IPO Report: Loxo Oncology (LOXO)

Francis Gaskins |

Loxo Oncology (LOXO) develops targeted small molecule therapeutics for the treatment of cancer in genetically defined patient populations. Headquarters are in Stamford, CT.

Nineteen other companies are scheduled to IPO for the week of July 28, 2014. The full IPO calendar is available at IPOpremium.

The manager and co-managers are Cowen and Company, Stifel.  The joint managers are  Oppenheimer, JMP Securities

LOXO scheduled a $57 million IPO with a market capitalization of $196 million at a price range midpoint of $13 for Friday, August 1, 2014 on the Nasdaq. 

SEC filings

LOXO IPO Overview

LOXO develops targeted small molecule therapeutics for the treatment of cancer in genetically defined patient populations.

Stockholders and funds have indicated an interest in purchasing up to $23.5 million of the IPO, or 41%.

Valuation for LOXO

Glossary

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Q1 '14

.

.

.

.

.

.

Loxo Oncology (LOXO)

$195

n/a

-16.8

1.8

1.8

29%

             

Conclusion for LOXO IPO

The rating is neutral

Low price-to-book of 1.8, a positive

41% of the IPO is spoken for

Loxo's Business

LOXO develops targeted small molecule therapeutics for the treatment of cancer in genetically defined patient populations. LOXO’s development approach translates key scientific insights relating to the oncogenic drivers of cancer into drugs that are potent and highly selective for their intended targets.

Such drugs typically achieve high target engagement, which has been correlated with improved tumor response. LOXO believes its approach will allows it to develop drugs with a high probability of clinical success while reducing the time, costs and risks of drug development.

Pre-clinical research indicates that LOXO’s lead product candidate, LOXO-101, is a potent and selective inhibitor of tropomyosin receptor kinase, or TRK, a family of signaling molecules that appear to play an important role in the development and perpetuation of many cancers.

LOXO is evaluating LOXO-101 in a Phase 1 dose escalation trial for patients with advanced solid tumors, and LOXO anticipates reporting data by early 2015.

LOXO is also building a pipeline of additional product candidates targeting cancers driven by genetic alterations. LOXO’s investors include affiliates of Aisling Capital, OrbiMed, New Enterprise Associates, Access Industries and Deerfield Management Company.

Background on Cancer and Oncogene Addiction

As genetic testing in cancer becomes more routine, LOXO is learning that cancers arising in diverse sites in the body may share the same type of genetic alterations.

Increasingly, tumors may be identified and treated according to their distinguishing genetic alterations, while in the past, the organ of origin was most important. Both research and clinical data suggest that some tumors, while having many identifiable genetic alterations, are primarily dependent on a single activated kinase for their proliferation and survival.

This dependency, often referred to as oncogene addiction, renders such tumors highly susceptible to small molecule inhibitors targeting the relevant alteration. The oncogene addiction paradigm appears to be especially important in understanding the pathogenesis of lung cancer.

Robust response rates in lung cancer patients with tumors displaying oncogene addiction have supported regulatory approvals for many drugs, including crizotinib (Xalkori) and afatinib (Gilotrif).

Researchers and clinical oncologists now often incorporate genetic assessments into clinical trials and routine care with the hope of directing patients to medicines which may have a greater chance of treating their cancers effectively.

LOXO believes that increased focus on oncogene addiction will lead to more efficient drug development and more robust clinical responses in genetically defined patient populations.

LOXO's Dividend Policy

No dividends are planned.

Intellectual Property

For its product candidates, LOXO generally strives for patent protection covering both composition of matter and methods of use.

LOXO has an exclusive license from Array to issued composition of matter patents covering LOXO-101 that expire in 2029, without taking into account any applicable extensions.

LOXO intends to work with Array to patent joint inventions in the United States and internationally.

In addition, during the development of its product candidates, LOXO may seek additional means of obtaining patent protection to potentially enhance commercial success, such as method of use claims.

LOXO also relies on trade secrets relating to its discovery programs and product candidates, and seek to protect and maintain the confidentiality of proprietary information to protect aspects of its business that are not amenable to, or that LOXO does not consider appropriate for, patent protection.

Competition for LOXO

While there are currently no approved drugs targeting TRK, LOXO is aware of a number of compounds that are in clinical development and enrolling in patients with TRK receptor activating alterations, including Daiichi Sankyo and its subsidiary Plexxikon's PLX-7486, Tesaro's TSR-011, Ignyta's RXDX-101 and Novartis AG's dovitinib.

In addition, LOXO’s collaboration partner, Array, has retained rights to development of compounds that target only one of the TRKA, TRKB or TRKC kinases, which if developed by Array or a licensee could be competitively significant, and it is likely that other companies are also engaged in preclinical development of compounds targeting one or multiple TRK kinases.

However, if LOXO-101 or LOXO’s future product candidates do not offer sustainable advantages over competing products, LOXO may otherwise not be able to successfully compete against current and future competitors.

5% Stockholders

Aisling Capital III, LP  28.9%

rbiMed Private Investments V, LP           18.1%

Array BioPharma Inc.     15.3%

AI Loxo Holdings LLC    13.0%

Entities affiliated with New Enterprise Associates 14, L.P.     14.9%

Joshua H. Bilenker, M.D. 6.0%

Dov A. Goldstein, M.D.             29.3%                                    

Use of Proceeds

LOXO intends to use the $51 million in proceeds from its IPO as follows:

$10 to $15 million associated with its currently planned Phase 1 dose escalation and expansion trial for LOXO-101;

$20 to $25 million to fund research and development and to advance its pipeline of preclinical product candidates; and

For working capital and general corporate purposes

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
LOXO Loxo Oncology Inc. 26.46 0.26 0.99 78,932
CCO.NT.J:CH CCO.NT.J:CHI n/a n/a n/a n/a

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