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Ziopharm Oncology Inc (NASDAQ:ZIOP)
Q3 2019 Earnings Call
Nov 7, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Ziopharm Oncology Third Quarter 2019 Results Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to turn the conference over to Mr. Chris Taylor, Vice President of Investor Relations and Corporate Communications. Sir, please go ahead.

Christopher Taylor -- Vice President of Corporate Communications and Investor Relations

Thank you, operator. Good afternoon, and welcome to the Ziopharm Oncology conference call and webcast to review results for the third quarter of 2019. This afternoon, we filed our 10-Q and issued our third quarter news release, both of which are available in the Investor's section of our website, ziopharm.com. For informational purposes, we have also included in our webcast a set of PowerPoint slides to accompany today's commentary. These slides can also be found on our website in the Investor's Section.

During this call, the company will make a number of forward-looking statements, including statements regarding the potential therapeutic candidates in our development pipeline, regulatory risks, financial information, and business trends. Forward-looking statements are subject to numerous risks and uncertainties as described in our 10-Q and within other filings that we may make with the SEC from time to time.

Participating on our call today for Ziopharm will be Dr. Laurence Cooper, Chief Executive Officer, Dr. David Mauney, President, and Satyavrat Shukla, CFO. Following commentary from our management team, we will open the call for Q&A. In the interest of time, we kindly request that you ask one question and a follow-up and then please feel free to return to the queue. Thank you.

And to lead things off, I'll turn the call over to David Mauney. Good afternoon, David.

David M. Mauney -- President

Thanks, Chris and good afternoon to everyone. Ziopharm is a company with a very big vision. Since late 2018, we have progressively shifted our focus toward our TCR program, in an effort where we believe we have the technology and building blocks to address the large market of solid tumor patients with individualized cancer therapies.

When considered in totality, we are unaware of any peer who can rival us. It starts with a clinically validated, non-viral gene transfer solution for which we have years of clinical experience that we believe can be used to manufacture patient specific drugs that allow us to be agnostic to the target or the tumor type. It is a technology platform that has been widely published. And going into the clinic for the first time ever with TCR-T, with a world-leading clinician and scientist at the NCI, Dr. Steve Rosenberg.

We didn't stop there as just last week, we partnered with the largest cancer center in the world and have already confirmed broad interest in our platform across multiple oncology subspecialties. We will now enjoy access to patients, samples, and the full punch of MD Anderson institutionally.

The economics of the deal are success-based and paid in the future, demonstrating the full confidence the institution places in our program going forward. Additionally, we have licensed what we believe is a world-class library of relevant TCRs and have recruited a key scientist from the NCI to help lead our clinical path for TCR-T within the walls of Ziopharm.

We are building out our team in Houston rapidly and are proud to be recruiting highly successful and experienced industry leaders away from companies like Novartis, for example, to join Ziopharm.

Finally, the NCI is about to treat the first patients using our technology in TCR-T in a Phase II trial. As Laurence will detail, it goes without saying that we are pleased to go straight to Phase II, as moving beyond Phase I will result in significant savings in terms of time and money.

Along with many others in the field, and based on past clinical history, we believe that TCRs are the drug of choice and that genetically modified healthy peripheral blood T cells are the best cancer fighting warriors as compared to a patient's own TIL, or tumor infiltrating lymphocytes for example.

In fact, Dr. Rosenberg's own experience shows a continuum that has evolved from using a large number of TILs to now genetically modifying peripheral blood T cells to express not one but multiple TCRs. It is our belief that a robust, scalable, non-viral approach to manufacturing will always be cheaper and more practical, with an eye toward commercialization as compared to a viral approach.

With regards to intellectual property and ownership rights, with this clinical work being performed under the CRADA, we recently took the opportunity to make it abundantly clear that we have the rights to our TCR program exclusively. We reminded the market about Ziopharm's IP and ownership rights under the NCI relationship by proactively following the CRADA agreement in an 8-K for all to see.

To briefly restate the facts, Ziopharm controls commercialization of its Sleeping Beauty TCR program, and importantly, holds full commercial economics, minus fees, milestone payments, and single-digit royalties payable to its partners.

