CANCER IMMUNOTHERAPY INDEX

LCINDX Index Frequently Asked Questions

1.  How is the index weighted?

The Loncar Cancer Immunotherapy Index (LCINDX) is an equal-weighted index of 30 top immunotherapy companies.  All 25 companies in the index start off with an equal weight (4.00%) on each semi-annual rebalancing date.  The advantage of equal-weighted indices is that both large and small companies can have significant impacts on overall index return.  While some indices are weighted by market capitalization, they tend to be heavily influenced by large companies.  The LCINDX seeks to provide a metric for tracking the progress of the field of cancer immunotherapy and, given that both large and small companies will likely make significant advances to the field, we thought that an equal-weighted index was the most appropriate measuring stick.

2.  How do you choose which companies to include in the index?

First, five top large pharmaceutical companies who are working on cancer immunotherapy are chosen. They are selected for both their strategic focus on immunotherapy and their leadership role in a specific type of immunotherapy.  Next, the top 25 growth biotechnology companies in immunotherapy by market capitalization are added.  This leaves the portfolio with a target composition of 30 companies.

 

Company inclusion criteria:  All companies included in the LCINDX index must have a high strategic focus on immunotherapy.  In determining whether a company has a high strategic focus on immunotherapy, a company's business must reflect one or more of the following factors:

 

  • The company has a drug(s) approved by either the FDA or EMA that harnesses the immune system to fight cancer.

  • The company has a drug(s) in the human stage of testing that harnesses the immune system to fight cancer.

  • The company has announced intentions to begin human stage testing of a drug(s) that harnesses the immune system to fight cancer. 

  • The company has announced an immunotherapy collaboration or partnership with a major pharmaceutical company.

 

Company exclusion criteria:  The Index Provider excludes from the underlying index companies with any of the following characteristics:

 

  • The company’s market capitalization is less than $100 million and/or it does not qualify to be in the top 25 biotechnology companies by capitalization who are leading in this effort.

  • The company's equity liquidity threshold does not surpass 50,000 shares or $500,000 in average daily trading volume.

  • The company is currently under investigation by the SEC or any other government or regulatory entity.

 

Notwithstanding the foregoing, the index provider reserves the right to exclude a company that, while it might meet the foregoing criteria, does not have, either as a company or through its management or scientific research staffs, an established history or credible presence in the field of cancer-focused immunotherapy research and development.

 

3.  Why include large pharmaceutical and smaller growth companies together?

Both large pharmaceutical and smaller growth companies deserve to be included in the index because companies of all sizes are making meaningful contributions to the field of cancer immunotherapy.  We are aware that in some cases, especially for larger pharmaceutical companies, cancer immunotherapy might be a small part of the company's overall business.  That dynamic is a reason why we have selected an equal-weighting strategy that fairly values contributions from companies large and small (see F.A.Q. #1 for a more detailed description).  Furthermore, we only include five large pharmaceutical companies in the index of 30 at any one time, initially giving large pharma an overall index weighting of approximately 20.00%.  We think that doing so will capture their contribution to the field, but not in a way that dominates the overall return of the index.  A diversified portfolio of 30 companies, all having a strategic focus on cancer immunotherapy, is the best way to capture both the direction and magnitude of the field's progress.

4.  How often is the index rebalanced and reconstituted?

The Loncar Cancer Immunotherapy Index (LCINDX) is rebalanced (positions are given an equal 4.00% weighting) and reconstituted (existing positions are replaced by new ones) on a semi-annual basis. This takes place on the third Tuesday of June and December each year.  For the reconstitution, companies will be removed from the index and replaced by a new name if they no longer meet one of the index's inclusion requirements (see F.A.Q. #2 for a more detailed description of the inclusion requirements). This is done to ensure that the index is comprised of only the top 30 companies in the cancer immunotherapy field.

8.  Where can I find a quote for the index?

Quotes for the Loncar Cancer Immunotherapy Index can be found each day under the symbol "LCINDX" on the Bloomberg Professional service, www.LoncarIndex.com, and other financial data providers.  Furthermore, quotes, returns, historical prices, and constituent weightings will all be updated daily on www.LoncarIndex.com.

9.  Who calculates the daily return of the index?

The daily price and return of the Loncar Cancer Immunotherapy Index (LCINDX) is independently calculated each day by Indxx, LLC.  Indxx, LLC is a professional index development, calculation, analytics, and research provider.

