EQUITY RESEARCH Healthcare | U.S. Biotechnology | 23 February 2011
23 February 2011
ZIOPHARM ONCOLOGY INC.
Stock Rating 1-OVERWEIGHT
Sector View 1-POSITIVE
Price Target USD 9.00
Price (22-Feb-2011) USD 5.75
Potential Upside/Downside +57%
Attractively Valued - Palifosfamide Key Driver
We are initiating coverage of ZIOP with a 1-Overweight rating and $9/share price target. We believe that upside potential to our price target can be achieved on continued progress with phase 3 development of lead product Zymafos (palifosfamide) in sarcoma with option value to successful trial execution, broadening development to SCLC and pipeline opportunities with Zinapar and Zybulin. We believe that the recent Intrexon collaboration provides downside support and would suggest that upside potential in sarcoma has been over-discounted in the context of positive randomized phase 2 data.
ZIOP is a development stage oncology company focused on inlicensing efforts in areas of significant unmet need. ZIOPs lead opportunity, Zymafos (palifosfamide), is the active metabolite of approved chemotherapeutic ifosfamide and has demonstrated statistically significant improvement in progression free survival (PFS) in a randomized phase 2 trial for patients with advanced soft tissue sarcoma. With a PFS risk reduction of 57% in phase 2 (HR=0.43, p=0.019), ZIOP is currently seeking to confirm benefit with the phase 3 PICASSO study powered for a 40% reduction.
At current valuation levels, we estimate an implied probability of success on a potential $300M global opportunity at 35%, which we believe is too low and expect share price appreciation on execution of enrollment completion. Further option value may exist from development of Zinapar in peripheral T-cell lymphoma (PTCL), Zybulin in solid tumors, and we believe that Intrexon's UltraVector platform provides significant downside support to mitigate risk to any one product event.
Ziopharm Oncology inc. (ZIOP) is a development stage biopharmaceutical company focused on inlicensing and development of novel therapeutics for the treatment of cancer.
Relative to other development stage oncology companies we believe that ZIOP offers greater downside protection from its INTREXON platform, is better diversified, with multiple product opportunities, and is more mature in terms of lead product opportunity with Palifosfamide in phase 3 development for soft tissue sarcoma (STS).
We believe that ZIOP is attractively valued relative to other phase 3 oncology peers like ARIA and relative to its initial opportunity in soft tissue sarcoma. With peak sales estimate of roughly $300M globally, we estimate an NPV of $9/share. At current levels, we estimate that the Street is pricing in a 35% likelihood of success for Zymafos (palifosfamide) in soft tissue sarcoma, which we believe is too low given 57% PFS benefit seen with prior randomized phase 2 data.
Upside potential beyond Zymafos (palifosfamide) success in STS could come from expansion to small cell lung cancer (SCLC) as well as pipeline progress with either Zinapar (darinaparsin) or Zybulin (indibulin). Visibility on INTREXON pipeline opportunities may be limited at present given early stage nature of efforts, however initial focus on IL-12 in melanoma appears promising, and we believe that rapid throughput with INTREXON platform has been under-estimated.
Overall we see limited downside risk for ZIOP over the next 12 months and with phase 3 data for Zymafos (palifosfamide) expected in 2012, we expect ZIOP shares to increasingly outperform as the year progresses. As such, we would be buyers at current levels.
