10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

Or

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-36562

LOXO ONCOLOGY, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	46-2996673 (I.R.S. Employer Identification No.)
One Landmark Square, Suite 1122 Stamford, CT (Address of Principal Executive Offices)	06901 (Zip Code)

Registrant’s telephone number, including area code: (203) 653-3880

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act: None

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o  No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x

Common Stock, $0.0001 par value Shares outstanding as of September 12, 2014: 16,629,590

EXPLANATORY NOTE

This Form 10-Q/A amends the Quarterly Report on Form 10-Q of Loxo Oncology, Inc. for the quarterly period ended June 30, 2014 (the “Form 10-Q”), as filed with the Securities and Exchange Commission on September 12, 2014, for the sole purpose of furnishing the Interactive Data Files as Exhibit 101 in accordance with Rule 405 of Regulation S-T. Exhibit 101 provides the financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

This Form 10-Q/A speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the Form 10-Q.

2

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: October 7, 2014

LOXO ONCOLOGY, INC.
By:	/s/ DOV A. GOLDSTEIN, M.D.
	Dov A. Goldstein, M.D.
	Chief Financial Officer and Director
	(Principal Accounting Officer and Principal Financial Officer)

3

EXHIBIT INDEX

Exhibit Number	Description
31.1**	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
31.2**	Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
32.1**	Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*†	XBRL Instance Document
101.SCH*†	XBRL Taxonomy Extension Schema Document
101.CAL*†	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*†	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*†	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*†	XBRL Taxonomy Extension Presentation Linkbase Document

†Pursuant to Rule 406T of Regulation S-T, the XBRL files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

*Filed herewith

**Filed previously

4

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Redeemable Convertible Preferred Stock and Stockholders' Deficit (Details 2) (Plan, USD $)	6 Months Ended			6 Months Ended		12 Months Ended	6 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2014 Minimum	Jun. 30, 2014 Stock option	Dec. 31, 2013 Stock option	Jun. 30, 2014 Stock option Maximum
2013 Equity Incentive Plan
Shares authorized for issuance	1,491,895		905,796
Shares available for future issuance	135,211		224,734
Term of award							10 years
Combined voting power of all classes of stock owned used to determine term of award (as a percent)				10.00%
Shares that could be required to be repurchased	16,866
Shares subject to repurchase liability, amount recorded in accrued expenses	$ 45,000
Number of Shares
Outstanding at the beginning of the period (in shares)					681,056
Granted (in shares)					658,762
Exercised (in shares)					(108,112)
Outstanding at the end of the period (in shares)					1,231,706	681,056
Vested and expected to vest at the end of the period (in shares)					1,231,706
Exercisable at the end of the period (in shares)					89,483
Weighted average grant date fair value of options granted					$ 10.53
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)					$ 1.1840
Granted (in dollars per share)					$ 3.3818
Exercised (in dollars per share)					$ 1.4689
Outstanding at the end of the period (in dollars per share)					$ 2.3055	$ 1.1840
Vested and expected to vest at the end of the period (in dollars per share)					$ 2.3055
Exercisable at the end of the period (in dollars per share)					$ 1.5282
Additional disclosures
Weighted average remaining contractual term					9 years 8 months 5 days	9 years 11 months 1 day
Unrecognized compensation expense					$ 9,539,479
Weighted-average period for recognition					3 years 3 months 11 days
Weighted average assumptions used to estimate fair value of option awards using Black Scholes option pricing model
Risk-free interest rate					2.15%
Expected dividend yield					0.00%
Expected stock price volatility					89.76%
Expected term of options (in years)					7 years 25 days
Expected forfeiture rate					0.00%
Fair value of common stock (in dollars per share)	$ 3.6480	$ 1.1840

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Unaudited Interim Financial Information

The accompanying balance sheet as of December 31, 2013, the statement of operations, statement of redeemable convertible preferred stock and stockholders’ deficit and the statement of cash flows for the period from May 9, 2013 (date of inception) to December 31, 2013 was derived from the Company’s audited financial statements included in Form S-1 filed on July 30, 2014 with the SEC that was declared effective on July 31, 2014.

The accompanying balance sheet as of June 30, 2014, the statements of operations for the three and six months ended June 30, 2014 and the period from May 9, 2013 (Date of Inception) to June 30, 2013, the statements of redeemable convertible preferred stock and stockholders’ deficit for the six months ended June 30, 2014 and the statements of cash flows for the six months ended June 30, 2014 and the period from May 9, 2013 (Date of Inception) to June 30, 2013 are unaudited. The interim unaudited financial statements have been prepared on the same basis as the annual audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2014 and the results of its operations, and its cash flows for the three and six months ended June 30, 2014 and the period from May 9, 2013 (date of inception) to June 30, 2013. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2014 and for the period from May 9, 2013 (date of inception) to June 30, 2013 are unaudited. The results for the six months ended June 30, 2014 are not necessarily indicative of results to be expected for the year ending December 31, 2014, any other interim periods or any future year or period.  These unaudited financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2013 included in the Company’s Form S-1 filed July 30, 2014 with the SEC.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2013 included in the Company’s Form S-1 filed on July 30, 2014 with the SEC. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies, other than those detailed below.

Property and Equipment

Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets which are generally three to five years. Maintenance and repairs are expensed as incurred. Upon disposal, retirement, or sale, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the results of operations.  Due to the timing in which property and equipment was placed into service, there was no depreciation expense during the three or six months ended June 30, 2014.

Deferred Initial Public Offering Costs

Deferred IPO costs as of June 30, 2014, consisting of legal, accounting, printing and filing fees incurred in the preparation of the Company’s Registration Statement on Form S-1 were capitalized. The deferred costs are included in deferred initial public offering costs on the unaudited condensed balance sheet as of June 30, 2014. The deferred offering costs were offset against the IPO proceeds upon the completion of the offering in August 2014.

Recent Accounting Pronouncements

On June 10, 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.  The guidance is intended to reduce the overall cost and complexity associated with financial reporting for development stage entities without reducing the availability of relevant information.  The Board also believes the changes will simplify the consolidation accounting guidance by removing the differential accounting requirements for development stage entities. As a result of these changes, there no longer will be any accounting or reporting differences in GAAP between development stage entities and other operating entities.  For organizations defined as public business entities the presentation and disclosure requirements in Topic 915 will no longer be required starting with the first annual period beginning after December 15, 2014, including interim periods therein.  Early application is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities).  The Company early adopted this guidance during the three months ended June 30, 2014 and, as a result, the Company no longer presents inception-to-date information about the statements of operations, cash flows, and stockholders’ deficit.