10.  How does this index differ from other biotechnology indices?

Most biotechnology indices are broad-based and dominated by large companies.  Biotech stocks tend to be grouped together as a whole, yet areas like immunotherapy trade on their own unique circumstances and innovations.   Our goal is to give investors a better awareness of immunotherapy and to provide a metric to track its progress.  Many general investors have missed a tremendous bull run in biotech over the last 5-6 years because they are not familiar with the sector.  We hope to make biotech more understandable and approachable so they can make educated decisions about whether to participate in the future.

11.  Why cancer immunotherapy?

Cancer immunotherapy has become an important sector in the biotechnology space and is changing the way many cancers are treated.  It is expected to become the foundational treatment for cancer disease over the next ten years.  While traditional medicines like chemotherapies often give cancer a broad punch, the benefit of using immunotherapy is derived from the immune system’s dynamic nature and the way it can more precisely be tailored to fight a patient's disease.  Interferon alpha (IFN-α), a cytokine, was the first cancer immunotherapy approved in 1986.  Antibody therapies that facilitate the destruction of cancer cells by the immune system have been widely used since 1997, and the first cell-based immunotherapy, a cancer vaccine to treat prostate cancer, was approved in 2010. Today, many new classes of therapies, including checkpoint inhibitors, next generation vaccines, oncolytic viruses, and chimeric antigen receptor (CAR) technologies, are being developed.  It is the progress of these new therapies that the LCINDX aims to track.

13.  How do I contact you with further questions?

The provider of the Loncar Cancer Immunotherapy Index is Loncar Investments, LLC, which is principally owned by individual biotech investor Brad Loncar. You can reach Brad on Twitter here. Media inquiries can be directed to Jill Tatios at loncar@gregoryfca.com.

 
 
 
 
 
 
 
 
 

12.  Why is it important to focus on one sector in the Biotechnology space?

The total market cap of companies within the broad IBB Biotechnology index is nearly $1 trillion. The science behind the companies provides a solid foundation for significant therapeutic advances in the future. It is time to give investors the opportunity to focus on the sectors they are most interested in. Cancer Immunotherapy is the first biotechnology sector we have elected to focus on. It is similar to strategic sectors within the Technology industry, such as the Internet, Cloud Computing and Cyber Security. Sector investing in Technology surpasses $10 billion today. 

 

7.  Why is XYZ Company not included in the LCINDX?

The company either did not qualify to be in the top 25 growth biotech companies by market cap when the index was last rebalanced and reconstituted in June, or did not meet some other criteria of inclusion (See F.A.Q. #2).  Companies that now meet those standards will be clear candidates for addition during the upcoming December rebalance and reconstitution date.

 

5.  What happens if a component is acquired in an M&A transaction?

If an index component's stock is tendered or discontinued due to a merger or acquisition, the index committee may, in its sole discretion, replace the tendered or discontinued component if more than 30 calendar days remain until the next reconstitution date.  The acquired component will be replaced with the next eligible security from a reserve list.  Furthermore, the replacement will be given the same weighting as the outgoing component.

 

If there are not more than 30 calendar days remaining until the next reconstitution date, the index committee will wait until the next reconstitution date to make the replacement.  In this scenario, any funds received from the tendered or discontinued security will be distributed to the remaining index components pro rata.

 

Additionally, if by virtue of the acquisition, the acquiring company then becomes the leading large cap company in one of the three most established and recognized categories of immunotherapy techniques (cell-based therapies, checkpoint inhibitors, and targeted antibodies) but is not already included in the index, the index committee may, in its sole discretion, add the acquiring company in place of an existing large cap company that has less of a focus and leadership role in immunotherapy.  The acquirer will be given the same weighting as the company it replaces.

 

6.  How do you treat IPOs that might be eligible for inclusion?

Eligible initial public offerings will be considered for inclusion on the index's next scheduled semi-annual reconstitution date.  The only exception to this rule is if a recent IPO is the top company in reserve when a current index component's stock is discontinued due to a merger or acquisition, and if more than 30 calendar days remain until the next reconstituion date.  In that scenario, the IPO may replace the discontinued security at the same weighting.  Please see F.A.Q. #5 for more information.

 

Loncar Investments, LLC : P.O Box 15072, Lenexa, KS  66285 : 913-871-5007 : Not investment advice or a solicitation to buy or sell securities