Figure 1: Late stage Oncology Comparables
Ticker Company Market Cap ($M) Enterprise Value ($M)
ALTH Allos Therapeutics $345 $236
ARIA Ariad Pharma $745 $696
ARQL Arqule $268 $184
AVEO Aveo Pharma $502 $386
CRIS Curis $214 $174
GERN Geron $607 $481
EXEL Exelixis $1,149 $1,216
GTXI GTx $137 $117
IMGN Immunogen $602 $483
MITI Micromet $534 $373
OGXI Oncogenex $153 $119
ONCY Oncothyreon $417 $397
PCYC Pharmacyclics $307 $245
SGMO Sangamo $342 $281
SGEN Seattle Genetics $1,681 $1,386
MEAN $534 $452
MEDIAN $417 $373
ZIOP* Ziopharm Oncology Inc. $377 $249
* assumes pro-forma shares outstanding of ~65.65M and cash of ~$128M
Source: Bloomberg, Barclays Capital research
ZIOP is a development stage biopharmaceutical company focused on inlicensing and development of small molecule drugs for cancer. ZIOP is pursuing a lower risk development strategy with focus on incremental improvements in existing categories of drugs with well documented risk/benefit profiles. ZIOP’s lead product candidate, Zymafos I.V. (Palifosfamide) comprises the active metabolite of Ifosfamide and is in phase 3 development in combination with doxorubicin for the first line treatment of advanced soft tissue sarcomas (STS). Palifosfamide is also in a Phase 1 trial with carboplatin and etoposide in frontline small cell lung cancer (SCLC) and an oral version is expected to enter Phase 1 in 1Q11. Zinapar I.V. (Darinaparsin), an anti-mitochondrial compound (organic arsenic) has completed Phase 2 studies for the treatment of various cancers including advanced myeloma, primary liver cancer, and as well as various hematologic malignancies and is also in a Phase 1 study in combination with CHOP, the standard of care in non-Hodgkin’s
Lymphoma (NHL) and Peripheral T cell lymphoma (PTCL). ZIOP plans to initiate a potential two stage pivotal trial in 1ST or 2nd line PTCL patients. The oral version of Zinapar is currently in a Phase 1 study upon completion of which a Phase 2 study is planned in patients with solid tumors. Zybulin (Indibulin) is an oral inhibitor of tubulin polymerization that is in a Phase 1/2 dosing trial in patients with metastatic breast cancer (mBC). Earlier this year ZIOP entered into an exclusive agreement with Intrexon Corp. to get access to a synthetic biology platform with therapies using DNA administered to humans for in vivo expression of anticancer effectors for cancer therapy. INXN 3001/1001 (DC-RTS-IL-12) is in a Phase 1b trial in advanced melanoma in the US and INXN 2001/1001 (Ad-RTS-IL-12) which is identical to INXN 3001/1001, except for the autologous dendritic cell component, is expected to initiate a Phase 1 trial in a solid tumor in 1H11.
Figure 2: ZIOP Pipeline
EXCLUSIVE CHANNEL PARTNERSHIP WITH INTREXON
ZIOP entered into an exclusive channel partnership agreement with Intrexon Corp. on January 6, 2011 to use Intrexon’s technology to develop synthetic DNA based therapies for in vivo expression of anti-cancer effectors. Under terms of the agreement, Intrexon purchased 5% of ZIOP’s outstanding stock for ~$11.6M ($4.80/share) and simultaneously issued Intrexon an additional 7.495% of its outstanding stock. Upon dosing of the first patient in a ZIOP conducted US Phase 2 trial using Intrexon technology, ZIOP will issue Intrexon an additional 7.495% of its outstanding stock. Intrexon agreed to fund ZIOP’s ongoing and future development programs through the purchase of up to $50M in future securities offerings conducted by ZIOP and in turn ZIOP agreed to pay Intrexon 50% of the operating profits derived from product sales from the partnership.
Under the agreement, ZIOP is responsible for the preclinical and clinical development of product candidates and Intrexon will be responsible for manufacturing the bulk API with ZIOP being responsible for downstream manufacturing including product formulation and packaging.
Intrexon’s UltraVector is an advanced genetic engineering platform that includes over 50,000 genetic parts including many novel components and control motifs that enables scalable synthetic biology. The UltraVector platform provides flexibility with its pre-built genetic modules that also enable volume and the integrated combinatorial transgene design, module re-use, downstream module synthesis and dynamic vector assembly make it nimble.. Previously tested modules and backbones can be reused in new transgene combinations reducing errors and consistency is maintained between transgenes through standardized molecular pivots that enable interchangeable parts.
Examples of UltraVector components include DNA controls like the RheoSwitch system (RTS) that regulates gene transcription, AttSite Integrases for integration of transgenes into genomic loci, Super-Secretor Sub-Systems that are optimized for high protein expression, Conditional promoters for conditional activation/regulation of transcription, Transcription Linkers for obtaining one mRNA from different proteins, and Subcellular Loc Signals for subcellular targeting. UltraVector components also include DNA effectors (encoded proteins) like Decoy inhibitors that are protein-protein inhibitors, cytokines that are immuno-modulating proteins, and Growth factors that stimulate cell growth. UltraVector utilizes proprietary software and modular DNA technologies to accelerate the rational, scalable engineering of complex transgenes. These complex transgenes provide control over the function and output of living cells where they can be used as gene therapies, cell therapies, and tissue therapies. As gene and cell/tissue therapies they are delivered to
resident tissue in vivo, or are transduced ex vivo into autologous/allogeneic cells/tissues respectively and then regulated using activator ligands and/or other controls. Intrexon’s molecular inducible cancer immunotherapeutics (MICI’s) comprise complex transgenes combined with activator ligands that control the delivery, targeting, activation, regulation, and location of biologics. MICI’s are inducible/controllable and can have localized or systemic secretion. In the modular RheoSwitch Therapeutic System the activator ligand binds to the switch activation protein resulting in anti-cancer effectors being expressed locally or systemically.
