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Ignyta and Its Key Risks in 2018

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Oct. 29 2019, Updated 10:43 p.m. ET

Equity dilution

In October 2017, Ignyta (RXDX) raised $150 million by issuing 10 million shares of its common stock. At the end of September 2017, its total outstanding shares were 56.2 million compared with 41.7 million at the end of December 2016.

Ignyta also raised a total of $136.7 million through stock offerings of 23.5 million shares of common stock in May 2016 and May 2017.

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Negative cash flows

Ignyta had negative cash flows from operations of $72.3 million in the first nine months of fiscal 2017. At the end of 3Q17, it had an accumulated deficit of $349 million.

Additionally, Ignyta raised $32 million in June 2016 through a loan. The loan bears an effective interest rate of 8.6%. The company has to make monthly principal payments of ~$1.1 million beginning in February 2019 and continuing to July 2021.

Currently, the company’s long-term debt-to-equity ratio is 0.34x. The ratios for peers Pfizer (PFE), Novartis (NVS), and Teva Pharmaceutical (TEVA) are 0.57x, 0.32x, and 1.28x, respectively.

Heightened competition

Currently, there are competing therapies in development. Loxo Oncology is in the process of developing larotrectinib for patients with solid tumors. The drug is in a Phase 2 trial for adult cancer patients with solid tumors. The drug competes with Ignyta’s entrectinib.

The FDA (U.S. Food & Drug Administration) has approved Pfizer’s Xalkori for metastatic non-small cell lung cancer in March 2016 and Novartis’s Zykadia in May 2017 for ALK[1. anaplastic lymphoma kinase]-positive NSCLC (non-small cell lung cancer).

Ignyta makes up 1.5% of the PowerShares DWA Healthcare Momentum ETF’s (PTH) total portfolio holdings.

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