In the 2017 CRADA, Ziopharm retains all rights to develop oncology products for Sleeping Beauty. The NCI has rights to use Sleeping Beauty, but solely for the purpose of conducting research under the CRADA. Or said another way, the NCI specifically cannot commercialize Sleeping Beauty related products.

In the May 2019 IP license agreement, Ziopharm exclusively licensed in certain fields, intellectual property from the NCI to develop and commercialize autologous peripheral blood T-cell therapy products, engineered by transposon-mediated gene transfer, to express TCRs reactive to the families of mutated KRAS, TP53 and EGFR hot spots.

The agreement also contemplates adding additional TCRs in the same hotspot families to this license, something that we are already actively seeking to utilize. While we haven't discussed it recently, our activities outside of the company continue to be robust. We have ongoing conversations with potential partners and we believe that clinical data will drive the most significant value.

Our initiatives to engage with potential new investors continues to ramp up. We are speaking with a broader base of sophisticated biotech investors and continue to push for an expanded share base around what we think is a significant investment opportunity in terms of a risk reward spread.

We are adding exposure through additional investment banking conferences, such as Morgan Stanley. And as a reminder, we will be presenting at Jefferies later this month in London. As the company enters a period of significant growth toward developing and commercializing products in a highly promising oncology space, we recognize that not all parties will embrace our progress. In fact, we will likely continue to have vocal detractors.

It is worth highlighting that these detractors are most often misinformed, and rest assured, they only reinforce our desire to prove them wrong. Of course, the best elixir for all is execution and clinical data, where we are working aggressively to deliver on those milestones, which we control and provide proper assistance on those we do not.

We remain steadfast and proud 13 months into our charter as an independent company and look forward to the clinical data that lies ahead. To summarize, over the last year, we have executed on a focused plan to expand and prioritize efforts around the TCR core assets for the largest untapped markets in solid tumors. We licensed critical IP exclusively and will continue to further develop and license more IP.

We continue to refine our technology, including efforts in screening, bioinformatics, and in manufacturing. We are building a team and a board aligned with skills to support this vision. We raised capital from a very smart and supportive investor base to assure that we pass critical clinical milestones and signed an agreement with the largest cancer center in the world to help us run the trials and build the library.

And now, like you, we await the first patient in a groundbreaking Phase II trial. Laurence's vision many years ago was to provide a rational, scalable, cost-effective immunotherapy that could have an impact on not just some markets of cancer patients, but all of them. His predictions are now playing out real-time and the opportunities that lie ahead are tremendous.

With that, I turn the call over to Laurence.

Laurence James Neil Cooper -- Chief Executive Officer

Thanks, David and good afternoon everyone. As mentioned, one cornerstone to Ziopharm's future is our TCR-T program for solid tumors, for which we have made significant progress, even since our last call. Let me start by updating you on our clinical work at the NCI. As a reminder, this trial evaluates the infusion of T-cells that are genetically modified with the Sleeping Beauty system to express one or more TCRs targeting personal neoantigens. The trial is under the control of Dr. Rosenberg and his team. We are pleased that the IND with the NCI is for a Phase II trial, which is a positive change since our last quarterly call.

To highlight, the primary endpoint now being tumor response rate. The patients will be closely followed at the NCI with participants seen in clinic every few months. Thus, we will learn a great deal from each and every patient enrolled and associated data will likely be available in the weeks or months following the T-cells infusions.

Recall that Dr. Rosenberg is enrolling patients with a range of solid tumors, which will reveal how T-cells tackle a variety of cancers. We will learn how each tumor type succumbs to the T-cell infusions. We will learn how these T-cells target tumor, which includes persistence and trafficking to the sites of cancer.

I want to provide you with a sense of the opportunity for Ziopharm based on our CRADA with the NCI. Dr. Rosenberg estimates that T-cells can recognize cancer antigens in over 80% of patients with tumors. There are approximately 1.5 million new cases of solid tumors each year in the United States. The solution we are developing with Dr. Rosenberg can target most, 80% or so, of these patients, which represent a massive opportunity for us.

