Clinical-stage biopharma company Ziopharm (NASDAQ:ZIOP) has proven to be a frustrating stock to own in the last year, down 37%from January. Investors can chalk up some of the lackluster performance to volatility in the broader industry (the iShares NASDAQ Biotechnology Index is down 16% in the same period), but it's also time to consider a much simpler explanation: Ziopharm has a data problem.
More specifically, results reported to date from preclinical and clinical trials don't support the idea that Ziopharm will commercialize any treatments currently being investigated. And because the company's entire pipeline is dependent on a technology -- which may have issues of its own -- licensed from engineered biology conglomerate Intrexon (NYSE:XON), investors need to seriously consider that the company may actually be worthless.
Troubled clinical programs
Ziopharm distinguishes clinical trials into two categories:
- those investigating the use of interleukin-12 and veledimex combination therapies
- those investigating cytokines or chimeric antigen receptor T, or CAR-T, cells
The two most advanced clinical trials under way belong to the first category utilizing IL-12: a phase 2 trial for breast cancer and a phase 1 trial for glioblastoma, a type of brain cancer. IL-12 was originally investigated as a potential treatment for skin cancer, but poor results forced Ziopharm and Intrexon to abandon those efforts.
Unfortunately, results trickling out of the remaining two trials aren't overwhelmingly positive, either. In November 2015 Ziopharm presented an update from its phase 2 breast cancer trial. One out of 12 patients showed a partial response.
The phase 1 glioblastoma trial isn't faring much better, albeit for different reasons. Although Ziopharm reported in May that 10 of 11 patients enrolled were still alive and at a median follow-up of 6.2 months (compared to normal overall survival of no more than five months for patients failing salvage chemotherapy), it's important to remember that this is a single arm study without any control. Optimism faded quickly. On July 15, it was reported that three patients in the trial had died.
In the second category, Ziopharm is working with Intrexon and MD Anderson to investigate a unique CAR-T therapeutic in B-cell malignancies, which are blood cancers. The technology, called Sleeping Beauty, was purchased from MD Anderson in January 2015 for $115 million in equity from the two companies. Past preclinical trials have shown that Sleeping Beauty may be accompanied by lower toxicity compared to other CAR-T therapies, but some experts think that's merely because the therapy isn't actually that effective. Even if the trio proves successful in the clinic, any potential drug will hit the market years after CAR-T therapies from a handful of other companies. If it's not more effective than the incumbents, then it doesn't stand a chance.
These troubled clinical trials get worse when investors consider that Ziopharm is completely dependent on Intrexon, which, despite representing a major risk for investors, is also the reason it trades at a market cap of $687 million. A trip to Ziopharm's website is welcomed by the claim that "our pipeline is enabled by seven key technologies." All seven are licensed from Intrexon. Not one has resulted in a commercialized product to date in any application -- even outside of healthcare. Intrexon doesn't need Ziopharm in order succeed, but the reverse is certainly not true.
What does Ziopharm's data problem mean for investors?
If investors are honest, then it quickly becomes clear that Ziopharm is a troubled company without much going for it. The data that have been announced to date are far from home runs, which hints that later stage trials, if pursued, may not end well. Additionally, the dependence on Intrexon should be a red flag, not a welcomed derisking factor, to investors. The good news is that it's not too late to take your losses, sell out of any position you may have (don't attempt to time the market by waiting for "one last big move"), and invest that money in better opportunities. I'd recommend all other investors steer clear of this stock.
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