In June 2014, the FASB issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period, (“ASU 2014-12”). ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The Company does not anticipate that the adoption of this standard will have a material impact on its financial statements.

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Subsequent Events (Details) (USD $)	0 Months Ended	1 Months Ended				0 Months Ended											0 Months Ended		0 Months Ended		0 Months Ended			0 Months Ended
	Jul. 03, 2013	Aug. 31, 2014	Jul. 31, 2014	Jun. 30, 2014	Dec. 31, 2013	Aug. 06, 2014 Initial public offering	Aug. 06, 2014 Private placement	Sep. 04, 2014 Over-allotment option	Jun. 30, 2014 Preferred stock	Dec. 31, 2013 Preferred stock	Jun. 30, 2014 Series A preferred stock	Dec. 31, 2013 Series A preferred stock	Jun. 30, 2014 Series A-1 preferred stock	Dec. 31, 2013 Series A-1 preferred stock	Jun. 30, 2014 Series B preferred stock	Dec. 31, 2013 Series B preferred stock	Jul. 09, 2014 Subsequent event	Jul. 21, 2014 Subsequent event	Aug. 06, 2014 Subsequent event Initial public offering	Aug. 07, 2014 Subsequent event Initial public offering	Aug. 06, 2014 Subsequent event Private placement	Sep. 04, 2014 Subsequent event Over-allotment option	Aug. 31, 2014 Subsequent event Over-allotment option	Aug. 06, 2014 Subsequent event Initial public offering and private placement	Jul. 02, 2014 Subsequent event 2014 Equity Incentive Plan	Sep. 12, 2014 Subsequent event 2014 Employee Stock Purchase Plan	Jul. 31, 2014 Subsequent event 2014 Employee Stock Purchase Plan	Jul. 31, 2014 Subsequent event 2014 Employee Stock Purchase Plan First day of trading	Jul. 31, 2014 Subsequent event 2014 Employee Stock Purchase Plan Last day of trading in offering period	Jul. 31, 2014 Subsequent event 2014 Employee Stock Purchase Plan Minimum	Jul. 21, 2014 Subsequent event Common stock	Aug. 07, 2014 Subsequent event Common stock Initial public offering	Jul. 21, 2014 Subsequent event Preferred stock	Aug. 07, 2014 Subsequent event Preferred stock Initial public offering	Jul. 21, 2014 Subsequent event Series A preferred stock	Jul. 21, 2014 Subsequent event Series A-1 preferred stock	Jul. 21, 2014 Subsequent event Series B preferred stock
Subsequent events
Awards granted (in shares)																	204,780
Exercise price of awards granted (in dollars per share)																	$ 7.1360
Vesting period																	4 years
Capital stock, shares authorized				21,010,691	15,031,954													31,010,691		130,000,000
Common stock, shares authorized				12,187,500	9,375,000																										22,187,500	125,000,000
Common stock, par value (in dollars per share)				$ 0.0001	$ 0.0001																										$ 0.0001	$ 0.0001
Preferred stock, shares authorized									8,823,191	5,656,954	5,156,250	5,156,250	500,704	500,704	3,166,237	0																	8,823,191	5,000,000	5,156,250	500,704	3,166,237
Preferred stock, par value (in dollars per share)									$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001																	$ 0.0001	$ 0.0001
Shares of common stock reserved for issuance under the plan																									1,092,085
Shares of common stock reserved for issuance under the plan																											149,600
Increase in common stock reserved for issuance as percentage of the aggregate number of outstanding shares of common stock																									3.00%
Employment period required to participate in the plan																														6 months
Period per week on a regular schedule required to participate in the plan																														20 hours
Offering period																											6 months
Maximum shares which may be purchased by eligible employee																											1,000
Maximum value of shares which may be purchased by eligible employee																											$ 25,000
Purchase price as percentage of fair market value of a share of common stock																												85.00%	85.00%
Award term																											P10Y
Shares issued under the plan																										0
Stock split ratio of the common stock	0.48309		1.5625
Shares of common stock sold						5,261,538	230,769	642,000											5,261,538		230,769	642,000		5,492,307
Initial public offering price (in dollars per share)						$ 13.00		$ 13.00											$ 13.00			$ 13.00	$ 13.00	$ 13.00
Aggregate gross proceeds from shares sold																			68,400,000		3,000,000
Aggregate gross proceeds from shares sold		72,400,000				68,400,000																		71,400,000
Net offering proceeds, after deducting underwriting discounts and commissions and offering expenses								$ 8,300,000														$ 8,300,000

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Related Party Transactions (Details) (Collaboration agreement, Array, USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014
Related party transactions
Related party research and development expenses		$ 3.0
Research and development
Related party transactions
Related party research and development expenses	1.7
Related party | Research and development
Related party transactions
Related party research and development expenses	1.7	3.0
Prepaid expenses	$ 0.7	$ 0.7

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Organization and Description of the Business

6 Months Ended

Jun. 30, 2014

Organization and Description of the Business

Organization and Description of the Business

1. Organization and Description of the Business

Loxo Oncology, Inc. (the “Company”) is a development-stage company that was incorporated on May 9, 2013 in the State of Delaware. The Company develops targeted small molecule therapeutics for the treatment of cancer in genetically defined patient populations. The Company’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. The Company is also building a pipeline of additional product candidates targeting cancers driven by genetic alterations. The Company operates in one segment and has its principal office in Stamford, Connecticut. As of June 30, 2014, the Company was financed by venture capital investors.

Initial Public Offering

On July 31, 2014, the Company’s registration statements on Form S-1 (File Nos. 333-197123 and 333-197779) relating to its initial public offering of its common stock were declared effective by the Securities and Exchange Commission (“SEC”). The shares began trading on The NASDAQ Global Select Market on August 1, 2014.  The initial public offering closed on August 6, 2014, and 5,261,538 shares of common stock were sold at an initial public offering price of $13.00 per share, for aggregate gross proceeds to the Company of $68.4 million. Concurrent with the close of the offering, New Enterprise Associates 14, L.P., or NEA, an existing stockholder, purchased 230,769 shares of common stock at the initial public offering price in a private placement and the Company received gross proceeds of $3.0 million.  In addition, upon the closing of the initial public offering, all of the Company’s outstanding convertible preferred stock was converted into an aggregate total of 9,932,042 shares of common stock.