Clinical Stage Products in Development
Two lead programs are in clinical development under ZIOP’s partnering agreement with Intrexon.
INXN 3001/1001 (or DC-RTS-IL-12)
INXN 3001 turns on in vivo expression of Interleukin (IL)-12 and includes a combination of intra-tumorally injected modified dendritic cells from each patient and an activator ligand (INXN-1001) that is orally dosed. INXN 3001/1001 employs the RheoSwitch Therapeutic System (RTS) to regulate the expression of human IL-12 in the patient’s dendritic cells that are transduced with a replication deficient adenoviral vector carrying the IL-12 gene under the control of the RTS. The control on the timing and level of transgene expression is offered by the small molecule activator ligand in the absence of which IL-12 levels are undetectable.
Intrexon has obtained preclinical data for the activator ligand. In a B16 mouse melanoma model it was shown to induce regression of directly injected established melanoma lesions and those elsewhere in the body. Additionally, preclinical studies have demonstrated strong activity of DC-RTS-IL-12 in combination with INXN-1001 in cancers including brain, colon, renal, pancreatic, and melanoma. A Phase 1a randomized, blinded trial was conducted with the activator ligand in 65 healthy volunteers who underwent dose escalation of single daily oral doses (liquid and capsule) up to 4 mg/kg and multiple oral doses up to 3 mg/kg/day for 10 days. Pharmacodynamic (PD) data obtained indicated no crosstalk activation, no PD effects other than switch activation and no off target PD effects. The activator ligand exhibited PK dose proportionality with a Tmax of 2.5-5h and a short half-life. No dose limiting toxicities (DLT‘s) or maximally tolerated dose (MTD) were identified and the two most common side effects were taste impairment and throat irritation.
INXN 2001/1001 (or Ad-RTS-IL-12)
A phase 1 trial of INXN 2001/1001 is expected to initiate in 1H11 in patients with advanced melanoma. INXN 2001/1001 is identical to INXN 3001/1001, with the exception that INXN 2001/1001 does not use an autologous dendritic cell component.
Ifosfamide is a pro-drug that is approved by the FDA for the treatment of testicular cancer and that is also used off-label in combination with doxorubicin in first line treatment of sarcoma. Ifosfamide, as a pro-drug, is converted into a number of metabolites by the liver on infusion. One of the metabolites that is generated, isophosphoramide mustard (IPM-tris) is the therapeutic metabolite responsible for the activity of ifosfamide. Palifosfamide is a novel bifunctional DNA crosslinker that is this stabilized active metabolite of ifosfamide.
Unfortunately, some of the other metabolites of ifosfamide, like acrolein and chloroacetaldehyde are known to have toxic effects. Specifically, acrolein is known to be toxic to the kidneys and the bladder causing hemorrhagic cystitis. Chloroacetaldehyde has been shown to be neurotoxic and has been shown to cause encephalopathy. As the active metabolite of ifosfamide Palifosfamide is designed to retain anti-tumor activity while avoiding dose limiting toxicities associated with these other ifosfamide metabolites.
Palifosfamide has received orphan drug designation in the US and EU for the treatment of soft tissue sarcoma (STS). ZIOP was recently granted a composition of matter patent in the US and has applications currently under review internationally for Palifosfamide. ZIOP plans to initiate a Phase 1 trial of oral Palifosfamide in 1Q11.
Palifosfamide has shown broad activity in tumor cell lines and human xenograft models including osteosarcomas and soft tissue sarcomas. Preclinical studies have also demonstrated broad activity against human sarcoma cell lines in vitro and in human xenografts, including in ifosfamide and cyclophosphamide resistant cell lines. Palifosfamide was also active in a platinum-resistant p388 leukemia/lymphoma murine model and was orally active in this model and in MX-1 breast cancer xenografts. Palifosfamide demonstrated synergy with doxorubicin in the OS31 osteosarcoma xenograft model at lower doses of 12 mg/kg and also prolonged survival in these animals.