The Sleeping Beauty system was selected for this trial given the significant human experience and clinical responses seen upon administration of CD19 specific CAR. Furthermore, Dr. Rosenberg's team has demonstrated and published that the Sleeping Beauty system can be used to genetically modify clinical grade T-cells to express neoantigen specific TCRs.

We are in close dialogue with Dr. Rosenberg and like you, await the first patient dose. The next step is then opening enrollment to a broader number of patients and indications. While Ziopharm does not control the timing and release of the NCI's data, we do know that information on even a small number of patients can result in significant value creation.

It's important to note why we are so confident that this technology will work. There are four important clinical data points in support of this assertion. The first is that we know T-cells can target solid tumors. This is primarily based on the infusion of tumor infiltrating lymphocytes, or TILs, in some patients with melanoma.

The second is the understanding that TILs successfully targeting tumors do so via their T-cell receptors, or TCRs that recognize cancers' neoantigens. The third is that TILs, which are not genetically modified, typically run out of gas and struggle to target tumors other than melanoma. And fourth and last is that the genetic engineering can insert the neoantigen-specific TCRs into young T-cells derived from the peripheral blood that can therefore recycle their killing.

Ziopharm built upon these clinical experiences using the following three scientific advances to create a leading TCR-T therapy for solid tumors. Firstly, we developed a scalable, low-cost, non-viral approach to genetic engineering of T-cells based on the Sleeping Beauty System. Second, we used this system to genetically modify T-cells from peripheral blood, which overcomes infusing tired or exhausted T-cells from TIL. And third, we harnessed the Sleeping Beauty system's ability to scale to meet the needs of patients and the demands of commercialization.

For example, multiple TCRs will be needed, whether for personalized T-cell therapy, targeting individual targets, or infusion of T-cells targeting hot spots. This work, beginning with our partnership at the NCI, has resulted in an open IND for a Phase II trial, exclusivity to key intellectual property surrounding the TCRs and T-cell manufacturer, independence to operate, and now, the relationship with MD Anderson to execute on our own clinical TCR trials.

This brings me to our next update on the TCR-T program, which is the recently announced R&D agreement with MD Anderson. This was months in the making and we are delighted to strengthen our engagement with them. The excitement is reciprocal as we've already secured buy-in from multiple oncology subspecialties and leading investigators within MD Anderson, wanting to work with Ziopharm.

The agreement accomplishes the following three things for us. Firstly, we are partnering with the largest cancer center in the world and we now enjoy access to more patients than we could at any other single center. Secondly, it accelerates the expansion of the initial library of TCRs and hotspots in three important families of genes that really drive cancer biology. In other words, KRAS, TP53, and EGFR. And lastly, it allows us to implement Ziopharm-led clinical trials for solid tumors.

We believe the initial TCR library from the NCI already provides us a competitive advantage. This library covers multiple mutations and maps to a diversity of HLA molecules. In other words, the current library will enable us to enroll existing patients at MD Anderson, and increasing the library will further broaden the application.

There are three additional points I would like to make regarding TCRs from the library, with respect to trial design. Firstly, the TCR library allows us to simply screen patients for hotspot mutations, which will reduce the time to deliver cancer targeting T-cells to weeks. Secondly, we already had enough TCRs in our library to begin a clinical trial at MD Anderson. And lastly, the larger the library, the greater the number of patients that can be treated and the greater the likelihood of success.

In addition to accelerating the pace of growth at the TCR library, this new agreement with MD Anderson provides a foundation for two new Ziopharm led clinical trials. The first is a trial utilizing TCRs from the library, targeting hotspots inpatients that are rapidly screened with a simple blood test. The second is if the patient does not have a mutation in a hotspot, then much like the NCI trial today, we will execute on a protocol to manufacture a personalized product for individual neoantigens. We are making great progress and look forward to providing more color on the timing of these trials early next year.

With regard to next generation technologies in TCR-T, we are also pleased to present preclinical data this December at the American Society of Hematology on the rapid personalized manufacture, or RPM, of TCR-T, which is based on the co-expression of TCR and membrane bound IL-15 using the Sleeping Beauty system.

To achieve success in our path to cure solid tumors, we must have a playbook, be in control of our development, and be aligned with the leading cancer centers to run the groundbreaking trials. We have achieved all three over this past year.

