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As we all know, Ziopharm (ZIOP) announced some very disappointing news to shareholders Tuesday. Ziopharm's drug Palifosfamide failed to show any statistically significant improvement in progression free survival in soft tissue sarcoma. To Ziopharm's credit, the company handled the bad news rather well, announcing that it was discontinuing development of the drug. This was against the recommendation of the data monitoring committee, which recommended allowing the study to continue in order to see if there was any change in overall survival. Overall, Ziopharm made the right decision, as the company would have had to conduct a new trial anyway to see if there was an increase in overall survival. Also, there is no point throwing away good money on the off chance that the drug would show a benefit in overall survival. So now that Ziopharm has experienced a massive shift in stock price, investors are left with the question of what is left?

Ziopharm is now taking a turn of direction and focusing much more on its synthetic biology program. This program's most advanced drug candidate is Ad-RTS IL-12 which is currently in two different Phase II studies for the treatment of advanced melanoma and in the second drug trial, in combination with Palifosfamide for the treatment of metastatic breast cancer. This program has shown promise in Phase I testing, but it is obviously too early to tell if this drug actually works. Ziopharm also has a few other drug candidates which are in early stages of clinical testing. According to Ziopharm's website: Ziopharm also has the drug Indibulin also for the treatment of metastatic breast cancer: the drug is currently in a combined Phase I and 2 clinical trial. Ziopharm also has Darinaparsin. It looks as though Ziopharm has completed phase I testing of this drug candidate in patients with Advanced Solid Tumors. As these drugs advance further along the clinical pipeline, Ziopharm's stock price should indeed begin to pick up once more. However, after the devastating loss of its Phase III candidate, Ziopharm is essentially pushed years back on the scale and has spent tens of millions of dollars for nothing. In order for investors to begin to get more faith in Ziopharm again, Ad-RTS IL-12 will have to do outstanding in Phase II testing, and we would need to see positive developments of Ziopharm's other drug candidates. A clinical pipeline that needs advancement is going to require cash, and a large amount of it. With that in mind, let's take a peek at Ziopharm's financials.

Ziopharm's financials do appear to be rather concerning. Currently, the company is sitting on $73.3 million in cash. Ziopharm, however, suffered a net loss of $102.1 million for the year 2012. Ziopharm conceded in its last report that "the company ended the year with $73.3 million in cash and cash equivalents, which is currently expected to support operations into the second half of 2013." Obviously, had Phase III testing been successful, when the second half of 2013 would approach, Ziopharm would have likely not had any trouble raising the required funds from shareholders to bring Palifosfamide to the market. However, now with the status of Palifosfamide essentially being dead, Ziopharm is going to need a lot more money to conduct new clinical trials of its pipeline candidates. With the date coming where Ziopharm is to run out of money, Ziopharm appears as though it will have a much harder time raising money. At the very least, in order to raise the amount of money required, the dilution would have to be much larger in magnitude. This leaves concerns for shareholders of if it is really worth it? With Ziopharm sitting on a mid-stage drug, and a few early stage drugs, it becomes hard to justify a $149.33 million market cap.

With upcoming dilution, there seems to be no reason at this point to invest in Ziopharm. Perhaps after the dilution, and once it becomes much more clear about where Ziopharm is headed. The current drugs in its pipeline might work, but I am not sure that Ziopharm will be able to raise enough money to advance its pipeline in the short-run. In the long run, if we see drugs advance to Phase III testing, then Ziopharm should once again be able to regain its former price per share, as investors will once again bring attention back to Ziopharm.

Source: Ziopharm: What Now?