On August 29, 2014, the underwriters of the Company’s initial public offering gave notification that they would partially exercise the over-allotment option granted to them and on September 4, 2014, 642,000 additional shares of common stock were sold on the Company’s behalf at the initial public offering price of $13.00 per share, for aggregate gross proceeds of approximately $8.3 million.

The Company paid to the underwriters underwriting discounts and commissions of approximately $5.6 million in connection with the offering, including the private placement and over-allotment.  In addition, the Company incurred expenses of approximately $1.7 million in connection with the offering. Thus, the net offering proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses, were approximately $72.4 million.

Stock Splits

In July 2013, the Company’s Board of Directors (the “Board”) and stockholders approved a 2.07 to 1 reverse stock split of the Company’s common stock. The reverse stock split became effective on July 2, 2013. Subsequently, in July 2014, the Board and stockholders approved a 1.5625-for-1 forward stock split of the Company’s common stock. The forward stock split became effective on July 21, 2014.  All share and per share amounts in the financial statements and notes thereto have been adjusted to give effect to this reverse stock split.

Liquidity

At June 30, 2014, the Company had working capital of $50.7 million, an accumulated deficit of $17.1 million, and cash and cash equivalents of $51.3 million. Upon consummation of its initial public offering and the concurrent private placement on August 6, 2014, the Company received cash proceeds, net of underwriting discounts and commissions, of approximately $72.4 million. The Company has not generated any product revenues and has not achieved profitable operations. There is no assurance that profitable operations will ever be achieved, and, if achieved, could be sustained on a continuing basis. In addition, development activities, clinical and pre-clinical testing, and commercialization of the Company’s products will require significant additional financing.

The Company believes that its existing cash and cash equivalents, in conjunction with the proceeds received in connection with its initial public offering and concurrent private placement in August 2014, will be sufficient to enable the Company to continue as a going concern for a reasonable period of time beyond June 30, 2014. However, the Company will need to secure additional funding in the future, from one or more equity or debt financings, collaborations, or other sources, in order to carry out all of its planned research and development activities. If the Company is unable to obtain additional financing or generate license or product revenue, the lack of liquidity could have a material adverse effect on the Company’s future prospects.

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Condensed Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 51,304	$ 14,994
Prepaid expenses with related party and other current assets	651	17
Total current assets	51,955	15,011
Property and equipment	7
Deferred initial public offering costs	927
Security deposit	23	11
Total assets	52,912	15,022
Current liabilities:
Accounts payable	652	221
Accrued expenses	581	189
Total liabilities	1,233	410
Commitments and contingencies
Redeemable convertible preferred stock	68,049	24,843
Stockholders' deficit:
Common stock, $0.0001 par value; 9,375,000 and 12,187,500 shares authorized at December 31, 2013 and June 30, 2014, respectively; 452,896 and 577,874 shares issued and 452,896 and 561,008 outstanding at December 31, 2013 and June 30, 2014, respectively
Additional paid-in capital	727	59
Accumulated deficit	(17,097)	(10,290)
Total stockholders' deficit	(16,370)	(10,231)
Total liabilities, redeemable convertible preferred stock and stockholders' deficit	52,912	15,022
Redeemable convertible Series A preferred stock
Current liabilities:
Redeemable convertible preferred stock	32,821	17,799
Redeemable convertible Series A-1 preferred stock
Current liabilities:
Redeemable convertible preferred stock	7,044	7,044
Redeemable convertible Series B preferred stock
Current liabilities:
Redeemable convertible preferred stock	$ 28,184

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Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit (Parenthetical) (USD $)	Mar. 31, 2014 Redeemable convertible Series A preferred stock	Jun. 30, 2014 Redeemable convertible Series B preferred stock	Apr. 30, 2014 Redeemable convertible Series B preferred stock
Issuance of redeemable convertible preferred stock, issue price (in dollars per share)	$ 6.40	$ 8.9661	$ 8.9661

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Net Loss Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	2 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2014
Basic and diluted net loss per common share calculation:
Net loss	$ (90)	$ (3,905)	$ (6,807)
Accretion of redeemable convertible preferred stock		(17)	(28)
Net loss attributable to common stockholders	$ (90)	$ (3,922)	$ (6,835)
Weighted average common shares outstanding		271,317	238,246
Net loss per share of common stock-basic and diluted		$ (14.46)	$ (28.69)
Outstanding securities excluded from computation of diluted weighted average shares outstanding, as they would have been anti-dilutive
Total (in shares)			10,319,083
Convertible preferred stock
Outstanding securities excluded from computation of diluted weighted average shares outstanding, as they would have been anti-dilutive
Total (in shares)			8,823,187
Unvested restricted stock
Outstanding securities excluded from computation of diluted weighted average shares outstanding, as they would have been anti-dilutive
Total (in shares)			264,190
Stock options
Outstanding securities excluded from computation of diluted weighted average shares outstanding, as they would have been anti-dilutive
Total (in shares)			1,231,706

