Ziopharm Awaits Cancer Drug Data as Wall Street Withholds Judgment

8/29/12Follow @arleneweintraub

Jonathan Lewis, the CEO of New York-based Ziopharm (NASDAQ: ZIOP), was stunned earlier this year when he ran across a commercial on YouTube produced by his company’s biggest investor, Fidelity. In the video (see below), a young man makes a bold prediction: “Within 50 years we could have more life forms invented in the lab then we’ve ever identified in nature,” he says. He talks about goats whose milk can be spun into silk, and genetically modified salmon that naturally grow bigger than their non-altered cousins. This “synthetic biology,” he declares, “could become the defining technology of the 21st century.”

Ziopharm, which has a large research and operations facility in the Boston Navy Yard, is betting that synthetic biology will define its future, as well. In January 2011, Ziopharm took a huge step towards realizing that vision by forming a partnership with Germantown, MD-based Intrexon that gave it access to a technology for transforming DNA into human therapeutics. R.J. Kirk, Intrexon’s billionaire CEO, joined Ziopharm’s board as part of the transaction. The first drug to emerge from that partnership could go into mid-stage testing to treat melanoma by the end of this year, Lewis says.

But unlike the folks at Fidelity, most investors tend to focus more on the potential for short-term profits than they do on sci-fi-like visions of manufactured genes serving as human therapeutics. That may explain why Ziopharm’s stock has been rather stagnant this year, trading between $5 and $6 a share, despite Fidelity’s enthusiasm both for synthetic biology and for Ziopharm. (The Boston-based mutual-fund company holds more than 8 million shares of the biotech firm, spread across several of its funds, according to Capital IQ). “This is a lull going into data,” Lewis says.

The data he’s referring to is not related to synthetic biology, but rather to Ziopharm’s flagship project—a drug called palifosfamide that’s in late-stage testing to treat soft-tissue sarcoma. The drug is a new form of chemotherapy, and therefore not quite as sexy as synthetic biology (which we’ll get to in more detail below), but it is Ziopharm’s most immediate shot at a marketable product. So investors are waiting for data from the pivotal human trials of the drug, which should be released by the end of this year, Lewis says.

Palifosfamide is in a class of drugs called “alkylating agents,” which stop tumors from growing by binding to the DNA in cancer cells and interfering with its functioning. The drug seems to interact with cancer stem cells—key tumor-forming cells—and therefore may be effective in patients who have become resistant to existing therapies, Lewis says. “We think with this newer generation of drugs we can break through that resistance, and as we get better at using it, we may be able to prevent resistance,” Lewis says.

J.P. Morgan analyst Cory Kasimov estimates that palifosfamide could be on the market by 2014 and be bringing in $404 million in sales a year by the end of 2017. Ziopharm is also testing the drug in small-cell lung cancer. Kasimov has a price target of $8 on the stock.

With all their hopes resting on palifosfamide, analysts are not really factoring any of Ziopharm’s other programs into their estimates. Nevertheless, Lewis is clearly excited about synthetic biology and the company’s lead contender in that area, a drug it calls Ad-IL-12. The treatment involves delivering a gene directly into patients. A pill is used to switch the gene into active mode, at which time it produces an immune-boosting molecule called IL-12 (interleukin 12).

The idea of using IL-12 as a therapy has been around for over a decade, but previous attempts produced toxic side effects. Ziopharm’s approach is to sidestep the side effects by getting the therapeutic DNA directly into patients’ cells and then turning it on for a limited amount of time. “It’s a biological switch,” Lewis says. “For the DNA to work, we have to switch it on with a pill. It’s a controllable way to give this drug.”

Other companies are working on different synthetic-biology approaches to making IL-12 palatable in oncology. San Diego-based OncoSec Medical, for example, is using electrical pulses to transmit IL-12 into skin tumors. And Lewis says he also expects some competition from genomics pioneer Craig Venter, who has a number of initiatives underway in synthetic biology, including some aimed at combating cancer. “The one that’s at the front in terms of human therapeutics, as far as we know, is Ziopharm,” Lewis says.

Lewis is driven by a personal need to improve the therapeutic choices for cancer patients. He is an oncologist who served as professor of surgery and medicine at Memorial Sloan-Kettering Cancer Center in New York, which has been involved in several of Ziopharm’s clinical trials. “I’ve experienced so many limitations as a treating physician,” he says. “We need better treatments.”

Ziopharm has a handful of other compounds in its pipeline, including the cancer drug that the company was founded on in 2004: darinaparsin, which is derived from arsenic. Darinaparsin is in early-stage trials in Japan and the Pacific Rim in partnership with the Japanese company Solasia Pharma.

Lewis says he has pursued a selective partnering strategy, and thus far the company has chosen to go it alone on its lead program. “There was a time when the financial markets were shut down and we were desperate to partner it,” he says. But with $110 million in cash, the company is now in a strong position to fund all its R&D work through next year, without the need to take on new partners, he says. Still, Ziopharm isn’t opposed to talking to potential partners, he says, and in fact, the company’s board members are well-versed in doing deals—especially Intrexon’s R.J. Kirk. His career is dotted with lucrative deals, including having served as the chairman of Fremont, CA-based Scios, which was acquired by Johnson & Johnson (NYSE: JNJ) for $2.69 billion in 2003, and as the chairman of Newton, MA-based Clinical Data, which was bought by Forest Laboratories (NYSE: FRX) in 2011 for $1.2 billion.

For now, Lewis remains focused on his immediate priorities: producing good data by year-end for palifosfamide and proving that Ziopharm’s foray into synthetic biology holds promise. And though he’s well aware Wall Street won’t be all that impressed with Ziopharm until there’s a product on the horizon, he’s convinced his company has more to look forward to in the long run. “I predict the future of medicine is going to change dramatically in the next 10 years,” Lewis says. Synthetic biology, he adds, “is going to change how we treat patients, how we interact with them. It’s just starting right now.”

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