There are still many big catalysts ahead and closer to the end of the year that will propel the stock price much higher
Back in May, I wrote a very thorough article on the potential of the IL-12 therapy that Ziopharm (NASDAQ:ZIOP) is working on along with Intrexon (NYSE:XON), and the novel platform that they use in therapy, called the RheoSwitch, an Intrexon developed technology. One of the most attractive reasons to own Ziopharm is the fact that they have the full rights to develop and prosper from all Intrexon oncology drugs, with 50% of all revenues in the future. The exact details of this agreement can be found in the 10-Q (here - page 15) and was also highlighted in a recent company presentation (JMP Securities HC) as one of the most important reasons to invest in Ziopharm (found here). I also mentioned in my previous article the various scientific experts behind Ziopharm/Intrexon to include that of RJ Kirk, who is also the CEO of Intrexon, and the huge prior successes he has had in various biotechnology ventures.
You can read that previously written article here. Also, at the time I mentioned many reasons why I felt that Ziopharm would be a huge success and who was behind the two mentioned companies, and since then Ziopharm's stock price had risen up very nicely, but has come back down somewhat, along with many other biotech companies. And Intrexon had nearly doubled in price since that time. I will not get into a large discussion as to why this fall back did occur; however, both companies had been heavy short targets at one time. Also, I personally still have a large position here. I am primarily focused on the long-term potential and not just the next month or two, and failed to take profits on recent highs, even though I was able to do so. That said, I believe if certain things do fall into place, the stock price could be at least 50% higher by year end, and depending on how much is revealed in the new INDs (Investigational New Drugs) by year end, the stock price could even be much higher, in my opinion.
The biggest catalyst to launch the share price higher will be the revelation of the new INDs, including the recent hint of CAR-T with RheoSwitch
In the most recent company presentation (here), CEO Dr. Jonathan Lewis mentioned that one of the new INDs will be of the CAR-T type, and appears very excited about the potential. The CEO also talks about the potential of IL-12 and particularly in Glioblastoma, and that various testing in the past by many smart investigators "had been stopped due to not having any Control" but they feel that Ziopharm is on to something big and "ground breaking" here. They also mention of expanding this technology into using it with CAR-T therapy with "exquisite control", with the on/off switch of RheoSwitch, which sounds like huge potential, especially if they are so confident to mention it now. It means that they are far enough along with it to consider it for new therapy treatment soon. I would highly recommend listening to this presentation. Also, just last week this was announced in a formal PR. There was some criticism on this particular announcement. Some feel that it was overhyped, but if the company had wanted to do just that, they could have spelled out all 8 new INDs to come and given such grand detail instead of just a hint of what is to come into next year with this only one new IND revealed to date. Keener minds will appreciate this news, in my opinion.
One of the major limitations of the CAR-T therapy has been the cytokine storm syndrome, and with one private company, in particular, Juno Therapeutics, their own CAR-T therapy was halted temporarily by the FDA after several patients died (but then restarted rather quickly). Once this cytokine storm starts it is difficult to turn off. Ziopharm has seen this similar syndrome in the IL-12 treated therapy (that starts with symptoms) and every single time with the on/off switch (dose stopped) have seen a complete reversal of those symptoms. Thus, if they can further demonstrate how effective the IL-12 therapy is with the RheoSwitch, with control of the symptoms, then moving on to other therapies with this ground breaking RheoSwitch might just make Ziopharm the top company in CAR-T therapy to own over any other, as well as the other INDs that they will reveal in the future to validate a further lift in share price. All of this is still early on, but it sounds like very huge potential, which could develop very quickly by year end into early next year.