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Redeemable Convertible Preferred Stock and Stockholders' Deficit (Details) (USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended			0 Months Ended		6 Months Ended									0 Months Ended		3 Months Ended				0 Months Ended				0 Months Ended		2 Months Ended
	Aug. 06, 2014	Jun. 30, 2014	Dec. 31, 2013	Jul. 03, 2013 Common stock Co-founders	Jun. 28, 2013 Common stock Co-founders	Jun. 30, 2014 Common stock Two co-founders item	Jun. 30, 2014 Common stock Two co-founders Vesting on July 3, 2014	Jun. 30, 2014 Common stock Two co-founders Vesting in equal monthly installments over a specific period thereafter	Jun. 30, 2014 Common stock Two co-founders Vesting in equal monthly installments over a specific period thereafter Maximum	Jun. 30, 2014 Preferred stock	Dec. 31, 2013 Preferred stock	Jun. 30, 2014 Series A preferred stock	Mar. 31, 2014 Series A preferred stock	Dec. 31, 2013 Series A preferred stock	Mar. 18, 2014 Series A preferred stock Investors Stock purchase agreement	Jul. 03, 2013 Series A preferred stock Investors Stock purchase agreement	Sep. 19, 2013 Series A preferred stock Investors Stock purchase agreement	Feb. 28, 2014 Series A preferred stock Investors Stock purchase agreement	Jun. 30, 2014 Series A-1 preferred stock	Dec. 31, 2013 Series A-1 preferred stock	Jul. 03, 2013 Series A-1 preferred stock Collaboration agreement Array	Jun. 30, 2014 Series B preferred stock	Apr. 30, 2014 Series B preferred stock	Dec. 31, 2013 Series B preferred stock	Jun. 24, 2014 Series B preferred stock Stock purchase agreement	Apr. 24, 2014 Series B preferred stock Stock purchase agreement	Jun. 24, 2014 Series B preferred stock Stock purchase agreement
Capitalization
Capital stock, shares authorized		21,010,691	15,031,954
Common stock, shares authorized		12,187,500	9,375,000
Common stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Preferred stock, shares authorized										8,823,191	5,656,954	5,156,250		5,156,250					500,704	500,704		3,166,237		0
Preferred stock, par value (in dollars per share)										$ 0.0001	$ 0.0001	$ 0.0001		$ 0.0001					$ 0.0001	$ 0.0001		$ 0.0001		$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001
Shares issued				452,896	452,896
Number of co-founders to whom stock is issued and is subject to vesting pursuant to the restricted stock agreements						2
Number of shares issued that are subject to vesting pursuant to the restricted stock agreements						264,190
Vesting percentage							25.00%	75.00%
Vesting term									3 years
Shares agreed to be issued upon the satisfaction of certain conditions																2,812,497									501,890	2,664,343
Shares issued												5,156,250		2,812,497		1,562,500	1,249,997	2,343,753	500,704	500,704	500,704	3,166,233		0
Net proceeds															$ 15.0		$ 17.8										$ 28.4
Estimated fair value																					$ 7.0
Share purchase price (in dollars per share)													$ 6.40					$ 6.40				$ 8.9661	$ 8.9661		$ 8.9661	$ 8.9661	$ 8.9661
Number of shares of common stock into which outstanding convertible preferred stock are converted	9,932,042

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Condensed Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	2 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2014
Operating activities:
Net loss	$ (90)	$ (6,807)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		537
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(79)	(634)
Security deposits		12
Accounts payable	55	355
Accrued expenses	114	118
Net cash used in operating activities		(6,443)
Investing activities:
Purchase of property		(7)
Net cash used in investing activities		(7)
Financing activities:
Proceeds from issuance of redeemable convertible preferred stock, net		43,223
Proceeds from the exercise of stock options		159
Payment of deferred financing fees		(622)
Net cash provided by financing activities		42,760
Net increase in cash and cash equivalents		36,310
Cash and cash equivalents-beginning of period		14,994
Cash and cash equivalents-end of period		51,304
Supplemental schedule of noncash financing activities:
Accounts payable and accrued expenses related to financing fees		$ 350

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Condensed Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	12,187,500	9,375,000
Common stock, shares issued	577,874	452,896
Common stock, shares outstanding	561,008	452,896
Redeemable convertible Series A preferred stock
Redeemable convertible preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Redeemable convertible preferred stock, shares authorized	5,156,250	5,156,250
Redeemable convertible preferred stock, shares issued	5,156,250	2,812,497
Redeemable convertible preferred stock, shares outstanding	5,156,250	2,812,497
Redeemable convertible preferred stock, liquidation preference (in dollars)	$ 33,000	$ 18,000
Redeemable convertible Series A-1 preferred stock
Redeemable convertible preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Redeemable convertible preferred stock, shares authorized	500,704	500,704
Redeemable convertible preferred stock, shares issued	500,704	500,704
Redeemable convertible preferred stock, shares outstanding	500,704	500,704
Redeemable convertible preferred stock, liquidation preference (in dollars)	12,000	12,000
Redeemable convertible Series B preferred stock
Redeemable convertible preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Redeemable convertible preferred stock, shares authorized	3,166,237	0
Redeemable convertible preferred stock, shares issued	3,166,233	0
Redeemable convertible preferred stock, shares outstanding	3,166,233	0
Redeemable convertible preferred stock, liquidation preference (in dollars)	$ 28,389	$ 0

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Net Loss Per Common Share (Tables)

6 Months Ended

Jun. 30, 2014

Net Loss Per Common Share

Schedule of computation of basic and diluted net loss per share

The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except share and per share data):

	Three Months Ended June 30, 2014			Six Months Ended June 30, 2014
Basic and diluted net loss per common share calculation:
Net loss	$	(3,905	)	$	(6,807	)
Accretion of redeemable convertible preferred stock	(17		)	(28		)
Net loss attributable to common stockholders	$	(3,922	)	$	(6,835	)
Weighted average common shares outstanding	271,317			238,246
Net loss per share of common stock—basic and diluted	$	(14.46	)	$	(28.69	)

Schedule of outstanding securities excluded from the computation of diluted weighted average shares outstanding, as they would have been anti-dilutive

Convertible preferred stock	8,823,187
Unvested restricted stock	264,190
Stock options	1,231,706
Total	10,319,083

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Sep. 12, 2014
Document and Entity Information
Entity Registrant Name	Loxo Oncology, Inc.
Entity Central Index Key	0001581720
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		16,629,590
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2014

Accrued Expenses

Schedule of accrued expenses

Accrued expenses consisted of the following (in thousands):

	December 31, 2013		June 30, 2014
Research and development expenses	$	81	$	92
General and administrative expenses	108		104
Share repurchase obligation	—		45
Financing costs and other	—		340
	$	189	$	581

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Condensed Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	2 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2014
Operating expenses:
Research and development	$ 6	$ 855	$ 1,566
General and administrative	31	1,333	2,249
Total operating expenses and net loss	(90)	(3,905)	(6,807)
Accretion of redeemable convertible preferred stock		(17)	(28)
Net loss attributable to common stockholders	(90)	(3,922)	(6,835)
Per share information:
Net loss per share of common stock, basic and diluted (in dollars per share)		$ (14.46)	$ (28.69)
Weighted average shares outstanding, basic and diluted		271,317	238,246
Research and development from a related party
Operating expenses:
Research and development with a related party	$ 53	$ 1,717	$ 2,992

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Redeemable Convertible Preferred Stock and Stockholders' Deficit

6 Months Ended

Jun. 30, 2014

Redeemable Convertible Preferred Stock and Stockholders' Deficit

Redeemable Convertible Preferred Stock and Stockholders' Deficit

5. Redeemable Convertible Preferred Stock and Stockholders’ Deficit

Capitalization

As of December 31, 2013, the Company’s amended and restated certificate of incorporation reflected the following authorized shares: 15,031,954 shares of capital stock, consisting of 9,375,000 shares of common stock, par value of $0.0001 per share, and 5,656,954 shares of preferred stock, par value of $0.0001 per share of which (i) 5,156,250 shares are designated Series A Redeemable Convertible Preferred Stock (“Series A”) and (ii) 500,704 shares are designated Series A-1 Redeemable Convertible Preferred Stock (“Series A-1”).