Early Phase 1/2 Data
In a Phase 1 study using a lysine formulation of Palifosfamide presented at the ASCO 2006 meeting, the MTD was 400 mg/m2 hen given intravenously on days 1, 2, and 3. In a subsequent Phase 1/2 single agent trial in advanced sarcoma presented at the Connective Tissue Oncology Society meeting in 2007, 44/50 evaluable patients (48%) had stable disease or better with a median PFS of 10 weeks. During this trial another formulation with tris-mannitol was studied as it had the same pharmacokinetics as the lysine formulation with lower toxicity.
The third study was a Phase 1 study of a combination of palifosfamide (tris-mannitol) with doxorubicin primarily in patients with soft tissue sarcoma that was presented at the ASCO 2009 meeting. In this study the MTD for Palifosfamide was determined to be 150 mg/m2 when given intravenously on days 1, 2, and 3 in combination with 75 mg/m2 doxorubicin given intravenously on day 1. In this study 2 of 8 sarcoma patients had a tumor response.
Phase 2 Randomized Trial Data Presented at ASCO 2010 (PICASSO 2)
Supported by data from the prior trials, ZIOP initiated a randomized, multicenter, controlled Phase 2 study of Palifosfamide (150 mg/m2 on days 1, 2, and 3) + Doxorubicin (75 mg/m2 on day 1) vs Doxorubicin (75 mg/m2 on day 1) in patients with unresectable metastatic soft tissue sarcoma (STS). The treatment was repeated every 3 weeks for 6 cycles with responses evaluated every 6 weeks until progression. After 6 cycles patients were allowed to be treated with Palifosfamide at 150 mg/m2. Patients enrolled into the trial were stratified according to age (>65 and <65 years) and histologic subtype (leiomyosarcoma, synovial sarcoma, and others). Progression free survival (PFS) was the primary endpoint of the study with secondary endpoints including responses, survival, and safety. The trial was powered to demonstrate a hazard ratio (HR) for PFS significance of 0.75. An independent DSMB met at predetermined points to assess safety following completion of the first cycle of therapy for the 20th patient. Subsequent to enrolment of >50% of patients, a formal interim PFS efficacy analysis was undertaken to determine whether to continue, terminate, or amend the study. The initial analysis demonstrated that the HR met the specified endpoint and after consultation with the Data Committee, independent sarcoma experts, and the Medical Advisory Board, enrolment was stopped and results were subsequently reported at the 2009 CTOS Annual Meeting. A second and subsequent analysis was conducted for an end-of-Phase-II meeting with the FDA and those data were reported at ASCO.
Sarcomas excluded in this study included alveolar soft part sarcoma, chondrosarcoma, DFSP, Ewing’s, GIST, Kaposi, mixed mesodermal tumor, osteosarcoma, radiation-induced sarcomas, and unresectable low grade liposarcoma. Patients were either 1st line or 2nd line but had to be doxorubicin naïve, although patients treated previously with Ifosfamide were eligible.
A total of 67 patients were enrolled with 34 on the P+D arm and 33 on D only. 1 patient wasn’t treated and 4 patients were ineligible for cardiac reasons or missing histologies (3 on P+D and 1 on D only). 16/62 patients continued on single agent palifosfamide after 6 cycles including 7 patients on P+D and 9 on D only.
Figure 6: PICASSO 2 - Patient Predisposition
N P + D D
Enrolled 67 34 33
Treated 66 33 33
Eligible 62 30 32
Ongoing single agent Palifosfamide 16 7 9
Source: ASCO 2010 and Barclays Capital research
Baseline characteristics were well balanced with 1/3 elderly patients (> 65 yrs) and median age being equal on both arms. 2/3 of enrolled patients received the treatment as frontline and 1/3 received it as second line therapy. Histologies were also well balanced between the two arms.