Finally, a summary on our other two programs before I turn the call over to Sat for a financial update. Turning to our CAR-T program. This is our second T-cell therapy program, also build on the Sleeping Beauty platform. And it's based on the rapid personalized manufacture, or RPM, of CD19 specific CAR-T. The goal of the program is to prove that we can dose cells with 70% viability or greater, as soon as the day after gene transfer, and demonstrate that the cells grow under the control of membrane-bound IL-15 to target tumor, as they did in preclinical models.

Since we have the rights to the technology in the only approved CAR to date, we think the fastest path to human data is the most important path. As a result, we uncovered an opportunity in patients who have limited therapeutic options available to them, wrote the IND, and obtained clearance all this year.

We announced on October 1 that the FDA had cleared an IND for a Phase I clinical trial. We will evaluate infusion of donor-derived RPM CAR-T in patients with CD19 expressing leukemias and lymphomas who have relapsed after allogeneic bone marrow transplantation. This study will be conducted at MD Anderson.

Ziopharm remains committed to our work for the autologous RPM program targeting CD19. In addition, Eden BioCell is actively planning on an autologous trial in greater China and has made steady progress establishing a clinical network of hospital sites and undertaking steps to facilitate regulatory submissions.

Turning to our controlled IL-12 program. In August, we are pleased to report the supported data from the Phase I monotherapy trial were published in Science Translational Medicine. A link to that publication can be found on our website. We had benefited from progress in the enrollment to our combination studies with both Opdivo and Libtayo, and we continue to monitor those patients enrolled in the monotherapy expansion study.

The 12 additional patients in the Opdivo trial have now been enrolled. The first six patients in the Libtayo study have been enrolled and those patients are nearing the end of the required monitoring period before we resume enrollment. We are preparing our two poster presentations for the Society of Neuro-oncology later this month. As we did at ASCO earlier this year, we plan to present interim data for both the monotherapy study and the Phase I combination study with Opdivo.

And now, we'll hear from our CFO, Satyavrat Shukla, with a financial commentary related to Q3.

Satyavrat Shukla -- Chief Financial Officer

Thank you, Laurence. It's been a fast paced initial three months for me at Ziopharm and I'm very excited as we advance up our efforts to build a great community to bring our disruptive technologies to market. Throughout the organization, our team is intensely focused on executing on our strategic plan to advance transformative immunotherapies for patients and achieve the milestones, which will create value for the company and for our investors.

Now, turning to the specific financial results for Ziopharm's third quarter of 2019. As noted in our news release and 10-Q, research and development expenses were $8.6 million for Q3 of 2019, compared to $8.3 million of Q3 of last year. G&A expenses were $4.8 million for the third quarter of 2019 compared to $4.3 million for the third quarter of 2018.

On a cumulative basis, we recorded a one-time, non-cash charge of $60.8 million associated with the warrant exercise from the financing we completed in Q3. Reflecting that non-cash charge, net loss applicable to the common shareholders for the third quarter of 2019 was $74 million, or $0.43 per share, compared to a net loss of $18.7 million or $0.13 per share for the third quarter of 2018.

For informational purposes only, if we exclude the one-time, non-cash charge of $60.8 million, net loss which have been $13.2 million, or $0.08 per share, in line with the net loss reported in the first and second quarters of this year.

On the financing side, during this past quarter, we announced that a group of our investors, led by MSC Partners, entered into an agreement to exercise existing warrants, providing more than $15 million in proceeds to the company. The company ended the quarter with unrestricted cash resources of approximately $88 million. Additionally, we also have a prepayment balance of approximately $21.5 million for clinical and preclinical work to be conducted by the company at MD Anderson Cancer Center.

To summarize, we significantly strengthened our financial sheet -- balance sheet in the third quarter. Combined with the prepaid capital to fund our work at MD Anderson, we have more than $100 million of liquidity to put into our business and our cash takes us into the first half of 2021. We believe we have sufficient capital to see critical data readouts in each of our three core programs.

And now, I will hand the call back to Laurence for a final thought.

Laurence James Neil Cooper -- Chief Executive Officer

Thank you. In closing, we are proud of all that has been accomplished in the past quarter, and indeed the past year. We're putting key pieces in place today to enable Ziopharm to attain our mission to become a leading global commercial stage immune-oncology company.