As for what market cap Ziopharm might command with the revelation of these new INDs in the not so distant future, one can look at some of the various other companies working on CAR-T therapy at present. The further one along is said to be Novartis (NYSE:NVS) and we all know that it has a very large market cap, and one cannot say of course that ZIOP should be up to that high level in market cap level anytime soon, but there are a few others in early stage development. Novartis recently achieved its special "breakthrough" status from the FDA just this month in this therapy. A few of those in the $800 million to $1 billion market cap level area are Bluebird (NASDAQ:BLUE), working with Celgene (NASDAQ:CELG), and Kite Pharma (NASDAQ:KITE) which are both in very early stages of development. Also, Juno Therapeutics is highly regarded with a huge backing of experts, and could possibly come to the public market with a very large market cap in the future (in the billions some have said). Another one is Cellectis from France, which recently signed a very large deal with Pfizer (NYSE:PFE), and does not have a very large market cap possibly because it is not well known and does not have a broad pipeline thus far, and is still early on in development. However, Cellectis' shares did advance more than 50% after this deal with Pfizer was revealed. There are also a few others that are in early stage and not far enough along to obtain much awareness and respect, and I will not mention them here.
So, depending on what happens prior to this public release of pipeline updates in the not so distant future, and the value that the street places on these new INDs, will determine how high the company moves up by year end. It very well could be to the level of BLUE or KITE if things work out to their benefit and that could be more than twice the current ZIOP price, or even higher with the right level of good data that would be released by year end. Also, shares of BLUE or KITE could even be higher by year end depending on the overall market as well as the biotech indexes. In the least, I would expect that the share price by year end would be 30 to 50% higher, and possibly much higher if they exceed expectations along with other market conditions. And if they do greatly exceed expectations, there is a very large short position that would need covering, especially with a large warrant position to be closed by year end as well.
There are still many catalysts ahead that should raise share price
Ziopharm still has the same amount of catalysts ahead that I mentioned in my previous article. One in particular, the early melanoma results that one can read about here on the Clinical Trials site, may come in July as previously mentioned, and data could be revealed anytime between now and year end. The other several IL-12 catalyst events to look for are the breast cancer and newly started Glioblastoma cancer trials data to come by year end (updates at least). Many experts feel that the IL-12 Glioblastoma cancer trials will end up having the best chance at success to possibly become a primary level treatment, if human trials prove to be as successful as the murine results have so far demonstrated. An interesting Glioblastoma abstract document from April of this year can be viewed here, which is very impressive. My primary reasoning for why I feel that these present IL-12 clinical trials will be successful was supported in the first article, mainly by showing how previous extensive clinical trials failed because the IL-12 was being administered systemically versus locally (presently). By injecting directly into the tumor site and having an activator ligand to turn on the IL-12 allows for a more controlled dose regimen, with a more advantageous control of side effects. Also, the activator ligand, Veledimex, can cross the blood brain barrier making it an ideal activator candidate in the treatment of Glioblastoma. The results so far in early clinical trials have been successful, and I am very optimistic that further Phase II clinical trials will also demonstrate good efficacy and safety, with the advantage of the RheoSwitch system.
If all of those (3) indications demonstrate good results, they will further solidify this new innovative IL-12 therapy, and possibly even before the newer INDs are revealed, the share price will begin to rise much higher. Why, you ask? Well, you could make the argument that things are still early on and with each new IND revealed, you could tell me to wait for more proof in the Phase I data to propel the stock price higher, and I understand that. My argument would be that with each new step in this Synthetic Biology program, Ziopharm will gain more respect by demonstrating success in various trials, and smart minds will buy into the future expectations feeling confident that any future endeavors will demonstrate similar success. This will add in larger valuations to their view of the company for each new IND, such as CAR-T. These same large buyers of stock are also in ZIOP/XON partly because of the past success of RJ Kirk (read more in my previous article), and that alone will add to the credibility of both companies. And, if another company is in Phase 1 or 2 with the same technology then Ziopharm might at least have 1/2 the market cap of that company. I doubt that once the Phase I of the CAR-T IND (or other advance multigenic level INDs) starts, the market cap of ZIOP would be at the same level as the bear argument might indicate, present price or lower. Would that really make sense? Especially if Ziopharm can demonstrate that a CAR-T and RheoSwitch system can accomplish a better benefit to the patient and possibly without losing any patients to an early death, and treat in a more economical way? To me, the bull argument here makes much more sense. Also, some may argue whether or not the RheoSwitch can be applicable in the CAR-T treatment, since with the IL-12 candidate there is a longer half-life or longer time before the peak converts to trough levels of the therapeutic range. Of course, we will find out more later, but in my opinion the experts at Intrexon and Ziopharm will likely construct or engineer such a on/off switch designed to cut off quicker and possibly have an antibiotic tagged onto the system to possibly pre-treat any adverse cytokine release syndrome effect that might come up (side effect seen with other similar CAR-T candidates from other companies). Also, I am looking forward to hearing from the company about even more advanced multigenic candidates and how well they will work along with the RheoSwitch system. With further proof of success, there are many possible partnership opportunities that could come with either the per indication choice of drug or with the licensing out of the technology with other medications or a combo of the two, where Ziopharm could combine the technology with various medications.
