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With Billions of Dollars at Stake, Is Ziopharm a Bargain?

By Todd Campbell - Sep 4, 2015 at 8:03AM

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Ziopharm Oncology is researching promising CAR-T therapies, but it may be too risky to buy.

Source: MD Anderson Cancer Center.

Soaring enthusiasm for curing cancer using personalized medicine sent Ziopharm Oncology (ZIOP -4.52%) shares soaring earlier this year. But shares have been retreating as investors rein in risk after a multiyear run in biotechnology stocks.

Although millions of cancer patients are eager for new therapies that work better with fewer side effects, and billions of dollars in market opportunity are in play, risks associated with CAR-T could mean that buying Ziopharm Oncology shares isn't the best bet for investors.

Reimagining cancer care
The concept of reengineering the body's immune system to better battle cancer is endlessly intriguing.

Proponents of immunotherapy that genetically alters the immune system's T-cells by creating receptors that allow them to bind to specific antigens expressed on a cancer cell, known as CAR-T, could displace or significantly reduce the decades of reliance on chemotherapy.

If so, then patient quality of life and chances for survival may improve dramatically because chemotherapy's shock-and-awe approach is indiscriminate in destroying cells, both healthy and cancerous, and that often results in significant side effects, including low red blood cell counts, nausea, and vomiting, which make some wonder if the treatment is worse than the disease.

Source: MD Anderson Cancer Center.

No magic bullet
Although the promise of CAR-T is significant, investors ought to approach CAR-T drug developers like Ziopharm Oncology cautiously because cancer research is fraught with failure.

Historically, less than 10% of once-promising cancer drugs have eventually made their way through human clinical trials and regulators' desks to pharmacy shelves.

A lot of the 90% plus of cancer drugs that fail in clinic do so because of toxicity that makes them ultimately unsafe for use, and it's not clear (yet) whether or not CAR-T therapies will overcome that risk.

CAR-T therapies' ability to hone in on their targets suggests that their accuracy could lead to fewer off-target safety risks, but the jury is still out on the matter and will be for years as later stage and larger trials are conducted.

Use of CAR-T in early stage, small trials has proven to be effective, but cases of cytokine release syndrome and cytokine storms -- a life-threatening condition in which T-cells become overly active -- have been reported, resulting in trial holds and refinements.

For example, when Ziopharm Oncology's peer Juno Therapeutics IPO'd last year, it disclosed in its S-1 that, as of the time of its filing, 39% of acute lymphoblastic leukemia patients treated with its JCAR015 CAR-T therapy suffered from severe cytokine responses, resulting either directly or indirectly in two deaths.

In addition to cytokine responses, infusion reactions can occur and although risks can often be managed, there's also the risk that positive responses to CAR-T therapy will fade or disappear over time.

Sadly, cancer is prone to evolve and that means that once CAR-T therapy destroys cancer cells expressing a particular antigen, previously dormant and nonantigen-expressing cancerous cells may emerge that escape detection.

Investors should also recognize that CAR-T therapies, including those being developed by Ziopharm Oncology, may struggle to combat all forms of cancer, thus CAR-T may not end up as widely used as some investors may hope.

Initially, CAR-T research is predominantly focusing on B-cell malignancies that commonly express the CD19 antigen, but those B-cell blood cancers tend to be easier for T-cells to access and effectively kill than solid tumor cancers, which CAR-T therapies may find to be difficult to penetrate and destroy.

Source: MD Anderson Cancer Center.

Refining the approach
Recognizing these potential obstacles to CAR-T therapy, Ziopharm is teaming up with Germany's Merck KGaA, the MD Anderson Cancer Center, and Intrexon, the developer of a genetic switch that can turn off and on Ziopharm's CAR-T therapy, in hopes of creating a best-in-class CAR-T treatment.

The company hopes to have five CAR programs in the clinic by the end of this year and to launch a clinical trial of an off-the-shelf program utilizing universal donor T-cells next year.

That's an aggressive and costly timeline, but it's do-able. Ziopharm Oncology's management believes it has enough cash to fund its operations into early 2018. That's good news for investors worrying about dilution associated with future stock offerings, but investors still need to remember that the company is losing a lot of money, including some $14 million in Q2, and that those losses will grow as more trials enter the clinic.

Watchful waiting
The possibility for CAR-T to change how cancer is treated and for Ziopharm Oncology's collaboration to yield therapies less prone to toxicity may have investors eager to step up and buy shares on this sell-off, but doing so comes with risks that may be too great for all but the most aggressive of us.

After all, there's no guarantee that Ziopharm Oncology's clinical trials will pan out or that the company will ever generate enough revenue to turn profitable. Even if trials succeed, it will still be years before one of the company's therapies is commercialized. Because of these reasons, I'm content to watch and root for Ziopharm Oncology from the sidelines until we have more definitive efficacy and safety data to digest.

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