On Friday, December 4th, Ziopharm Oncology Inc. (ZIOP) announced a public offering of 15.5 million common shares and warrants to buy 7.7 million shares in a public offering. The deal was priced @ $3.10 per unit and netted the company approximately $45.2 million. For a micro cap, this was a large, fairly dilutive deal. Common shares now stand at 41,192,287 with a market cap of roughly $125 million.
First, the negatives--dilution, dilution, dilution. Rodman & Renshaw, LLC,was involved in the transaction. Experience tells me that they are not the most discriminating firm when it comes to stock placement. Many R & R clients are rumored to have no interest in holding positions long term, but merely flip the shares and strip the warrants in unit deals. This may explain the weak aftermarket performance of the stock. (Currently trading @ $ 3.02) Also, since the warrants are exercisable @ $4.02, there may be a short term cap on the share price. Why the big raise? With $7 million in the bank (pre-raise), I believe that Ziopharm was likely low-balled in any partnering discussions so the public offering may (in the long term) turn out to be the wise decision.
Now the pros: JMP Securities, LLC co-underwrote the deal. For those of you unfamiliar with the firm, JMP traces its roots back to Montgomery Securities. Hopefully they can bring some larger, long term players into the stock. Prior to the deal, there was very little mutual fund interest with the majority of shares held by VC and hedge funds. We will have to wait for the Q4 filings to see if any of the big boys got involved. Perhaps ZIOP will finally get some coverage pick-ups and gain a bit of added liquidity as a result of this offering.
As for the company proper, Dr. Lewis and Co. can now steam ahead at full speed on their two later stage IV chemo programs and finally make a serious push into the oral versions as well. I went to the analysts' meeting last month and ZIOP appears to have the PH IIIs mapped out for both ZIO-101 (150 patients ) and ZIO- 201 (324 patients) as well as preliminary plans for a PH I/II launch with Memorial Sloan Kettering in their ZIO-301 drug. I think enrollment in the two more mature programs will probably take them through the late spring-early summer. I am unsure of time needed for data collection and analysis, but anticipate results being available by Q4 2010.
The future is now interesting. With $50 million in the bank, ZIOP has the ability to move all 3 programs rapidly forward. The question is will ZIOP's improved balance sheet give it greater bargaining power with potential partners? Will it attempt to get one or both drug's across the finish line themselves or will ZIOP look to partner prior to getting the complete data set(s)?
Finally, I believe there is an outside chance Ziopharm may look to buy something on the cheap. There are a number of companies which have recently failed to meet clinical milestones and have been punished accordingly. Perhaps there is some interesting IP available on the market. Time will tell.
Disclosure: Long Ziopharm.
Disclosure: Long Ziopharm