As of June 30, 2014, the Company’s amended and restated certificate of incorporation reflected the following authorized shares: 21,010,691 shares of capital stock, consisting of 12,187,500 shares of common stock, par value of $0.0001 per share, and 8,823,191 shares of preferred stock, par value of $0.0001 per share of which (i) 5,156,250 shares are designated Series A, (ii) 500,704 shares are designated Series A-1 and (iii) 3,166,237 shares are designated Series B.

On June 28, 2013 and July 3, 2013, the Company issued 452,896 shares of common stock to its co-founders. The shares of common stock issued to two of these co-founders, aggregating 264,190 shares, were subject to vesting pursuant to restricted stock agreements, with 25% of such shares vesting on July 3, 2014 and the remaining 75% vesting in equal monthly installments over a three-year period thereafter. The estimated grant-date fair value of these restricted shares was de minimis.

On July 3, 2013, the Company entered into a stock purchase agreement, which was subsequently amended on September 19, 2013, pursuant to which the Company agreed to sell to certain investors, upon the satisfaction of certain conditions, up to 2,812,497 shares of Series A. The initial closing occurred on July 3, 2013 and 1,562,500 shares of Series A were issued. The remaining 1,249,997 shares were issued on September 19, 2013. Upon completing the July and September closings, the Company received net proceeds of approximately $17.8 million. Additionally on July 3, 2013, the Company issued 500,704 shares, with an estimated fair value of approximately $7.0 million, of Series A-1 to Array in connection with entering into a collaboration agreement (see Note 6). The estimated fair value of these shares has been recognized as research and development expense-related party in the accompanying statements of operations.

On February 28, 2014, the Company filed with the United States Food and Drug Administration an Investigational New Drug Application for a tyrosine kinase inhibitor targeted to the TRK family of receptors. As a result and in accordance with the provisions of the stock purchase agreement entered into on July 3, 2013, the Company issued 2,343,753 shares of Series A at a price of $6.40 per share and received net proceeds of $15.0 million on March 18, 2014.

On April 24, 2014 and June 24, 2014, the Company entered into stock purchase agreements pursuant to which the Company agreed to sell 2,664,343 and 501,890 shares, respectively, of Series B, $0.0001 par value, at a purchase price of $8.9661 per share. Upon completing the April and June offerings, the Company received gross proceeds of approximately $28.4 million.

As previously discussed in Note 1, the Company completed its initial public offering in August 2014.  As part of that offering, all of the Company’s outstanding convertible preferred stock was converted into an aggregate total of 9,932,042 shares of common stock.

2013 Equity Incentive Plan

Effective July 2, 2013, the Company adopted the 2013 Equity Incentive Plan, which was amended in November 2013 (the 2013 “Plan”). The 2013 Plan provides for the granting of incentive stock options, non-statutory stock options and the issuance of restricted stock awards. As of December 31, 2013 and June 30, 2014, there were 905,796 and 1,491,895 shares, respectively, of common stock authorized for issuance in connection with the Plan, of which there were 224,734 and 135,211 shares available for future issuance, respectively.

Incentive options may be granted to employees, including members of the Board. Non-statutory stock options and purchase rights are granted to employees and consultants of the Company, including members of the Board and advisory board members. The terms of the stock option agreements, including the purchase price per share payable upon exercise of the non-statutory options, are determined by the Board. The exercise price of the incentive options shall not be less than the fair market value per share of common stock on the date of grant. The maximum term of the options granted is ten years, unless an employee owns more than 10% of the total combined voting power of all classes of stock of the Company.

Certain options are eligible for exercise prior to vesting. Exercised but unvested shares are subject to repurchase by the Company at the initial exercise price. The proceeds from the shares subject to repurchase are classified as a liability and reclassified to equity as the shares vest. Under the 2013 Plan’s early exercise feature, the Company could be required to repurchase 16,866 shares as of June 30, 2014. The Company records cash received from early exercised shares as a liability. As of June 30, 2014, $45,000 has been recorded as a liability and included in accrued expenses.  In connection with the Company’s initial public offering, no further grants will be made under this plan and all remaining shares available for grant were transferred to the 2014 Incentive Plan (see Note 8).

The following table summarizes stock option activity under the 2013 Plan for the period from December 31, 2013 through June 30, 2014:

	Number of Shares			Weighted- Average Exercise Price
Outstanding at December 31, 2013	681,056			$	1.1840
Granted	658,762			3.3818
Exercised	(108,112		)	1.4689
Cancelled	—			—
Forfeited	—			—
Outstanding at June 30, 2014	1,231,706			$	2.3055
Vested and expected to vest at June 30, 2014	1,231,706			$	2.3055
Exercisable at June 30, 2014	89,483			$	1.5282
Weighted-average grant date fair value of options granted during the six months ended June 30, 2014	$	10.53

The 1,231,706 shares of common stock issuable upon the exercise of options outstanding as of June 30, 2014 in the table above includes 16,866 shares of common stock that have been issued upon exercise prior to vesting and are subject to repurchase by the Company.

The weighted-average remaining contractual term of the outstanding options at December 31, 2013 and June 30, 2014 was 9.92 and 9.68 years, respectively.

As of June 30, 2014, there was $9,539,479 of total unrecognized compensation expense related to options granted but not yet vested.  This amount will be recognized as expense over a weighted-average period of 3.28 years.

The Company uses the Black-Scholes option pricing model to estimate the fair value of option awards with the following weighted-average assumptions, which are based on industry comparative information, for the period indicated:

	Six Months Ended June 30, 2014
Risk-free interest rate	2.15	%
Expected dividend yield	0	%
Expected stock price volatility	89.76	%
Expected term of options (in years)	7.07
Expected forfeiture rate	0	%

The weighted-average valuation assumptions were determined as follows:

· Risk-free interest rate: The Company bases the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.

· Expected annual dividends: The estimate for annual dividends is 0%, because the Company has not historically paid, and does not expect for the foreseeable future to pay, a dividend.

· Expected stock price volatility: The expected volatility used is based on historical volatilities of similar entities within the Company’s industry which were commensurate with the Company’s expected term assumption.

· Expected term of options: The expected term of options represents the period of time options are expected to be outstanding. The expected term of the options granted to employees is derived from the “simplified” method as described in SAB 107 relating to stock-based compensation. The expected term for options granted to non-employees is equal to the contractual term of the awards.

