A Silver Lining in a Sea of Red

Kudos to ZIOPHARM Oncology (NASDAQ: ZIOP  ) .

Shares were cut by two-thirds today after announcing that its cancer drug palifosfamide failed to show a strong enough effect in a phase 3 trial in metastatic soft tissue sarcoma.

That's bad, really bad, but at least the company isn't twisting the knife it just got stabbed with.

The primary endpoint of the study was progression-free survival -- essentially how long it takes before the tumor starts growing again or the patient dies, whichever comes first. The control arm that received just doxorubicin had a progression-free survival of 5.2 months. Palifosfamide combined with doxorubicin improved progression-free survival by approximately a month, but that wasn't statistically significant.

The Independent Data Monitoring Committee recommended the trial continue to follow patients for overall survival, but the company said it doesn't plan to continue the trial. That's the silver lining.

The committee is made up of scientists that tend to be curious by nature. But they're not the ones footing the bill. There's a very small chance that a drug wouldn't show progression-free survival but would increase overall survival. Some drugs stop tumor growth but don't help patients live longer, but you hardly ever see it happen the other way.

And even if palifosfamide were to improve overall survival, the trial couldn't be used to support an approval. Overall survival was a secondary endpoint that, by definition, is only valid if the primary endpoint is met. At best, continuing the trial would give ZIOPHARM a reason to run another trial with overall survival as a primary endpoint, but that's a long-shot bet that the company is rightfully not willing to take.

Palifosfamide was always facing an uphill battle in soft tissue sarcoma, a difficult to treat cancer. ARIAD Pharmaceuticals (NASDAQ: ARIA  ) and Merck's (NYSE: MRK  ) ridaforolimus was turned down by U.S. and EU regulators last year after posting less-than-stellar data. Like ridaforolimus, palifosfamide might still work in other cancers. Both drugs are being tested in lung cancer and ridaforolimus is being tested in other solid tumors as well.

Investors in Threshold Pharmaceuticals (NASDAQ: THLD  ) should take note; its cancer drug TH-302 is also being tested in soft tissue sarcoma. Palifosfamide's failure means less competition, but it's also a reminder of the riskiness of developing drugs for the hard-to-treat cancer. Fortunately, like ZIOPHARM and ARIAD, Threshold isn't putting all its eggs in the sarcoma basket and is testing TH-302 on a variety of tumor types.

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