Ziopharm is succeeding where Big Pharma has failed
Keep in mind that many successful companies and other scientific organizations have tried and failed to accomplish what Ziopharm has achieved thus far with the IL-12 therapy, including Roche Pharmaceuticals (or Holdings) (OTCQX:RHHBY) which attempted to develop an IL-12 treatment regimen in the past, and so, many are watching Ziopharm now. Please refer to my previous article as to more detail on the latter point on the prior history of IL-12. Some bear thinkers would say that the new PD-1 treatments by several companies are the only way to go and are so successful, so why should Ziopharm have any chance at success? Well, if you realize that those PD-1 (or Programmed cell death) treatment therapies will not work for everyone, and many combo treatments are being examined for the best possible treatment, then of course Ziopharm IL-12 therapy has an important place in this search for a better treatment therapy for melanoma cancer, breast cancer, and especially Glioblastoma. Also, the bears would say that the trials will take time, to include the latter Glioblastoma Phase I to start this year. However, all 3 are open label and will have updates along the way, and any surprisingly spectacular good news will support and possibly propel the stock price much higher, especially the Glioblastoma trial, in my opinion. Since the early mouse trial was so impressive, if anything close to the efficacy seen in mice is also seen in humans, then Ziopharm would likely double in price (at least). One company, Celldex (NASDAQ:CLDX), has seen great appreciation in its stock price due to its lead drug candidate, rindopepimut (CDX-110), a targeted immunotherapeutic which is now in Phase III. The market cap of Celldex in this presently challenging biotech market (due to Fed comments twice this year) is now at $1.2 billion and was 3 times higher earlier this year. So, if Ziopharm can demonstrate very early success in this open label trial to that level or greater, then I am sure that it would at least add $100 million or more to its market cap in Phase I to Phase II. And there is such a great need for a treatment of Glioblastoma and treatment will likely end up being the best of what is to be seen in a combo treatment either after success of singular trials with great success, or a required combo treatment trial as determined by the FDA or data to come.
Programmed Cell death treatment is not the only game in town
As for melanoma cancer treatment, recently, an interesting accomplishment by Exelixis (NASDAQ:EXEL) was revealed in their own combo melanoma cancer trial drug, Cobimetinib, which was shown to be effective with a Roche drug called Zelboraf, for those who have a mutation in a particular gene called BRAF that allows the melanoma cells to grow. So, it is important to realize that there will be various drugs that can be effective in a combo treatment for the disease, and the PD-1 drugs, while quite impressive, will not work for all patients alone; and they could also be included in an effective combo treatment, possibly with this Ziopharm IL-12 therapy. Many are of the belief that the added RheoSwitch could end up to be the deciding factor and the best to control side effects along with the most precise dose to combat various diseases, and versatile enough to be used in other therapy regimens too.
Palifosfamide - the wild card lottery pick that time forgot?
There is also the big wild card event that could benefit the company, and that is the Palifosfamide data to come out this fall (likely) in several trials as mentioned previously. As you may remember, many were critical of the company for the apparent abandonment of this program from the pipeline, and placing it on the back burner while going forward with their more exciting new future platform that Mr. RJ Kirk had been talking about for many years. To me it was a brilliant idea because if the data turns out to be bad, then it would not end up such a huge let down. On the other hand, if it turns out to be good (the independently run Germ Cell trial and Ziopharm run Matisse lung cancer trials), then it will be a big surprise that can help the company bring in more funds by a sale of the Palifosfamide drug to another company. And it would end up a more lucrative sale, if either of those clinical trials are successful. Keep in mind that Palifosfamide-tris is still being used in the Breast Cancer Phase II trial along with the Ad-RTS-hIL-12 in one arm of the trial. If it was not an effective cancer fighting chemotherapy drug, why would Ziopharm use it there? Those Palifosfamide trials' success might also bring back some respect from some people that just gave up on the company, even though Ziopharm was one of the fastest comeback stories in biotechnology that I have ever seen.
