What: Shares of Ziopharm Oncology (NASDAQ:ZIOP), a clinical-stage biopharmaceutical company that focuses on gene expression to treat cancer, sank by as much as 15% on Tuesday after the company reported its second-quarter earnings results.

So what: For the quarter, Ziopharm delivered a 36% increase in year-over-year revenue to $272,000 (remember, this is a clinical-stage company without a Food and Drug Administration-approved product), while its net loss ballooned to $14.2 million, or $0.11 per share, from $5.6 million, or $0.06 per share, in the year-ago period. In comparison, Wall Street was looking for a much wider loss of $0.32 per share, but more in the way of $1.65 million in revenue.

Typically earnings reports don't have this sort of effect on clinical-stage companies, but a 133% rise in general and administrative expenses to $7 million, which was most attributed to non-cash equity compensation and "other employee related expenses," probably isn't sitting well with investors as Ziopharm continues to burn through its cash on hand.

The company also noted that it ended the quarter with $118.6 million in cash and cash equivalents, or enough cash in its best estimates to fund its operations through the first quarter of 2018.

Now what: Despite Ziopharm's mixed earnings results, the real push lower today appears to be coming from investors who are getting a bit of a reality check.

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Source: Food and Drug Administration.

Ziopharm's development platform coupled with partner Intrexon's RheoSwitch platform, which can effectively turn gene expression on or off, is viewed by some analysts as a major opportunity. In fact, Boston Business Journal columnist reported in June that Joe Barton of hedge fund White Rock Capital believes Ziopharm could be a $5 billion to $10 billion takeover candidate in relatively short order.

Then today's earnings results emerged, and we realize that Ziopharm's pipeline is still incredibly young. It has five preclinical studies under way, a B-cell malignancy study in a phase 1 trial, and its leading compound, Ad-RTS-IL-12, is being study in a midstage breast cancer study. Yet, even after today's tumble, Ziopharm still packs a $1.3 billion valuation. Today looks like nothing more than a wake-up call to investors that Ziopharm is still a long ways away from making any major impact on its top- or bottom-line.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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