Figure 7: PICASSO 2 - Patient Baseline Characteristics
N P + D D
> 65 23 12 11
Age < 65 43 21 22
Median 57 57
1st line 46 23 23
Line of Therapy
2nd line 20 10 10
Source: ASCO 2010 and Barclays Capital research
Figure 8: PICASSO 2 - Histologic Subtypes of Treated Patients
P + D D
Leiomyosarcoma 9 11
Synovial Sarcoma 2 2
Liposarcoma 5 9
Myxofibrosarcoma (MFH) 5 5
MPNST 3 2
Spindle Cell Sarcoma 2 3
Source: ASCO 2010 and Barclays Capital research
In 62 eligible patients evaluated for PFS, 28 progressed with 18 of these being on the D only arm and with 10 on the P+D arm. The HR of 0.427 (95% CI: 0.191, 0.951) favoured the P+D arm (p=0.019). The median PFS for D only was 4.4 months and it was 7.8 months for patients on the P+D arm. When assessing PFS in patients censored for the effect of palifosfamide continuation or cross-over to palifosfamide the HR was maintained (HR=0.396; P=0.023). On the response secondary endpoint, 23% partial response (PR) rate was observed on the P+D arm vs 9% on D only. Preliminary survival data at the time of the presentation based on a median follow-up of ~9 months and with a number of patients still on study showed a survival advantage trending in favour of P+D vs D only.
In terms of safety, an imbalance in Grade 3+ thrombocytopenia was observed in the P+D arm (12% vs 0%) but no patient required a platelet transfusion and Grade 3+ neutropenia was comparable across both arms (40% vs 36%). The P+D arm also had imbalances in renal toxicity as seen through elevated creatinine in 9% of P+D patients vs 3% on D only that was quickly reverted with hydration while febrile neutropenia was higher on the D only arm (6% vs 3%). Dose reductions were comparable on both arms (24% on P+D vs 27% on D only). In comparison with Ifosfamide, no hemorrhagic cystitis or encephalopathy was observed, no mesna was used, there was no Renal-Fanconi syndrome, and bone marrow suppression was equivalent.
Figure 10: Safety data for PICASSO 2
P + D D
N 33 33
Neutropenia 13 (40%) 12 (36%)
Grade 3+ Events >10%
Thrombocytopenia 4 (12%) 0 (0%)
Elevated creatinine 3 (9%) 1 (3%)
SAE's > 5%
Febrile neutropenia 1 (3%) 2 (6%)
Dose reductions 8 (24%) 9 (27%)
Source: ASCO 2010 and Barclays Capital research
Pivotal Phase 3 Study of Palifosfamide IV (PICASSO 3)
Following reporting of favorable interim results from its randomized PICASSO 2 Phase 2 study, ZIOP had an end of Phase 2 meeting with the FDA to discuss its pivotal trial design and protocol that included a subsequent dialogue on obtaining a Special Protocol Assessment (SPA). The Phase 3 trial (PICASSO 3) is an international, randomized, double blind,placebo-controlled trial that is evaluating Palifosfamide + Doxorubicin vs Doxorubicin alone with no crossover between arms in ~424 frontline patients with metastatic STS. The trial excludes patients with GIST and Ewing’s sarcoma. PFS is the primary endpoint of this trial for accelerated approval while overall survival (OS), which the trial is powered for, is the primary endpoint for full approval. In their discussions with the FDA, the agency did not agree to include PFS as the primary endpoint under an SPA but agreed to the protocol with PFS as a primary endpoint outside of a SPA. The trial has 85% power to detect a 0.60 hazard ratio (HR) benefit on PFS for P+D over D. ZIOP could file for accelerated approval after review by an IDMC on achieving a predetermined number of PFS events along with review of then available survival data. ZIOP has estimated a median PFS of 4.3 months in the control arm and suggested that a median 3 month or greater increase in PFS on P+D vs the control arm could achieve the targeted HR of 0.60 (P=0.0005, one tailed) and predict a demonstrable improvement in OS. ZIOP believes that this would represent a clinically meaningful improvement in PFS in frontline sarcoma patients. The trial is being conducted at ~150 centers in North America, Europe, South America, Australia, and Korea. ZIOP
expects to complete patient enrolment by YE11, with data expected by mid-2012.
Sarcoma is estimated to account for 1% of adult malignancies. Sarcomas are known to arise from multiple tissue types including fat, muscle, nerves, joints, blood vessels, and bone among others. NCCN guidelines indicate that the standard first line treatment for sarcomas in the US typically consist of either doxorubicin (Adriamycin, generic) or doxorubicin in combination with ifosfamide. Response rates for both doxorubicin and ifosfamide in the first line setting are in the range of 15% and 30%. Patients are typically treated with first line therapy for ~4-6 cycles until best response and then stop therapy for treatment holiday until the patient progresses again. Second-line therapy in STS is a combination of gemcitabine and docetaxel. In 2010, the NCI estimated that there were ~13,000 new cases of STS and bone sarcoma in the US. It is estimated that of these ~10,660 cases were STS with ~3,680 deaths from STS expected in 2009.