· Expected forfeiture rate: The Company’s estimated annual forfeiture rate was 0%, based on historical forfeiture experience of various employee groups.

· Fair value of common stock: The fair values of common stock of $1.1840 per share, and $3.6480 per share in March 2014 and $13.00 per share June of 2014, were determined with the assistance of a third-party valuation firm in connection with the Company’s initial Series A, A-1, and B convertible preferred stock issuances.

· The estimated fair value of the Company’s stock-based awards is amortized on a straight-line basis over the awards’ service period. Share-based compensation expense recognized was as follows (in thousands):

	Three Months Ended June 30, 2014		Six Months Ended June 30, 2014
Research and development	$	281	$	325
General and administrative	192		212
	$	473	$	537

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Accrued Expenses

6 Months Ended

Jun. 30, 2014

Accrued Expenses

Accrued Expenses

4. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	December 31, 2013		June 30, 2014
Research and development expenses	$	81	$	92
General and administrative expenses	108		104
Share repurchase obligation	—		45
Financing costs and other	—		340
	$	189	$	581

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Accrued Expenses (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Accrued Expenses
Accrued expenses	$ 581	$ 189
Research and development expenses
Accrued Expenses
Accrued expenses	92	81
General and administrative expenses
Accrued Expenses
Accrued expenses	104	108
Shares repurchase obligation
Accrued Expenses
Accrued expenses	45
Financing costs and other
Accrued Expenses
Accrued expenses	$ 340

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Redeemable Convertible Preferred Stock and Stockholders' Deficit (Tables)

6 Months Ended

Jun. 30, 2014

Redeemable Convertible Preferred Stock and Stockholders' Deficit

Summary of stock option activity under the 2013 Plan

	Number of Shares			Weighted- Average Exercise Price
Outstanding at December 31, 2013	681,056			$	1.1840
Granted	658,762			3.3818
Exercised	(108,112		)	1.4689
Cancelled	—			—
Forfeited	—			—
Outstanding at June 30, 2014	1,231,706			$	2.3055
Vested and expected to vest at June 30, 2014	1,231,706			$	2.3055
Exercisable at June 30, 2014	89,483			$	1.5282
Weighted-average grant date fair value of options granted during the six months ended June 30, 2014	$	10.53

Schedule of weighted-average assumptions under the Black-Scholes option pricing model estimate the fair value of option awards

	Six Months Ended June 30, 2014
Risk-free interest rate	2.15	%
Expected dividend yield	0	%
Expected stock price volatility	89.76	%
Expected term of options (in years)	7.07
Expected forfeiture rate	0	%

Schedule of Share-based compensation expense recognized

Share-based compensation expense recognized was as follows (in thousands):

	Three Months Ended June 30, 2014		Six Months Ended June 30, 2014
Research and development	$	281	$	325
General and administrative	192		212
	$	473	$	537

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Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Events

Subsequent Events

8. Subsequent Events

Stock Option Grant

On July 9, 2014, the Board granted 204,780 options with an exercise price of $7.1360 per share pursuant to the Plan. The vesting terms of each award may vest immediately, over a four-year period or upon the achievement of certain milestones as defined in each award.

Capital Stock

On July 21, 2014, the Company amended and restated its certificate of incorporation to reflect the following authorized share increases: 31,010,691 shares of capital stock, consisting of 22,187,500 shares of common stock, par value of $0.0001 per share, and 8,823,191 shares of preferred stock, par value of $0.0001 per share of which (i) 5,156,250 shares are designated Series A Redeemable Convertible Preferred Stock, (ii) 500,704 shares are designated Series A-1 Redeemable Convertible Preferred Stock and (iii) 3,166,237 shares are designated Series B Redeemable Convertible Preferred Stock.

On August 7, 2014, in connection with its initial public offering, the Company amended and restated its certificate of incorporation to reflect the following authorized share increases: 130,000,000 shares of capital stock, consisting of 125,000,000 shares of common stock, par value $0.0001 per share and 5,000,000 shares of preferred stock, par value $0.0001 per share.

2014 Equity Incentive Plan

The Company adopted a 2014 Equity Incentive Plan that became effective on July 30, 2014 and serves as the successor to the 2013 Equity Incentive Plan. The 2014 Equity Incentive Plan provides for the grant of awards to employees, directors, consultants, independent contractors and advisors, provided the consultants, independent contractors, directors and advisors are natural persons that render services not in connection with the offer and sale of securities in a capital-raising transaction. The exercise price of stock options must be at least equal to the fair market value of our common stock on the date of grant.

The Company has reserved 1,092,085 shares of its common stock to be issued under the 2014 Equity Incentive Plan and will increase automatically on January 1 of each of 2015 through 2024 by the number of shares equal to 3.0% of the aggregate number of outstanding shares of our common stock as of the immediately preceding December 31. The Company’s Board may reduce the amount of the increase in any particular year.

The 2014 Equity Incentive Plan authorizes the award of stock options, restricted stock awards, or RSAs, stock appreciation rights, or SARs, restricted stock units, or RSUs, performance awards and stock bonuses.

2014 Employee Stock Purchase Plan

The Company adopted a 2014 Employee Stock Purchase Plan (“ESPP”) that became effective on July 31, 2014 which was the effective date of the Company’s registration statement.  The ESPP provides employees of the Company, including any parent or subsidiary companies that the Board designates from time to time as a corporation that shall participate in the plan, with a means of acquiring an equity interest in the Company and to provide an incentive for continued employment.

There are 149,600 shares of common stock reserved for future issuances under the ESPP. Any employee regularly employed by the Company for six months or more on a full-time or part-time basis (20 hours or more per week on a regular schedule) will be eligible to participate in the plan. The ESPP will operate in successive six month offering periods. Each eligible employee who has elected to participate may purchase up to 1,000 shares or $25,000 during each offering period. The purchase price will be the lower of (i) 85% of the fair market value of a share of common stock on the first trading day of the offering period or (ii) 85% of the fair market value of a share of common stock on the last trading day of the offering period. The ESPP will continue for a period of ten years from the first purchase date under the plan unless otherwise terminated by the Board. As of September 12, 2014, no commencement date for the first offering period has been approved by the Board or compensation committee and no shares have been issued under the ESPP.

Forward Stock Split

In July 2014, the Board approved a 1.5625-for-1 forward stock split of the Company’s common stock (see Note 1).

