Business context and reporting period
This is ZIOPHARM Oncology, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2017. The filing describes a development-stage biopharmaceutical company focused on cancer immunotherapies and graft-versus-host disease (GvHD); it reports minimal collaboration revenue and no approved products. The filing entity is ZIOPHARM Oncology, Inc., notwithstanding the request metadata naming Alaunos Therapeutics.
Financial results and liquidity
Amounts below are in millions of dollars unless otherwise noted. The company reported no product sales; revenue was collaboration revenue.
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $1.597 | $1.697 | $3.194 | $3.666 |
| Research and development expense | $10.831 | $129.228 | $22.798 | $139.427 |
| General and administrative expense | $3.780 | $3.711 | $7.375 | $7.521 |
| Net loss | $(12.862) | $(131.200) | $(28.349) | $(143.219) |
| Net loss per common share | $(0.13) | $(1.01) | $(0.28) | $(1.10) |
At June 30, 2017, cash and cash equivalents were $97.2 million, up from $81.1 million at year-end 2016. Current assets were $125.1 million, current liabilities $16.0 million, and working capital $109.1 million. The balance sheet reports no interest-bearing debt; it includes $44.7 million of deferred revenue and $2.5 million of derivative liabilities. No cash interest or income taxes were paid during the six-month period. Profit margins are not meaningful given the company’s development-stage operations and minimal revenue.
Six-month operating cash use was $29.8 million, investing cash use was $0.4 million, and financing provided $46.3 million. The financing included $47.3 million net proceeds from a May 2017 public offering of 9.7 million common shares. The company had an accumulated deficit of $686.5 million.
Changes versus the prior comparable period
- Revenue fell 6% in Q2 and 13% for the six-month period, primarily because Solasia and Predictive Therapeutics revenue recognized in 2016 had been fully recognized by 2017; Ares Trading revenue remained about $1.6 million per quarter.
- R&D expense fell sharply year over year, mainly because 2016 included a $119.1 million noncash charge related to Series 1 preferred stock issued to Intrexon under collaboration amendments. The lower reported expense should not be read as a comparable reduction in underlying program costs.
- Net loss improved substantially versus 2016, principally reflecting that same one-time noncash charge. The 2017 six-month loss also includes a $1.5 million expense from the change in fair value of preferred-stock derivative liabilities.
- Cash increased following the May equity offering, while common shares outstanding rose to 142.0 million at June 30 from 132.4 million at December 31, 2016. Preferred-stock dividends are paid in additional preferred shares and contributed $9.0 million during the first half.
Outlook, management commentary and risks
- Management expected existing cash to fund operations into the fourth quarter of 2018, but stated that there were no committed additional financing sources and that further capital would be needed for longer-term plans. Management warned that spending may exceed forecasts and that inability to raise capital or secure partnerships could force program delays, reductions or cancellations. The prior-year auditor’s report had expressed substantial doubt about going concern; management cited the May 2017 offering in support of its updated runway estimate.
- The lead candidate, Ad-RTS-hIL-12 plus veledimex, is being studied in recurrent glioblastoma. At the 2017 ASCO meeting, the company reported median overall survival of 12.5 months in the 20 mg cohort (15 patients), based on interim data. These small, interim trial results are not proof of efficacy or predictive of final outcomes. The company cited positive FDA end-of-Phase 2 guidance and was assessing a pivotal-trial path, with a pivotal study anticipated later in 2017 subject to further discussions.
- Other stated plans included stereotactic administration in recurrent glioblastoma, studies combining the candidate with a PD-1 checkpoint inhibitor and in pediatric brain tumors, and advancing engineered CAR-T, NK-cell and TCR programs. The FDA had accepted an investigator-initiated IND for a CD33 CAR-T Phase 1 study; first-patient treatment was expected in Q3 2017. These were plans, not completed milestones.
- Key risks include clinical and regulatory uncertainty, adverse effects (including cytokine-release effects), manufacturing and supply constraints, competition, reliance on Intrexon and MD Anderson licenses and collaborations, intellectual-property disputes, and dependence on additional financing. Preferred stock issued to Intrexon carries monthly dividends, liquidation and conversion rights, and potential dilution; its stated value and dividend accrual increase while outstanding.
- Contractual obligations totaled $21.4 million, including operating leases, CRADA commitments and $11.3 million of MD Anderson license payments due within one year. The company reported no material legal proceedings as of June 30, 2017.
Important facts for investors to verify
- Cash-burn trajectory and whether the projected runway into Q4 2018 remains achievable, particularly as clinical programs and MD Anderson commitments progress.
- Financing needs, terms and dilution risk, including the May 2017 share issuance and the conversion, dividends and liquidation preferences of Intrexon’s Series 1 preferred stock.
- Final and updated clinical data for Ad-RTS-hIL-12 plus veledimex, FDA feedback and the actual timing, design and funding of any pivotal study.
- Execution and costs of planned CD33 CAR-T, stereotactic, checkpoint-combination, pediatric, NK-cell and NCI CRADA programs.
- Revenue recognition and collaboration economics, including the remaining $44.7 million Ares Trading deferred-revenue balance and obligations to Intrexon and MD Anderson.