A much higher share price is most likely to come by year end if not before
As mentioned before, often it is timing with share price due to several factors that can move a share price higher in the biotech realm, and often many names fall when the biotech indexes fall. I can say to you that I have a strong opinion that a certain stock price should move much higher, but it is no guarantee that it will do so, and it depends on several factors. For one, the combination of good news from all the mentioned catalysts should move the share price higher, and secondly, the new additions (INDs) to the pipeline should move the share price much higher than the first. Also, if partnership talks turn into a lucrative deal, or if some large pharmaceutical or biotech company feels the drive or need to buy Ziopharm for a decent price, then of course, that could move the share price much higher, or even just a bid for the company publicly revealed could theoretically do the same (the latter occurred with Amylin Pharma - more later). And, there has been a very large option call buyer of late, to include very recent in July, in the October month strikes; so there is huge interest to own call options, and not just in that one month. I will not get into too deep speculation of who it might be, except that some have said that it is a very large buyer taking a strong position, who is of the belief that good news is to come before the October month option expiration. To be fair though, the bear argument is that someone buying up large calls could be doing so as a hedge on their large short position and/or to unwind the short position by year end. My argument on this would be, if that is the case, then why would they be buying such a large call option position in such 'out-of-the-money' strikes, such as the $6 price, unless they were confident that the price would rise to that level? Why not buy the more secure in-the-money call options? Or if you are so short heavy, why not just cover your large short position between now and then? One can look at certain financial internet pages (and here) to see the very large open interest of the various call options and not so many put options purchased. While it could be just a large speculative gamble, often a large buyer of stock will start out accumulating a large amount of call options, such as the way I have read that Carl Icahn operates (has done so in the past). I am not saying that Mr. Icahn would be buying ZIOP here, but other well known individuals such as David Einhorn and Daniel Loeb did buy shares of Intrexon not that long ago, and possibly they might take a position here in ZIOP. Not saying a buyout in particular would be a guarantee either, but due to the possibility that Ziopharm with its more innovative RheoSwitch technology, with the ability to control side effects and dose more finely than others (along with a pipeline to come that would value Ziopharm much lower than other similar biotech companies) with similar pipelines (only considering the CAR-T therapy) that are not that far along in development, might be a reason to speculate that at least a buyout offer could come in the future. If not a buyout, I would have to say that at least a very lucrative partnership deal would be likely similar or greater to other deals in the CAR-T arena. Of course, any such deal or buyout may not come or could take time, so one can not take this recent option activity as an absolute guarantee, and you should do your own due diligence. And, not every huge call option buying example that I could show you ends up having a huge news event after such purchases, although there have been quite a few just this year that have demonstrated that someone made a great deal of money by buying calls or selling puts. One can only look as far back as last week on Puma Biotechnology (NYSE:PBYI) for a prime positive example to that. The shares flew up over 200% after it was revealed positive results from a Phase III trial of a Breast Cancer treatment. There were some obvious put selling along with some call buying that sparked much internet interest not long ago; however, many were scared away from the huge price to those options, myself included.