Initial Public Offering

On August 6, 2014, the Company closed its initial public offering and private placement and 5,492,307 shares of common stock were sold at an initial public offering price of $13.00 per share, for aggregate gross proceeds to the Company of $71.4 million (see Note 1).

On August 29, 2014, the underwriters of the Company’s initial public offering gave notification that they would partially exercise the over-allotment option granted to them and on September 4, 2014, 642,000 additional shares of common stock were sold on the Company’s behalf at the initial public offering price of $13.00 per share, for aggregate gross proceeds of approximately $8.3 million (see Note 1).

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies.

Commitments and Contingencies.

6. Commitments and Contingencies

Array Collaboration Agreement

On July 3, 2013, the Company signed a multi-year strategic collaboration agreement with Array, and this agreement was subsequently amended on November 26, 2013 and April 10, 2014. Under the terms of the collaboration agreement, the Company obtained certain rights to Array’s TRK inhibitor program, as well as additional novel oncology targets. The Company has worldwide commercial rights to each product candidate from the collaboration and Array participates in any potential successes through milestones, royalties, and an equity ownership in the Company.

With respect to the discovery and preclinical program, the collaboration agreement runs through July 3, 2016, and the Company has the option to extend the term for up to two additional one-year renewal periods by providing written notice to Array at least three months before the end of the initial discovery and preclinical development programs or the renewal period, if applicable.

As part of the agreement the Company agreed to pay Array a fixed amount per month, based on Array’s commitment to provide full-time equivalents and other support relating to the conduct of the discovery and preclinical development programs. The Company recorded related-party research and development expenses for the three and six months ended June 30, 2014 of $1.7 million and $3.0 million, respectively, related to the conduct of the discovery preclinical development programs by Array.

On April 10, 2014, the Company and Array entered into an amendment to the collaboration agreement. Pursuant to the amendment, in addition to LOXO-101, the parties designated 12 discovery targets, of which six are to be selected for additional study on or before January 2015, which will be reduced to four on or before October 2015. The Company has the option to increase the total candidate selection number to five for a modest additional payment. The Company also agreed to provide additional headcount support for Array’s research activities on the agreed-upon targets.

Milestones

With respect to product candidates directed to TRK, including LOXO-101 and its back-up compounds, the Company could be required to pay Array up to $222 million in milestone payments, the substantial majority of which are due upon the achievement of commercial milestones. With respect to product candidates directed to targets other than TRK, the Company could be required to pay Array up to $213 million in milestone payments, the substantial majority of which are due upon the achievement of commercial milestones.

Royalties

The Company is required to pay Array mid-single digit royalties on worldwide net sales of products directed to TRK and directed to targets. With respect to the royalty on products directed to targets, the Company has the right to credit certain milestone payments against royalties on sales of products directed to such target.

Convertible preferred stock issuance

In connection with this agreement, the Company issued Array 500,704 shares of Series A-1 convertible preferred stock, par value $0.0001. The Company recognized, as a component of research and development expense with related party approximately $7.0 million related to the estimated fair value of the shares issued during the period from May 9, 2013 (date of inception) to December 31, 2013.

Legal Proceedings

The Company is not involved in any legal proceeding that it expects to have a material effect on its business, financial condition, results of operations and cash flows.

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Related Party Transactions

6 Months Ended

Jun. 30, 2014

Related Party Transactions

Related Party Transactions

7. Related Party Transactions

The Company recorded expenses for the three and six months ended June 30, 2014 of approximately $1.7 million and $3.0 million, respectively, as a component of research and development with a related party for services provided by Array under the collaboration agreement as described in further detail above in Note 6.  As of June 30, 2014, the Company had $0.7 million in prepaid expenses to Array under the collaboration agreement for services that will be provided in subsequent periods.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Unaudited Interim Financial Information

Unaudited Interim Financial Information

The accompanying balance sheet as of December 31, 2013, the statement of operations, statement of redeemable convertible preferred stock and stockholders’ deficit and the statement of cash flows for the period from May 9, 2013 (date of inception) to December 31, 2013 was derived from the Company’s audited financial statements included in Form S-1 filed on July 30, 2014 with the SEC that was declared effective on July 31, 2014.

The accompanying balance sheet as of June 30, 2014, the statements of operations for the three and six months ended June 30, 2014 and the period from May 9, 2013 (Date of Inception) to June 30, 2013, the statements of redeemable convertible preferred stock and stockholders’ deficit for the six months ended June 30, 2014 and the statements of cash flows for the six months ended June 30, 2014 and the period from May 9, 2013 (Date of Inception) to June 30, 2013 are unaudited. The interim unaudited financial statements have been prepared on the same basis as the annual audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2014 and the results of its operations, and its cash flows for the three and six months ended June 30, 2014 and the period from May 9, 2013 (date of inception) to June 30, 2013. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2014 and for the period from May 9, 2013 (date of inception) to June 30, 2013 are unaudited. The results for the six months ended June 30, 2014 are not necessarily indicative of results to be expected for the year ending December 31, 2014, any other interim periods or any future year or period.  These unaudited financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2013 included in the Company’s Form S-1 filed July 30, 2014 with the SEC.

Property and Equipment

Property and Equipment

Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets which are generally three to five years. Maintenance and repairs are expensed as incurred. Upon disposal, retirement, or sale, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the results of operations.  Due to the timing in which property and equipment was placed into service, there was no depreciation expense during the three or six months ended June 30, 2014.

Deferred Initial Public Offering Costs

Deferred Initial Public Offering Costs

Deferred IPO costs as of June 30, 2014, consisting of legal, accounting, printing and filing fees incurred in the preparation of the Company’s Registration Statement on Form S-1 were capitalized. The deferred costs are included in deferred initial public offering costs on the unaudited condensed balance sheet as of June 30, 2014. The deferred offering costs were offset against the IPO proceeds upon the completion of the offering in August 2014.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

On June 10, 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.  The guidance is intended to reduce the overall cost and complexity associated with financial reporting for development stage entities without reducing the availability of relevant information.  The Board also believes the changes will simplify the consolidation accounting guidance by removing the differential accounting requirements for development stage entities. As a result of these changes, there no longer will be any accounting or reporting differences in GAAP between development stage entities and other operating entities.  For organizations defined as public business entities the presentation and disclosure requirements in Topic 915 will no longer be required starting with the first annual period beginning after December 15, 2014, including interim periods therein.  Early application is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities).  The Company early adopted this guidance during the three months ended June 30, 2014 and, as a result, the Company no longer presents inception-to-date information about the statements of operations, cash flows, and stockholders’ deficit.

