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The Management Of XON & ZIOP Have Me Flummoxed!

|Includes: Intrexon Corp (XON), ZIOP

We all know that investing in publicly traded biotechnology companies is risky business. Needless to say, investing in early stage biotech companies with no clinical data to share, is almost akin to playing Russian Roulette. In order to find the proverbial "diamond in the rough," one has to play the role of a modern day Hercule Poirot...Painstakingly search for clues and then attempt to connect the dots that are usually fuzzy at best in order to identify the company that not only has the "goods" technology wise, but also has the seasoned management team that can navigate through the labyrinth called the FDA, and successfully bring to market a drug that will not only bring relief to suffering patients, but hopefully also produce riches to the company's investors...

In Immuno-Oncology, the hottest space in biotechnology, research in CAR-T therapy has been garnering the biggest headlines...and in CAR-T, only a handful of companies are conducting clinical trials and of those, JUNO and KITE have received the most attention from the investment community...And because their respective clinical programs are further along than their competitors and the data that they have shared to date is impressive, and in some cases, even spectacular, therefore, and for obvious reasons, stocks of both Juno and Kite have been on fire since late last year...On the other hand, the company that I have placed my big bet on is ZIOPHARM, the new kid on the block in the CAR-T space...And unlike Juno and Kite, it has shared zero data for the very simple reason that it has yet to announce the start of enrollment of even a Phase 1 clinical program! One of the main reasons behind my ZIOPHARM bull thesis is its exclusive RheoSwitch technology, licensed from Intrexon, that I believe should be a game changer and the key differentiator that will propel ZIOP ahead of the pack in the not too distant future...Over the last 6+ months, I have written a slew of posts here, here, here, here, here, here, here, here, here, and of course the most recent ZIOP post, 101 Reasons to Own ZIOPHARM Oncology, detailing my bull case and I'm sure many of you will be relieved to hear that I don't feel the need to sing the praises of ZIOPHARM all over again...

Well, except for this one last time...

;)

Sort of...

Even though I feel very strongly that ZIOPHARM has the cutting edge technology, a number of pundits covering CAR-T companies, like the widely followed Adam Feuerstein of The Street and others, are not as sanguine and in fact claim that Ziopharm is the weakest company in the space...Hence ZIOP is the most shorted immuno-oncology / CAR-T stock and its market cap is less than a third of Juno's and barely half that of Kite's...

Full time investing in biotech companies is, by itself, a very daunting and challenging line of work, with a myriad of obstacles and pitfalls lurking at every corner...In order to navigate safely and successfully through this very demanding obstacle course, I expect the management of the company I am betting on, to be both supportive and encouraging, and at a minimum, ensure that pertinent information(s) and milestone(s) achieved by the company is not only disseminated, but disseminated in a timely manner...In all the years that I have been investing in publicly traded companies, I have never ever experienced a situation like ZIOP's where the management of the company has gone to extraordinary lengths to keep good news under wraps, thus testing my patience almost to the breaking point...

Unlike my previous blog posts, I'm taking a somewhat different approach this time around...

The last few weeks I have been anticipating announcements of a number of key developments on the XON / ZIOP front and instead have been slapped with radio silence...This past Friday's news and how it got disseminated gave me some surprising insight(s) into the way the management of Intrexon and ZIOPHARM have played with news that honestly, I find quite perplexing and will share my bewildering thoughts with you all...Once I have presented my case, I request that readers of my blog to play the role of a jury of sorts, and help me decipher the jigsaw puzzle that has me somewhat confounded...I believe that with the help of our collective minds, we may be able to figure out the modus operandi that Randal Kirk, the brilliant CEO of Intrexon, is pursuing...The information that I am about to share, though perplexing, is extremely positive if you are a ZIOP investor but very negative for everyone short ZIOP shares...

So, ladies and gentlemen of the jury, let's get on with the case on hand...

Here are a couple of facts:

Fact #1) This past Friday, July 24th, 2015, more than an hour before the stock markets' opening bell, a number of very resourceful ZIOPHARM investors / detectives broke the news that the company's application for Orphan Drug Status "ODS" for Malignant Glioma treatment was granted by the FDA.

I cannot stress how important this news was for ZIOPHARM and predictably, investors bid up the company's stock in pre-market trading on Friday, clearly underscoring the value of this positive development...Bear in mind that this Orphan Drug Status was granted only after an application was initiated by ZIOPHARM and the company must have gone through a myriad of hoops to win approval from the FDA. The company's management had to be fully aware of the application's progress as it wound its way through FDA's burdensome approval process and I have absolutely no doubt that the Agency must have given the company multiple indications that its application was being looked upon favorably...In other words, the FDA must have kept ZIOP management completely in the loop and it is just not plausible that the management was totally in the dark when news broke on Friday and like everyone else, it too had to rely on investor sleuths on the Yahoo message board to tell them that it had won the ODS!

I checked the timeline on the Yahoo ZIOP board and the news was first reported by the poster, "twludd" at 8:13 am Eastern Standard Time...That is one hour and 17 minutes before the markets opened for trading...

Tick tock, tick tock, tick tock...the time is 9:00 am EST, 30 minutes before the opening bell at the New York Stock Market but the clock is stuck at ZIOPHARM and with the staff in deep slumber, no announcement has been released from the company's offices heralding this very important and positive development...

Tick tock, tick tock, tick tock and the clock strikes 9:30 am EST, the bells ring at the New York Stock Exchange but clearly not loud enough to wake the company's management from its deep stupor...

Tick tock, tick tock, tick tock, the clock strikes 10:30 am EST...it is now one full hour since the markets opened for trading but it's still all quiet on the ZIOPHARM front...but this time its management is not sleeping, having finally and rudely awakened by non-stop phone calls from a slew of very irate investors demanding to know why the company has not issued a press release???

