Ziopharm Oncology: Deal or Dilution?

| About: ZIOPHARM Oncology, (ZIOP)

This brief is a follow up to my November 17, 2008 article Ziopharm Oncology: Thinking Small. The company’s goal is to eventually develop oral formulations of its compounds which could be delivered in a cost efficient and convenient manner.

Let’s do a quick review of the company’s three drug 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. A Phase II trial is ongoing in patients with lymphomas, and a Phase I oral trial is in progress.
  2. 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.
  3. 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. ZIO-301 is currently in several Phase I and preclinical studies.

Recent Developments

In June of 2009 Ziopharm (ZIOP) published 4 ASCO abstracts (3 positive and 1 negative) with the Darinaparsin program being singled out for a high profile session (New Agents For Lymphoma” Clinical Science Symposia) that was very well attended. In this session, Dr. Izidore S. Lossos M.D.,Chief of the Lymphoma Program, and Professor of Medicine at the University of Miami Miller School of Medicine, presented the results of the company’s Phase II IV and Phase I oral trials in advanced lymphomas.

As pointed out in my prior article, Ziopharm only has enough cash to continue operations into Q1 of 2010. In light of the situation, I believe that management has focused the remaining resources on development of Palifosfamide while it is attempting to either secure additional VC funding or partner one of its existing compounds.

Currently Ziopharm is running a randomized phase II trial targeting soft-tissue sarcoma (PICASSO) for this drug in the United States, Italy and Romania. Initial results of the PICASSO trial are expected to be reported in Q4 2009.

The short term outcome for investors in this issue is based on which event happens first. Will Ziopharm be able to secure a commercial partnership of will it be forced to do another round of VC financing? Partnering efforts are likely focused on Darinaparson due to the compound’s significant ASCO exposure and to a lesser degree Palifosfamide pending the PICASSO results.

Ziopharm is not well followed by Wall Street. My guess is that any commercial deal would likely result in significantly expanded coverage by some of the mid-sized firms in the biotech and/or microcap space.

Additionally, the issue’s low price ($1.72) and very limited liquidity preclude involvement from many of the larger mutual funds or other institutional players. Major holders include Essex Woodlands Ventures and a SWF from Abu Dhabi.

With a current market capitalization of only $38M, ZIOPHARM (Nasdaq: ZIOP) is an interesting speculation. The clock is ticking. My guess is that ZIOP investors will have an answer shortly as to the near term prospects for this cancer drug developer.

Disclosure: Long Ziopharm (ZIOP)

About this article:

Tagged: , , , Biotechnology
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here