In June 2014, the FASB issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period, (“ASU 2014-12”). ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The Company does not anticipate that the adoption of this standard will have a material impact on its financial statements.

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Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014
Property and equipment
Depreciation expense	$ 0	$ 0
Minimum
Property and equipment
Estimated useful lives of the assets		3 years
Maximum
Property and equipment
Estimated useful lives of the assets		5 years

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Redeemable Convertible Preferred Stock and Stockholders' Deficit (Details 3) (Plan, USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014
Stock based compensation expense
Share-based compensation expense	$ 473	$ 537
Research and development
Stock based compensation expense
Share-based compensation expense	281	325
General and administrative
Stock based compensation expense
Share-based compensation expense	$ 192	$ 212

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Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit (USD $) In Thousands, except Share data, unless otherwise specified	Total USD ($)	Common Stock	Additional Paid-in Capital USD ($)	Accumulated Deficit USD ($)	Redeemable convertible Series A preferred stock USD ($)	Redeemable convertible Series A-1 preferred stock USD ($)	Redeemable convertible Series B preferred stock USD ($)	Series A shares USD ($)	Series B shares USD ($)
Balance at Dec. 31, 2013	$ (10,231)		$ 59	$ (10,290)
Balance at Dec. 31, 2013	24,843				17,799	7,044
Balance (in shares) at Dec. 31, 2013		452,896
Balance (in shares) at Dec. 31, 2013					2,812,497	500,704	0
Changes in Redeemable Securities
Issuance of redeemable convertible preferred stock								15,000	28,178
Issuance of redeemable convertible preferred stock (in shares)								2,343,753	3,166,233
Accretion of redeemable convertible preferred stock to redemption value	28				22		6
Changes Stockholders' Equity
Issuance of common stock due to exercise of vested options	159		159
Issuance of common stock due to exercise of vested options (in shares)		108,112
Accretion of redeemable convertible preferred stock to redemption value	(28)		(28)
Stock-based compensation expense	537		537
Net loss	(6,807)			(6,807)
Balance at Jun. 30, 2014	(16,370)		727	(17,097)
Balance at Jun. 30, 2014	$ 68,049				$ 32,821	$ 7,044	$ 28,184
Balance (in shares) at Jun. 30, 2014		561,008
Balance (in shares) at Jun. 30, 2014					5,156,250	500,704	3,166,233

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Net Loss Per Common Share

6 Months Ended

Jun. 30, 2014

Net Loss Per Common Share

Net Loss Per Common Share

3. Net Loss Per Common Share

The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except share and per share data):

	Three Months Ended June 30, 2014			Six Months Ended June 30, 2014
Basic and diluted net loss per common share calculation:
Net loss	$	(3,905	)	$	(6,807	)
Accretion of redeemable convertible preferred stock	(17		)	(28		)
Net loss attributable to common stockholders	$	(3,922	)	$	(6,835	)
Weighted average common shares outstanding	271,317			238,246
Net loss per share of common stock—basic and diluted	$	(14.46	)	$	(28.69	)

The following outstanding securities at June 30, 2014 have been excluded from the computation of diluted weighted average shares outstanding, as they would have been anti-dilutive:

Convertible preferred stock	8,823,187
Unvested restricted stock	264,190
Stock options	1,231,706
Total	10,319,083

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Commitments and Contingencies (Details) (USD $)	2 Months Ended	3 Months Ended	6 Months Ended			0 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended				3 Months Ended	6 Months Ended	8 Months Ended
	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2014 Series A-1 preferred stock	Dec. 31, 2013 Series A-1 preferred stock	Apr. 10, 2014 Collaboration agreement Array item	Jun. 30, 2014 Collaboration agreement Array	Jun. 30, 2014 Collaboration agreement Array Research and development	Jun. 30, 2014 Collaboration agreement Maximum Array item	Jul. 03, 2013 Collaboration agreement Series A-1 preferred stock Array	Jun. 30, 2014 Collaboration agreement Product candidates directed to TRK Array	Jun. 30, 2014 Collaboration agreement Product candidates directed to targets other than TRK Array	Jun. 30, 2014 Collaboration agreement Related party Array Research and development	Jun. 30, 2014 Collaboration agreement Related party Array Research and development	Dec. 31, 2013 Collaboration agreement Related party Product candidates directed to targets other than TRK Array
Commitments and contingencies
Number of additional renewal periods options available to the entity to extend agreement term									2
Term of additional renewal periods options available to the entity to extend agreement term							1 year
Related party research and development expenses							$ 3,000,000	$ 1,700,000					$ 1,700,000	$ 3,000,000
Number of discovery targets designated by the parties						12
Number of discovery targets which are to be selected for additional study on or before January 2015						6
Number of discovery targets which are to be selected for additional study on or before October 2015						4
Maximum number of candidates which can be selected by the entity for modest additional payment						5
Maximum milestone payments which the entity could be required to pay											222,000,000	213,000,000
Research and development	$ 6,000	$ 855,000	$ 1,566,000												$ 7,000,000
Shares issued				500,704	500,704					500,704
Redeemable convertible preferred stock, par value (in dollars per share)				$ 0.0001	$ 0.0001					$ 0.0001

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Organization and Description of the Business (Details) (USD $)	0 Months Ended		1 Months Ended		6 Months Ended		0 Months Ended
	Aug. 06, 2014	Jul. 03, 2013	Aug. 31, 2014	Jul. 31, 2014	Jun. 30, 2014 item	Dec. 31, 2013	Aug. 06, 2014 Initial public offering	Aug. 06, 2014 Private placement	Sep. 04, 2014 Over-allotment option
Organization and Description of the Business
Number of operating segments					1
Organization and description of the business
Stock split ratio of the common stock		0.48309		1.5625
Shares of common stock sold							5,261,538	230,769	642,000
Initial public offering price (in dollars per share)							$ 13.00		$ 13.00
Aggregate gross proceeds from shares sold			$ 72,400,000				$ 68,400,000
Aggregate gross proceeds from shares sold								3,000,000
Aggregate shares of common stock issued upon conversion of all outstanding convertible preferred stock	9,932,042
Underwriters underwriting discounts and commissions paid			5,600,000
Offering expense			1,700,000
Aggregate gross proceeds from shares sold									8,300,000
Working capital					50,700,000
Accumulated deficit					17,097,000	10,290,000
Cash and cash equivalents					$ 51,304,000	$ 14,994,000