Other Ongoing Trials
Palifosfamide IV Phase 1 Trial in Small Cell Lung Cancer
In December 2010, ZIOP initiated an open label dose-escalating single arm Phase 1 trial of Palifosfamide combined with etoposide and cisplatin/carboplatin (platinum therapy) for the treatment of extensive small cell lung cancer (SCLC) and other cancers. Palifosfamide will be delivered intravenously on days 1, 2, and 3 on each 21 day cycle for up to 4 cycles. The trial will assess the safety profile and determine the MTD for this regimen. After obtaining data from this trial, ZIOP plans to initiate a randomized Phase 2 trial in frontline extensive SCLC with OS as the primary endpoint. Ifosfamide (1.2 gm/m2) has been previously studied by the Hoosier Oncology Group in 171 patients in a randomized frontline extensive SCLC trial when combined with etoposide (75 mg/m2) and cisplatin (20 mg/m2). The addition of Ifosfamide resulted in a median OS of 9.1 months vs 7.3 months for etoposide + cisplatin and superior 1 and 2 year survival rates of 36% vs 27% and 13% vs 5% respectively. As expected, myelosupression was the most frequent AE with anemia, granulocytopenia, and thrombocytopenia being more frequent with Ifosfamide addition.
Zinapar is an organic arsenic compound (S-dimethylarsino-glutathione) that is mitochondrial targeted and which as a class are much less toxic than the inorganic arsenic compounds like arsenic trioxide/Trisenox that are currently available commercially in the US, EU, and Japan for the treatment of acute promyelocytic leukemia. Use of arsenic trioxide as an anti-cancer agent has been limited as it is toxic to the heart, liver, and brain. Arsenic trioxide has been shown to prolong the QT interval and has been associated with complete atrioventricular (AV) block and as a result carries a black box warning for ECG abnormalities. Inorganic arsenic has also been shown to cause skin and lung cancer in humans with the toxicity of arsenic being generally correlated to its accumulation in organs and tissues. As it relates to cardiac toxicity, Zinapar has been shown to be considerably less toxic than arsenic trioxide in preclinical and clinical studies. ZIOP has received orphan drug designation in the US and Europe for Zinapar in the treatment of peripheral T-cell lymphoma (PTCL).
At ASCO 2009, data were presented from a Phase 2 single-arm, open label, multicenter trial of Zinapar in patients with advanced lymphoma that received Zinapar 300 mg/m2 IV for 5 consecutive days every 28 days until disease progression or unacceptable toxicity. Patients had evaluable disease with > 1 prior therapy and currently requiring therapy. The study enrolled 29 patients including 8 patients with Peripheral T cell lymphoma (PTCL). Of 5 evaluable PTCL patients, 2 CR’s were observed, one for 3+ months that had received 3 prior treatment regimens and another for 5+ months that had received 6 prior treatments regimens. 1 PTCL patient had a PR, another had prolonged SD, and one had progressive disease. No QT prolongation was observed in the study with serious adverse events (SAE’s) including a fall and neutropenic fever.
ZIOP recently initiated an open label, single arm Phase 1 dose escalation study to define the toxicity profile and MTD of Zinapar in combination with CHOP in patients with previously untreated lymphomas. Patients will receive Zinapar for 5 consecutive days per cycle. ZIOP plans to use this data to initiate a two-stage pivotal randomized trial of Zinapar + CHOP in 1st or 2nd line PTCL patients.
A Phase 1 trial with oral Zinapar in advanced solid tumors is underway with data expected mid-2011. On completion of this study, ZIOP plans to initiate a Phase 2 study in solid tumors. Recent preclinical studies have shown that Zinapar had a significant cytotoxic and radio-sensitizing effect against different cancer cells under both normal and hypoxic conditions.
Zybulin was licensed in from affiliates of Baxter in 2006 and included the entire intellectual property portfolio. Zybulin is a novel anti-cancer agent that binds to tubulin, one of the essential proteins for chromosomal segregation, and targets mitosis like the taxanes and vinca alkaloids. Zybulin’s differentiating factors are its oral delivery (a potential advantage over the taxanes and vinca alkaloids) and lack of neurotoxicity demonstrated so far.
