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After attending a conference in New York City last week, I think I may have found an alternative model for the future of drug development that will potentially shorten development times and greatly reduce the funding needed to move a drug candidate through the FDA approval process. Potentially, this technology may create the next Genentech ... albeit a 2.0 version with a much lower cost structure and the ability to dramatically shorten drug development timeframes. Also, this new entity with not need to build out expensive manufacturing facilities, since the patient's own body will become a bioreactor. I know these claims sound grandiose, but bear with me as I explain my rationale.
I began following the fortunes of Ziopharm Oncology (ZIOP), a small oncology concern, approximately three years ago. The premise behind my investment thesis was simple: I believed that I had found a company that was trying to take a different tack in drug development. While others were working on very complex “designer drugs,” ZIOP chose to go after simpler targets: Small molecules. The company had hopes of building a few improved (less toxic) IV drugs that could eventually fund its more aggressive goal of oral drug development.
Why orals? A major issue in oncology is that many patients outside of the wealthiest countries (North America/Europe/Japan, etc.) lack access to clinics. The key to oral delivery would be that there would be less need for patients to get to a clinic (if at all) on a regular basis (as IV patients must), which would result in a potentially global reach for a successful oral oncology drug candidate. Also, since volume would potentially be much higher, the drug could be sold at much lower prices and still be quite profitable. A complete list of my coverage of Ziopharm can be found here.
The early pipeline consisted of three candidates (see website for more complete descriptions):
  1. Darinaparsin (ZIO-101 or Zinapar®) is a novel organic arsenic being developed for the treatment of various hematologic and solid cancers. Darinaparsin is being developed with the goal of avoiding toxic side effects and potentially expanding the application of this class of agents to a wide array of cancer indications.
  1. Palifosfamide (ZIO-201 or Zymafos®) is a proprietary stabilized formulation of isophosphoramide mustard (IPM), the active metabolite of ifosfamide. Ifosfamide is an alkylating drug used to treat diverse cancers including testicular cancer, sarcoma, and lymphoma. Palifosfamide delivers only the cancer fighting component of ifosfamide without the two toxic metabolites of the parent drug that cause the debilitating side effects of “fuzzy brain” (encephalopathy) and severe bladder toxicity.
  1. Indibulin (ZIO-301 or Zybulin®) is a novel, unique targeted tubulin binding agent which targets both mitosis and seeding. The drug is being developed with Dr. Larry Norton of Memorial Sloan Kettering, a world-renowned breast cancer specialist.
Over the next couple of years, Ziopharm advanced the development of these compounds and each of these drugs remain on the company’s development roster. The ZIOP story seemed to be progressing well with the eventual goal of moving one or more drugs into a registration trial. My thoughts were that at some point the company would partner with big pharma and, if successful, would be bought out as is the case with most micro-cap biotechs.
On Jan. 6, I found out that my premise was flawed. Ziopharm announced a partnership with R.J. Kirk’s Intrexon Corporation, a privately-held entity that billed itself as a next generation synthetic biology company. Intrexon's stated goal is to produce better DNA. I was confused. Why was a developer of small molecule drugs joining forces with a designer DNA drug entity? I could see no synergies in the match. Well, once again I was mistaken.
Fast forward to June 23's Ziopharm meeting at the Nasdaq market site. Several things came out of the meeting:
Legacy Programs
  • The lead small molecule program (PICASSO III) is on track. This program is testing Palifosfamide in STS. Data is expected in mid-2012.
  • Development is progressing on SCLC with Palofosfamide being tested by Dr. Larry Einhorn's HOG team. Expansion of the PH I trial is expected later this year.
  • Work continues on the oral programs, much of it shepherded by Norton. Likely indications for early oral drug candidates include triple negative breast cancer.
Synthetic Biology Programs
Here is where the story gets interesting. Tom Reed, Ph.D. (Intrexon’s founding scientist) presented his stunning vision of future drug development. Here are a few highlights:
Intrexon has combined biological science, engineering techniques and computer modeling to develop a modular development platform for the creation and assembly of complex transgenes. We are not talking about traditional cut-and-paste gene-splicing, in which native genes are cloned into host cells, but rather something radically different. Think of Henry Ford- like processes used to quickly and cheaply churn out customized building blocks (synthetic DNA) which could then be assembled into various configurations much akin to a highly developed biologic Lego block building system. Intrexon currently has over 200,000 items in its ULTRAVECTOR parts library.
Intrexon has developed an oral activator ligand (RHEOSWITCH) that allows drug action to be turned on or off or adjusted via a pill. This process would allow more effective control of dosing (timing and duration) without necessitating a trip back to the clinic, plus could potentially extend the drug's therapeutic window. Essentially, this advance will capture many of the cost benefits of oral dosing by allowing oncologists to switch the active drug on and off and/or adjust the drug's dosing characteristics without necessitating additional trips back to the clinic.
Finally, data presented on one of the programs (melanoma) in which patients’ blood is extracted, modified and returned via injection seems to indicate that the process not only provides localized effect against the targeted cancer but systematic as well. The treatment essentially creates modified, more robust T-cells that seem to render a vaccine-like effect. This is very big news.
A New Model of Drug Development
The balance of the presentation focused on how the Intrexon platform could be used to drive down drug development costs. The new technology will be able to design, optimize and validate complex transgenes very quickly. In a nutshell, the company envisions running multiple simultaneous programs in a drug candidate that could potentially quickly move a compound from conception to IND within months, not years. Intrexon’s platform does appear scalable as ZIOP has publicly estimated that it should have five new INDs filed in 2012, with eight additional filings coming in 2013.
The ultimate goal is to quickly and efficiently move a compound from preclinical status into a full-blown registration trial. Drugs that fail to show promise can be quickly tossed aside or modified before expensive large scale human trials commence.
Whether or not you choose to consider this issue for investment, I encourage all readers who have interest in the biotech space to listen to the archived presentation of this meeting, as the content discussed may have ramifications far beyond those directly associated with Ziopharm and/or Intrexon.
Investment Potential
Surprisingly, the stock has been under pressure over the last several weeks. After peaking in the high $7s, the shares now trade at approximately $6.00. Some of this price decline is likely due to an increasing short position in the shares. As noted above, the company has a very healthy balance sheet (about $124M as of March 31). Large investors include Fidelity and the aforementioned RJ Kirk.
In summary, Ziopharm presents a very interesting investment candidate. The company’s legacy programs provide investors with one near-term shot on goal (PICASSO III) and the potential of a second program in SCLC ramping up quickly. As many readers likely know, SCLC has seen very little successful drug development over the last 25 years -- not for lack of trying, given the scope of this deadly disease, which has a five-year survival rate nearing 0%. Longer term, Norton’s legacy oral programs provide further upside in the small molecule space.
The synthetic biology side of the company seems to present almost infinite possibilities regarding pipeline expansion, assuming the technology continues to work in later stage trials. If Intrexon's technology does prove out in larger trials, the ZIOP-Intrexon partnership will be able to significantly drive down development costs and I suspect the company will be flush with partnering offers from Big Pharma.
Disclosure: I am long ZIOP.
Source: Ziopharm: Small Molecules Meet Next-Generation Synthetic Biology