There have been several analyst reports out with opinions of late that the share price of Ziopharm at present could easily exceed $10 by year end. One may want to seek out and research these reports on their own. One in particular is very excited about the increasing chatter of a partnership relatively soon, in part due to the present on/off technology and the future expansion of the pipeline by year end to include new cancer therapies with exosomes, T cells with chimeric antigen receptors, and stem cells, to be used for treating hematological cancers and solid tumors. Ziopharm has also mentioned on occasion that no other is as far along as they are and have mentioned the capability of developing multigenic type drugs that can target more than one gene at the same time with precision. Ziopharm has also revealed that they plan to start filing eight new INDs at year end and into 2015, immensely increasing their existing drug pipeline. The bear argument will be that why should a large pharmaceutical company partner with Ziopharm and then share profits with Intrexon? Well, that adds to my argument that the same large pharma company may just end up taking a stake in Ziopharm to end up owning the whole company later (or even sooner). It still would make sense to partner up with Ziopharm if they see a good reason (efficacy/safety) to do so. And, such partnership levels could be on a wide pipeline level or just per each indication depending on the goals of the interested company involved. If you read any of the more thorough analysts' reports, you will see that Ziopharm has quite a many new INDs to come into next year, with the mention of multigenic targets (as previously mentioned), which could be on a scale that no other company has come close to having success with, to date. Also, if you have the view that the Intrexon 50/50 partnership deal is a hindrance to Ziopharm's future just consider this - Amylin Pharmaceuticals (AMLN) shared their Byetta drug revenues with Lilly (NYSE:LLY) 50/50 (diabetic drug, not first line) and was still bought out by Bristol-Myers (NYSE:BMY) and AstraZeneca (NYSE:AZN) for a whopping $7 billion. And often you have much larger takeovers or partnership deals in the cancer drug realm, than in the diabetic drug realm.
There are risks in every stock, especially a biotech stock such as Ziopharm. If any or all of the data to come in is not viewed as successful by the market and/or fails completely, that would not be good for the stock price. If funding is not enough to support further development, or the need to raise funds can often be viewed as temporarily negative by some, especially if raised in bad timing or a less than favorable price (as perceived by the market). There is also no guarantee that the stock price will rise in a poor market environment. To comment on the recent drop in price, the share price was holding up well over $4 before the recent Fed Chair's 'biotech stretched valuations' comments, and during that 2-week period nearly every biotech company that I follow fell sharply in price, so I would not attribute the recent drop in price to any other reason. Also, this recent drop in price, especially this last week, came with much lower volume than the previous drop to these levels, so we are seeing lighter volume panic and sell out. While that could change and a lower price can always come, you often see a sharp price rise back up in certain range bound stocks with the right conditions. I have to wonder, though, the next time certain biotech stocks are at much higher levels, will the Fed Chair let us know again? Of course, they will not let us know when to buy, when certain stocks are near a 52-week low, am I right? (Hint, look at the one-year chart on ZIOP).
While no biotech company to invest in, or even trade in, is perfectly safe, there are many reasons to own Ziopharm at the present time, with many event driven catalysts to come that can move the share price much higher, and gain much respect to drive other new programs into development along with RheoSwitch, such as with the CAR-T therapy and multigenic platform. With these new platform INDs, it is quite possible that Ziopharm will demonstrate that they are the best to 'control' certain therapies by controlling the dose along with a better side effect profile while doing so. While first to market can be important, it would not necessarily matter if Ziopharm can accomplish the same in a much better platform and in a more economical way. As for the specific IL-12 indications that they are working on presently, all three are open label. So, if results are looking spectacular, in particular the early Glioblastoma trial, it may not be long before the share price and/or options reveal that someone might know of this.
Also, I feel that the recent hint at this future CAR-T treatment was likely hinted as of late at the recent presentation because many were questioning what they might reveal in the next half year or so, due to their only mentioning that a certain number (only) of new INDs would be revealed soon, without any further details. They did not reveal this information because there is anything lacking in their current programs, so I would not necessarily speculate in that manner. In other words, they are not revealing this new information now because the current IL-12 program is not going well. If the latter were true, they would have to say that now due to certain rules of the market. Also, while it may appear to be some time away before the full revelation into all these new INDs are shown, many of the smart players and institutions will likely be accumulating well before then, as could be the reason for the very large call options being purchased the last month or so in very large numbers. You should of course do your own due diligence and not necessarily rely only on what I have shown you here, and recognize that all investments have risk, and you alone are primarily responsible for your investment.
Disclosure: The author is long ZIOP, XON. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Additional disclosure: You should of course do your own due diligence and not necessarily rely only on what I have shown you here, and recognize that all investments have risks and you alone are primarily responsible for your investment. Any stock has risks, in particular biotechnology stocks, and there is no guarantee that they will go higher, even if expectations are high. And even if they do end up much higher, can often be very volatile short term depending on market conditions. Invest or trade wisely and how much you can afford to invest.