With that, we'll return the call to the operator for questions.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from David Novak of Raymond James. Your line is now open.

David Novak -- Raymond James -- Analyst

Good afternoon, and thanks for taking my questions today. So to kick it off, I was hoping you might be able to provide us a bit of color around the new R&D agreement with MD Anderson to expand the TCR program, specifically how you will be prioritizing expanding the TCR library versus completing IND-enabling studies. And maybe some thoughts as to how the work at MD Anderson will be differentiated from the work being done at NCI, or how it will complement the NCI development?

Laurence James Neil Cooper -- Chief Executive Officer

Yeah. That's great, David. Thank you. So in terms of the prioritization versus completing the IND-enabling studies, they actually go hand in hand. The way I would like investors to think about this is that, there's basically two parts to the therapy. One part of the therapy is identifying the T-cell receptors. For instance, T-cell receptors against the hotspot mutations. And the second part is the genetic engineering of the T-cells to express those T-cell receptors.

You'll recall that the IND at the NCI actually is the playbook for the manufacture, for that second part of the puzzle, if you would. So when you talk about IND-enabling studies, those have been done. We essentially have that playbook and we use a cassette-based mentality essentially to swap in different T-cell receptors into the plasmas that allow us essentially to generate targets -- generate T-cells for each particular target.

So the IND studies have that really robust foundation. The generation of the T-cell receptors, the prioritization of that work, if you will, at MD Anderson, is really built on the tight relationship we have with them now under this R&D agreement. It really actually allows us to have the intellectual property associated with the discovery of those T-cell receptors. And importantly, we have relationships with key faculty members there, really the leaders of the institution who have access to many, many patients with solid tumors.

That essentially synergy between us and the investigators allows, then, tissue to flow into our laboratories. And as we mentioned in our press release, we are actually expanding our footprint in MD Anderson to handle this material. And we can therefore use these biologic samples to essentially look for the T-cell receptors that are either up on a personalized basis, or that would add to the library going into the hotspots.

So this is a way I think about, essentially as a win. Because we have the playbook for manufacture. We have the materials essentially from MD Anderson to be able to go after the T-cell receptors. And the whole thing has been jump-started by the NCI, because we're using their technology to discover the TCRs and we're using essentially the playbook, if you would, or the manufacturing SOPs and whatnot to generate the T-cells.

David Novak -- Raymond James -- Analyst

Excellent. Thank you. And as a quick follow-up, going through ASH abstracts yesterday, I came across two interesting ones detailing RPM of both CARs and TCRs, co-expressing membrane bound IL-15, as you highlighted in your prepared remarks. I've received a number of questions around RPM viability and why the company believes that clinically in grafting cells at 70% viability should not be materially different from in grafting cells at 90% viability. So maybe some comments around that? And also some comments around the significance of membrane bound IL-15 to both drive in vivo persistence and tackle heterogeneity?

Laurence James Neil Cooper -- Chief Executive Officer

Yeah. That's great, David. So in terms of the viability. So the benchmark there is guided by the agency. They say product has to be 70% or greater viability. Ziopharm has achieved that threshold and that's really the basis of our IND. Whether the cells are 70% or 90% doesn't really make much difference in terms of the outcome in the preclinical models. And we've looked at actually that question.

And just -- again, just to kind of highlight, this is a living drug. So if you're putting in cells that are 70% viable, those cells will begat, in a doubling cycle, more cells, and then double again, and so forth and so on, that will grow in the patient.

The reason we're able to say those statements with confidence is that we have that accelerator, that membrane bound IL-15 baked into the T-cells, the CAR modified T-cell, and now, our TCR modified T-cell that allows essentially for these cells when they go into the body, to grow in the patient.

So to get at the heterogeneity question, that's -- in my mind that actually triggers a slightly different thought. So I want to make sure I get the crux of your question here, David. So for us, when we're generating T-cells using membrane-bound IL-15, we've deliberately and worked very hard to shorten the manufacturing to really capture the heterogeneity of cells that come out of the bloodstream, especially for instance, the naive pool. Because we think that that pool of cells has the greatest potential once it's put back into the patient.

