO to initiate clinical trials of LumiCleanse in the United States in 2015 in support of its application.

KLOX anticipates that LEO will begin commercializing both LumiCleanse and LumiBel in the United States if and when LumiCleanse has been cleared or approved.

In November 2013, KLOX entered into a distribution and supply agreement with Sandoz Canada Inc., or Sandoz Canada, pursuant to which KLOX granted Sandoz Canada the exclusive right to commercialize LumiCleanse and LumiBel in Canada.

Sandoz Canada began commercialization of LumiCleanse and LumiBel in two Canadian provinces, Québec and Ontario, as their flagship branded products in the first half of 2014 and has indicated that it retained additional sales agents in early 2015 in order to support the expansion of its commercialization efforts to all major Canadian population centers in 2015.

All commercialization efforts have involved Sandoz Canada sales agents marketing and selling directly to physicians.

CE mark

Both products are regulated as medical devices in the European Union, have undergone the required procedures for Conformité Européenne, or CE, marking and can be marketed and sold in Europe.

KLOX intends to commercialize these products on its own. KLOX anticipates commercial launch of LumiCleanse, LumiBel and LumiHeal in Europe in 2015.

KLOX is also developing its oral health franchise, including PERIO-1 for the treatment of periodontitis, and KLOX intends to file for CE mark approval for PERIO-1 in 2015.

The CE mark is an international symbol that represents adherence to certain essential principles of safety and effectiveness mandated in the European Medical Device Directive and, once affixed, enables a product to be sold within the European Union and other countries that recognize the CE mark, subject to compliance with applicable submission and approval requirements in such other countries. Through its collaborators’ efforts and its own, KLOX plans to commercialize these and future treatment systems worldwide.

Klox Technologies (KLOX) Technology Platform

KLOX’s BioPhotonic technology platform is a proprietary and novel treatment solution that harnesses the power of light and photo-activated oxygen-rich gel formulations to treat skin and soft tissue disorders.

The combination of the emitted wavelengths from multi-light-emitting diode, or LED, lamps and the light absorbing molecules, or chromophores, contained in KLOX’s gels are specific to each indication.

By varying the interactions between light and gel, KLOX can induce different physiological processes that promote healing specific to the underlying pathology.

These physiological processes promote healing with bactericidal properties specific to the underlying pathology and include increased collagen production, altered cellular response and the production of photons and oxygen.

Klox Technologies (KLOX) Intellectual Property

As of December 31, 2014, KLOX’s patent portfolio includes 22 patent families relating to its products or product candidates and their methods of use, as well as to its technology platform.

KLOX is pursuing a global patent strategy and KLOX typically seekspatent protection in North America, Europe, and Asia.

As of December 31, 2014, KLOX’s patent portfolio included five U.S. patents, 12 non-U.S. patents and a total of over 150 pending U.S. and non-U.S. patent applications, including four allowed U.S. patent applications.

KLOX has an allowed U.S. patent application with composition-of-matter claims covering the gel components used or that may be used in its LumiCleanse, LumiBel, LumiHeal and PERIO-1 treatment systems. If issued, this patent is expected to expire in 2026. KLOX is pursuing or plan to pursue similar claims in other jurisdictions.

With regard to LumiCleanse, KLOX also has two issued U.S. patents directed to treating acne. The issued patents and the allowed patent application, once granted, are expected to expire in 2029. In addition, KLOX has a granted patent in each of Australia, Japan, and New Zealand, and patent applications pending in other jurisdictions.

With regard to LumiBel, KLOX also has one issued U.S. patent and one allowed U.S. patent application directed to a method of reversing or mitigating skin aging. The issued patent and the allowed patent application, once granted, are expected to expire in 2029. In addition, KLOX has a granted patent in each of Australia, Japan, and New Zealand, and patent applications pending in other jurisdictions.

With regard to LumiHeal, KLOX also has one issued U.S. patent and one allowed U.S. patent application directed to a method of wound healing. The issued patent and the allowed patent application, once granted, are expected to expire in 2029. In addition, KLOX has a granted patent in each of Australia, Japan, and New Zealand, and patent applications pending in other jurisdictions.

With regard to PERIO-1, KLOX has one issued U.S. patent and one allowed U.S. patent application directed to a method of treating periodontal disease.

Klox Technologies (KLOX) Competition

Products and product candidates in KLOX’s dermatology franchise compete with current treatment alternatives and treatment alternatives under development, which may include: topical retinoids (sold or under development by companies such as Allergan, Inc., Galderma S.A. and GlaxoSmithKline LLC); topical and oral antibiotics (sold or under development by companies such as Actavis plc, Allergan, PreCision Dermatology, Inc. and Valeant Pharmaceuticals International, Inc.); oral isotretinoins (sold or under development by companies such as Mylan, Inc., Ranbaxy Laboratories Limited and Teva Pharmaceutical Industries Ltd.); oral hormonal therapies (sold or under development by companies such as Actavis, Bayer HealthCare AG, Janssen Biotech, Inc. and Teva Pharmaceutical Industries); surgical procedures (using devices sold or under development by companies such as Deka m.e.l.a. Srl, Dornier MedTech, OmniGuide Inc.); injections (sold or under development by companies such as Allergan and Galderma); and light-based treatments (using devices sold or under development by companies such as BLT Industries, Inc. and Valeant Pharmaceuticals International) among others.

 Products in KLOX’s wound care franchise compete with current treatment alternatives and treatment alternatives under development, which may include: skin substitutes and scaffold therapies (sold or under development by companies such as LifeCell Corporation and Organogenesis, Inc.); negative pressure wound therapy (sold or under development by companies such as Kinetic Concepts, Inc. and Smith & Nephew plc); growth factor based therapies (sold or under development by companies such as Kinetic Concepts and Smith & Nephew); and platelet-rich plasma therapies (sold or under development by companies such as Nuo Therapeutics, Inc. and SafeBlood Technologies, Inc.) among others.

Product candidates in KLOX’s oral health franchise will compete with current treatment alternatives and treatment alternatives under development that are sold or under development by companies such as Ampio Pharmaceuticals, Inc., BioHorizons, Inc., Epirus Biopharmaceuticals, Inc., Interleukin Genetics Inc. and OraPharma, Inc.

Klox Technologies (KLOX) 5% Shareholders Pre-IPO

Carlo Bellini       53.4%

Francesco Bellini, PhD 45.8%

Rocabe Investments Inc.            32%

FMRC Family Trust        20.6%

Picchio International Inc.            5.2%

Francesco Bellini, PhD 45.8%

Carlo Bellini       53.4%  

Klox Technologies (KLOX) Dividends

No dividends are planned.

Klox Technologies (KLOX) Use of Proceeds

KLOX expects to receive $60 million from its IPO and use it for the following:

US$30 million to fund research and development and clinical trials for its wound care franchise;

US$20 million to begin commercial sales and marketing activities with respect to its wound care products in the European market; and

the balance for working capital requirements and other general corporate purposes.

 

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