Tick tock, tick tock, tick tock and the clock strikes 11:00 am EST...it is now 2 hours and 47 minutes since twludd broke the news about the ODS grant and an hour and thirty minutes since the US stock markets opened for trading and amazingly, still no word from ZIOPHARM...

Finally at 11:16 am EST, the management at ZIOPHARM, under intense pressure from newly balled investors who, having pulled out their own hair in total frustration and left with no hair of their own to pull are now threatening to descend upon the company's headquarters in Boston and pull out the management's hair instead, throws in the towel and finally issues the official press release announcing the news...

Absolutely unbelievable!

Again, it bears repeating: this was very important news that needed to be announced promptly, needed to be disseminated widely and the management and its investors had every right to gloat because clearly the FDA had to have seen the value of ZIOPHARM's therapeutic drug and also its much vaunted RheoSwitch technology to grant it an ODS...No more would the likes of Adam Feuerstein be able to claim with a straight face that the company's technology is hollow and the untested RheoSwitch is nothing but a switcharoo...but no, the management wanted to keep this important news under wraps?!? Seriously???

But Why???

Fact #2) It has now been almost 4 months since Intrexon and ZIOPHARM signed an agreement with Merck Serono "MS" and according to one of the Agreement's provisions, MS had to nominate 2 CAR-T targets and within 30 days after nominating the 2 targets, MS had to pay Intrexon $115 million half of which Intrexon has to split with ZIOPHARM...On the Investor Village's ZIOP board, poster Rule62 did a very fine, and I should add, helpful job of dissecting the Merck Serono / Intrexon Agreement and explaining the various timeline(s) spelled out in the Agreement...

Last week in a conference call, I asked Dr. Cooper, the new CEO of ZIOPHARM if he would confirm the rumors that MS had nominated the initial 2 targets and Dr. Cooper did so in the affirmative. I then asked Dr. Cooper if it would be fair to assume that MS had paid Intrexon the $115 million and again he confirmed that yes, MS had made the payment.

Did we hear a peep about this important development from Intrexon, the main party to the agreement with MS?

NOOO!

Again I ask: Why???

Unfortunately, unlike the FDA's website where the ODS news was posted and thanks to twludd and others, we were able to get the scoop in a timely manner, investors cannot go to MS' website to access the news about the MS' nomination of the initial 2 CAR-T targets and the subsequent payment of $115 million to Intrexon, simply because MS is under no obligation to share this development with us...and so we are left at the mercy of Intrexon and ZIOPHARM to tell us, but for some inexplicable reason, they prefer to stay mum...

WHY???

The good news is that whatever the reason(s) the managements of Intrexon and ZIOPHARM want to keep a lid on good news, it's clearly something very important and very significant and can only mean one thing: Something is definitely underfoot which, once revealed, will bring a major windfall to the investors in ZIOPHARM.

Fact / Deduction #3) From the evidence presented in #s 1 & 2 above, one may safely deduce that there has to be some progress from Intrexon and ZIOPHARM's groundbreaking agreement with MD Anderson signed way back in January of 2015 and it is quite possible that any progress on that front is also being kept under wraps...

Fact / Deduction #4) Again from the evidence presented above in #s 1 & 2, we may deduce that there could / should have been some progress from the CRADA Intrexon signed with the National Cancer Institute (NYSE:NCI) in early April, and it is quite plausible that any positive news from the NCI front may also have been suppressed...

Unlike #s 1 & 2, I have no hard evidence(s) to support my conjectures made in #s 3 & 4, but do believe that both those points could have merit...

What gives?

Honestly, I have no idea what plans do Kirk and Cooper and the rest of the Intrexon / ZIOPHARM management have hidden up their collective sleeves, but one possibility that keeps gnawing at me is as follows:

Intrexon plans on buying ZIOPHARM in a stock swap transaction...It is of course in the best interest of Intrexon and its shareholders to accomplish this acquisition by issuing the fewest number of shares of XON...Should Intrexon's share price rise about $60, the company could offer to exchange 1 XON share for every 2 ZIOP shares, in effect placing a $30 value on ZIOP shares, which would be a healthy premium to ZIOP's current market price of around $13, and thus stifling any potential opposition from current ZIOP shareholders and / or potential class action lawsuits...Should Intrexon take the lid off and allow good news to flow freely, then there is a strong likelihood that ZIOP shares may soar, making a 2 for 1 stock swap difficult as it may not be deemed a fair offer by many ZIOP shareholders, opening the door for potential class action lawsuits and quite possibly scuttling Intrexon's plans...

I must admit that the above is 100% conjecture and may even be considered by some as wild conjecture...

Now that I have presented my case and am still just as flummoxed, I want to see if other biotech Sherlock Holmes and Hercule Poirots will be able to play the role of a jury and bring to bear their collective gray matter and try and reach a consensus of what is turning out to be one heck of a page-turner mystery...

:)

karim

P.S. The last "101 Reasons" ZIOP post, after Friday's news, should now be titled "102 Reasons To Own ZIOPHARM Oncology (NASDAQ:ZIOP)"

DISCLAIMER: All postings made here are strictly for my personal record keeping and in no way, shape or form, am I even remotely suggesting others to follow my Buy and Sell moves. Trading options is definitely not for the faint of heart as one's portfolio can move up, or down, anywhere between 10%-30% during a single trading day. Feel free to follow my progress here, but PLEASE do not follow my moves. However, if, in spite of all my exhortations, should you decide to do so, be advised that you, and ONLY YOU will be responsible for any losses that you may suffer...In other words, the onus is strictly on you.

Disclosure: I am/we are long XON, ZIOP.