So unlike other companies that go through a growth of their cells in the incubator, those cells can actually be restricted in their heterogeneity, it can be actually terminally what we call differentiated. And the door can be closed essentially on their ability to survive after infusion. Whereas with our technology being so rapid, we essentially keep, as if you would, the full portfolio, all the flavors of the T-cells that come out of the person's bloodstream and we return them back to the patient soon thereafter.

David Novak -- Raymond James -- Analyst

That's fantastic. Well, thank you very much and congrats on all the progress. And I'll hop back in the queue.

Laurence James Neil Cooper -- Chief Executive Officer

Thank you.

Operator

Thank you. Your next question comes from Thomas Flaten with Lake Street Capital. Your line is now open.

Thomas Flaten -- Lake Street Capital -- Analyst

Great. Thanks guys for taking the questions. Specific to MD Anderson, a question around the pre-funding or the prepayment that already exists and then the commitment that you're expecting to make post-2021. Can you talk a little bit about how that's going to be distribute against -- across the TCR as well as the CAR-T programs and how we should think about additional commitments required in advance of 2021?

Laurence James Neil Cooper -- Chief Executive Officer

Sure, I'd be happy to. So that relationship about how we spend the money is actually governed by what we call the JSC, the Joint Steering Committee, of which MD Anderson is a member and also Ziopharm is a member. And the steering committee then reviews programs and makes resources available.

Those -- essentially MD Anderson and Ziopharm are invested in the CAR program as well as increasingly, the TCR program. So over time, what you're going to see is that funds available and put into play for building out our infrastructure and importantly, for running and completing the 2 clinical trials I've described around the TCR-T space.

Thomas Flaten -- Lake Street Capital -- Analyst

Great. And then do you have any -- or could you provide us with some sense of timing for the initiation of the MD Anderson CAR-T program?

Laurence James Neil Cooper -- Chief Executive Officer

Yeah. So we're working really hard to open that trial by the end of the year.

Thomas Flaten -- Lake Street Capital -- Analyst

Great. Fantastic. Thanks so much guys.

Operator

Thank you. And your next question comes from Sean Lee of H.C. Wainwright. Your line is now open.

Sean Lee -- H. C. Wainwright -- Analyst

Hi, guys. And thanks for taking my question. Just a quick one on the CAR-T program. I noticed that you are planning to do a donor-derived study in the US, while doing an autologous study in joint venture with Eden BioCell. So I was wondering what's the rationale behind these two parallel programs? Why not focus on one or the other for both studies?

Laurence James Neil Cooper -- Chief Executive Officer

So it's really a sequencing issue. So we start with the allogeneic RPM or rapid personalized manufacture of T-cells. That really we saw as the fastest path to the clinic and to really get a sense of the technology for the investors and patients alike. We're still committed to the autologous CAR-T in both the United States and in greater China.

So the way I would think about it for the purposes of the investor community is that, we've essentially funded the work in greater China through our relationship in Eden BioCell. And that's essentially now has money, it has people, it has momentum, and it's rolling. And we'll have more to say essentially as the trials then bubble up.

In terms of the MD Anderson agreement and the work in the United States, that's also, if you would, somewhat prefunded. Because it really is the money that's essentially at MD Anderson that could be used to run the CAR-T programs.

Sean Lee -- H. C. Wainwright -- Analyst

I see. Thanks for the additional color. That's all I have.

Operator

Thank you. At this time, we have no further questions and I will turn the call back to Dr. Cooper for final remarks.

Laurence James Neil Cooper -- Chief Executive Officer

Yes, thanks very much everyone and I wish everybody a good Thanksgiving week to come and thank you.

Operator

[Operator Closing Remarks]

Duration: 34 minutes

Call participants:

Christopher Taylor -- Vice President of Corporate Communications and Investor Relations

David M. Mauney -- President

Laurence James Neil Cooper -- Chief Executive Officer

Satyavrat Shukla -- Chief Financial Officer

David Novak -- Raymond James -- Analyst

Thomas Flaten -- Lake Street Capital -- Analyst

Sean Lee -- H. C. Wainwright -- Analyst

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