Preclinically, Zybulin has demonstrated activity in taxane-refractory cell lines and cytotoxic activity in rodent/human tumor cell lines, rodent, and human xenograft models. Zybulin has demonstrated synergy with other anticancer agents and was effective against multidrug resistant tumor cell lines in vitro and in vivo. With a mathematical dosing schedule established pre-clinically, in 2Q10, ZIOP initiated a Phase 1/2 safety trial of this novel Zybulin dosing schedule for the treatment of metastatic breast cancer. The primary endpoint of the Phase 1 portion of the study in 20 patients is to determine the MTD for Zybulin when given for 5 days followed by a 9 day rest using a standard 3+3 dose escalation scheme. The Phase 2 portion of the study that will enroll up to 46 patients will assess Zybulin efficacy at the MTD from the Phase 1 portion of the study.
The dosage form was recently modified so a smaller number of capsules could be administered. The new dosage form is expected to be used in this trial in 1Q11. ZIOP plans on initiating a Phase 2 proof of concept study in triple negative breast cancer on obtaining the data.
Figure 11: ZIOP Income Statement
Fiscal Year Ends December 31.
INCOME STATEMENT ($M) 1Q10A 2Q10A 3Q10A 4Q10E 2010E 2011E 2012E 2013E 2014E 2015E
Palifosfamide - US Sales $ - $ - $ - $ - $ - $ - $ - $ 20.0 $ 103.8 $ 129.5
Palifosfamide - EU Royalties - - - - - - $ - $ - $ 7.8 $ 32.4
Research contract revenue - - - - - - - - - -
Total Revenue $ - $ - $ - $ - $ - $ - $ - $ 20.0 $ 111.5 $ 161.9
COGS $ - $ - $ - $ - $ - $ - $ - $ 2.0 $ 10.4 $ 12.9
R&D 1 .9 2 .2 5.7 5.8 15.7 26.6 29.7 30.9 34.6 35.9
G&A 2 .6 2 .9 2.8 2.7 11.0 13.4 21.1 36.0 50.6 53.1
Total Expenses 4 .6 5 .1 8.5 8.5 26.7 40.0 50.8 68.8 95.6 102.0
Operating Income ( 4.6) ( 5.1) (8.5) (8.5) (26.7) (40.0) (50.8) (48.9) 16.0 59.9
Depreciation and amortization - - - - - - - - - -
EBIT (4.6) (5.1) (8.5) (8.5) (26.7) (40.0) (50.8) ( 48.9) 16.0 59.9
Total Other Income (Expense), Net 0 .0 0 .0 0.0 (0.0) (0.0) (0.1) (0.2) (0.3) (0.3) (0.3)
Chg in warrant value ( 13.1) 14.1 (3.7) (3.4) (6.1) (4.0)
Pre-Tax Income ( 17.7) 9 .0 (12.2) (11.9) (32.8) (44.1) (55.0) ( 53.1) 11.6 55.6
Income taxes - - - - - - - - - -
Recurring Net Income $ ( 17.7) $ 9 .0 $ (12.2) $ (11.9) $ (32.8) $ (44.1) $ (55.0) $ ( 53.1) $ 11.6 $ 55.6
Extraordinary item (net of taxes) - - - - - - - - - -
Reported Net Income (Loss) - GAAP $ (17.7) $ 9.0 $ (12.2) $ (11.9) $ (32.8) $ (44.1) $ (55.0) $ (53.1) $ 11.6 $ 55.6
Recurring EPS (Basic) $ ( 0.44) $ 0.21 $ (0.26) $ (0.25) $ (0.73) $ (0.67) $ (0.80) $ ( 0.74) $ 0.14 $ 0.69
Recurring EPS (Diluted) $ ( 0.44) $ 0.19 $ (0.26) $ (0.25) $ (0.76) $ (0.67) $ (0.80) $ ( 0.74) $ 0.14 $ 0.69
Extraordinary item (net of taxes) - - - - - - - - - -
Weighted average shares outstanding - Basic 40.2 42.4 47.4 47.5 44.4 65.8 69.0 72.1 76.3 80.4
Weighted average shares outstanding - Diluted 40.2 48.8 47.4 47.5 46.0 65.8 69.0 72.1 76.3 80.4
Source: Company reports, Barclays Capital research