IPO Preview: Lixte Biotechnology Starts IPO Process
Lixte Biotechnology Holdings (LIXT) aims to raise $10 million in an IPO of its common stock, according to an S-1 registration statement.
The firm is developing a pipeline of treatments for various types of cancers and vascular and metabolic diseases.
LIXT is outsourcing its clinical trials for its primary compound and likely intends to partner/license the drug upon successful completion of Phase 2 trials.
East Setauket, New York-based Lixte was founded to develop two series of product candidates, LB-100 and LB-200, that seek to act as inhibitors of protein phosphatases in order to block checkpoints within cancer cells, enabling compounds or the body's immune system to kill the cancer cells.
Management is headed by founder, president and CEO John S. Kovach, MD, who was previously in the laboratory of Chemical Biology at the National Institute of Arthritis and Metabolic diseases.
Below is a brief overview video of a 2014 interview of CEO Kovach:
The firm's lead program, LB-100, has completed Phase 1 safety trials, which concluded 'at doses that are readily tolerable.'
Additionally, 'Responses included objective regression (tumor shrinkage) lasting for 11 months of a pancreatic cancer and cessation of growth (stabilization of disease) for 4 months or more of 9 other progressive solid tumors out of 20 patients who had measurable disease.'
Below is the current status of the company’s drug development pipeline:
Source: Company S-1 Filing
Investors in the firm have invested at least $29.5 million in preferred stock and additional paid-in capital. There are no institutional investors in the company.
According to a 2019 market research report by ResearchAndMarkets, the global market for solid tumor cancer treatment was an estimated $121.3 billion in 2018 and is expected to grow sharply to nearly $425 billion by 2027.
This represents a forecast CAGR (Compound Annual Growth Rate) of 15.0% from 2019 to 2027.
Key elements driving this expected growth are a continued high incidence of breast cancer as well as lung cancer due to a rise of smokers and air pollution effects.
Also, North America currently accounts for a 33.6% market share by region, followed by Europe which accounts for 30.2%.
The Asia Pacific region accounts for 19.5% of total demand but is forecast to register 'significant growth soon owing to the rising public health awareness regarding cancer and its treatment and developing healthcare infrastructure..'
As for competitors, there are dozens of pharma firms of all sizes developing treatments for various types of solid tumors.
Lixte’s recent financial results are typical of a development stage biopharma in that they feature no revenue and material R&D and G&A costs associated with advancing its pipeline of treatments.
Below are the company’s financial results for the past two and ½ years (Audited PCAOB for full years):
Source: Company registration statement
As of June 30, 2020, the company had $1.8 million in cash and $213,965 in total liabilities. (Unaudited, interim)
Lixte intends to raise $10 million in gross proceeds from an IPO of its common stock, although the final amount may be different.
No existing shareholders have indicated an interest to purchase shares at the IPO price, although this element may become a feature of the IPO if disclosed in a future filing.
The company’s stock is currently quoted on the OTCQB marketplace under the symbol “LIXT.”
Management says it will use the net proceeds from the IPO as follows:
We intend to use the net proceeds to fund our planned clinical trials, updating our manufacturing protocols, manufacturing our product candidate, maintenance and expansion of our patent portfolio, retention of contract research organizations, development of a form of our primary compound, LB-100, for oral administration, and for general corporate purposes, including working capital.
Management’s presentation of the company roadshow is not available.
The sole listed bookrunner of the IPO is WestPark Capital.
Lixte is seeking a small IPO transaction to advance its primary compound into Phase 2 trials.
The solid tumor treatment market is the largest cancer treatment market and is really composed of many sub markets.
Management has disclosed no research or commercial collaborations with other pharma firms.
The firm seeks to complete Phase 2 trials for its lead compound before initiating partnering/licensing discussions, so it appears at this point that management doesn’t intend to fully commercialize its research, assuming a positive outcome.
The company’s investor syndicate does not include any institutional venture capital firms.
WestPark Capital is the lead left underwriter and the only IPO led by the firm over the last 12-month period has generated a return of negative (56.7%) since its IPO. This is a bottom-tier performance for all major underwriters during the period.
Lixte is a tiny biopharma essentially operating on a small budget and seeking to manage a process by which other research entities (Moffitt, GEIS and NCI) run point on trial studies.
Typically, biopharma firms conduct their own clinical studies, so outsourcing this critical aspect is an unusual strategy.
When we learn more about the IPO’s proposed pricing and valuation assumptions, I’ll provide a final opinion.
Expected IPO Pricing Date: To be announced.
(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)
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