Why Ziopharm Oncology Inc. Shares Floundered

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Ziopharm Oncology (NASDAQ: ZIOP  ) , a clinical-stage biopharmaceutical company focused on treating various types of cancer, dipped as much as 14% after announcing a secondary stock offering after the bell last night.

So what: According to Ziopharm's press release, it intends to sell $50 million worth of stock and grant its underwriters the option of purchasing an additional $7.5 million worth of stock. Based on its current price, that's close to an 11 million share offering, which will dilute existing shareholders by boosting Ziopharm's outstanding share count by approximately 13%. Ziopharm notes that it plans to use the cash to fund additional research in its pipeline and for general corporate purposes. Ziopharm ended its most recent quarter with $39 million in the bank and no debt.

Now what: This is about as cut-and-dried of a news story as you'll ever get from the biotech sector. Ziopharm is still in the clinical stage of its existence, and, as such, it has a tendency to burn through its cash in its never-ending quest to bring revolutionary new drugs to market. Today's move lower in the stock corresponds almost perfectly with the amount of dilution shareholders should expect from its announced secondary offering, so there's nothing out of the ordinary there. But given that Ziopharm's metastatic soft tissue sarcoma drug, palifosfamide, failed in late-stage trials earlier this year and sent Ziopharm back to the drawing board, I'd take today's drop as all the more reason to watch this company from the sidelines until data from its pipeline gives investors a reason to be excited.

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  • Report this Comment On October 23, 2013, at 1:40 PM, baloneyspotter wrote:

    So, just because one drug in their pipeline failed in one clinical trial the whole pipeline must be just awful huh? Can you not just spend more time wasting by writing this mess? Are you aware of the huge backing from some of the greatest minds ever in the space, such as Samuel Broder, and of course the genius of bio picks such as RJ Kirk? Are you at all mindful of how many biotech companies such as CELG, REGN, MDVN, and others have failed and then came back strong and trading at many billions of dollars in market cap today? Do you and Adam Feurerstein hail from the same university of narrow-mindedness?

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