Eloxx Buys Zikani Therapeutics In An All-Stock Deal; Shares Gain

Shares of Eloxx Pharmaceuticals gained 1.2% to close at $3.36 on April 1 after the clinical-stage biopharmaceutical company announced the acquisition of Zikani Therapeutics. The all-stock transaction is likely to strengthen the company’s ribosomal RNA-targeted therapies for the treatment of rare diseases and oncology.

Per the terms of the deal, Zikani’s shareholders were granted 7.6 million Eloxx (ELOX) common shares and 16% ownership of the combined entity.

Zikani, an emerging leader in the science of ribosome modulation, is leveraging its innovative TURBO-ZM chemistry technology platform to develop novel Ribosome Modulating Agents (RMAs) as therapeutics for people with limited treatment options, the company said.

ELX-02 is currently in Phase 2 clinical trials in Cystic Fibrosis (CF) patients, who are affected by nonsense mutations in the cystic fibrosis transmembrane conductance regulator (CFTR) gene. Notably, nonsense mutations cause around 10%-12% of rare inherited diseases. Therefore, the company expects ELX-02 along with the TURBO-ZM library of compounds to significantly expand to include the treatment of many other rare diseases and certain cancers.

Along with CF, the company intends to file an IND in 2022 for first-of-its-kind oral therapy for protein restoration in patients with nonsense mutations in Recessive Dystrophic Epidermolysis Bullosa (RDEB), and Junctional Epidermolysis Bullosa (JEB).

Eloxx Chairman Tomer Kariv said, “With the strength of our ELX-02 program for cystic fibrosis, this acquisition provides us with the opportunity to amplify the potential of our innovative science by developing a new class of therapies to treat diseases with limited to no treatment options under the stewardship of leaders with a proven ability to translate technology into treatments for patients.” (See Eloxx stock analysis on TipRanks)

Following the deal announcement, Piper Sandler analyst Edward Tenthoff reiterated a Buy rating and a price target of $6 (78.6% upside potential) on the stock.

In a note to investors, Tenthoff said that the combined entity is likely to initially focus on developing oral RMAs in rare orphan skin disease, Recessive Dystrophic Epidermolysis Bullosa and Junctional Epidermolysis Bullosa, with an IND filing expected in 2022.

The consensus rating among analysts is a Moderate Buy based on 1 Buy and 1 Hold. The average analyst price target stands at $4.50 and implies upside potential of 33.9% to current levels. Shares have gained 22.6% over the past six months.

Eloxx scores a 9 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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