Business context and reporting period
This is ZIOPHARM Oncology, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2015. The filing identifies ZIOPHARM—not Alaunos Therapeutics—as the registrant. ZIOPHARM was a development-stage biopharmaceutical company focused on cancer therapies, with minimal revenue and no approved products.
Financial highlights
| Metric | Three months ended June 30, 2015 | Six months ended June 30, 2015 | Comparison |
|---|---|---|---|
| Revenue | $0.272 million | $0.544 million | Up 36% from 2014 in both periods |
| Research and development expense | $7.424 million | $81.673 million | Quarter down 11%; six-month expense up 449% |
| General and administrative expense | $7.073 million | $11.323 million | Up 133% and 75%, respectively |
| Net loss | $14.211 million | $92.442 million | 2014 losses were $5.576 million and $15.287 million |
| Basic and diluted loss per share | $0.11 | $0.76 | 2014 was $0.06 and $0.15 |
| Cash used in operating activities | Not presented separately for the quarter | $21.411 million | Compared with $16.289 million in 2014 |
The unusually high first-half 2015 R&D expense included a $67.3 million noncash charge for shares issued to MD Anderson for licensed research and development technology. Excluding that item, the filing attributes the increase mainly to higher immunotherapy costs, partly offset by lower employee-related and other costs. The quarter’s higher G&A reflected increased stock compensation and bonuses.
At June 30, cash and cash equivalents were $118.550 million, versus $42.803 million at December 31, 2014. Current assets were $123.080 million, current liabilities $13.110 million, and working capital $110.0 million. Total liabilities were $13.597 million; the filing reports no debt balance. Financing cash flow was $97.180 million, primarily reflecting $94.320 million of net proceeds from a February public offering. The company issued 11.5 million shares in that offering and 11.7 million shares to MD Anderson; shares outstanding rose from 104.5 million at year-end to 130.8 million at June 30.
Revenue was immaterial relative to expenses, so operating or net profit margins are not meaningful. Cash used for investing activities was $0.022 million. No cash interest or income taxes were paid during the six-month period.
Material changes and significant transactions
- In January, ZIOPHARM and Intrexon licensed CAR-T and related cellular-therapy technologies from MD Anderson. ZIOPHARM issued MD Anderson shares valued at $67.3 million, recorded as R&D expense, and committed to fund research and development for three years at $15–$20 million annually. Quarterly payments were $3.75 million; another $3.75 million was paid in July.
- In February, ZIOPHARM raised approximately $94.3 million net through a public offering of 11.5 million shares.
- In March, ZIOPHARM and Intrexon entered a CAR-T collaboration with Ares Trading, a Merck KGaA affiliate. Ares paid Intrexon a $115 million upfront fee; Intrexon is to remit 50%, or $57.5 million, to ZIOPHARM. The company reported the ZIOPHARM payment as received in the third quarter, after the reporting date. The agreement also provides for potential milestone and royalty payments, shared equally with Intrexon under their amendment.
- The 2014 comparative periods included noncash warrant fair-value gains of $5.6 million for the quarter and $5.7 million for six months. Those warrants expired in December 2014; there were none outstanding at June 30, 2015.
Outlook, commentary, and risks
Management expected available cash, under current development plans and excluding the $57.5 million Ares-related receipt, to fund operations into the second quarter of 2017. The filing cautions that spending, clinical progress, regulatory changes, and other factors could shorten that runway; additional financing will be needed for longer-term plans, and no committed source of additional capital was identified.
Near-term plans included ongoing Phase 1 testing of Ad-RTS-IL-12 plus veledimex in brain cancer and a Phase 1b/2 study in breast cancer. Management expected early data from both studies in the fourth quarter of 2015. It also expected to advance CAR-T programs, with planned clinical starts and interim data during 2015 and additional programs in 2016. These were expectations, not assured outcomes. ZIOPHARM said it would pause further intratumoral IL-12 development in melanoma amid a changing and competitive standard of care. On July 23, 2015, after quarter-end, the FDA granted orphan-drug designation for Ad-RTS-IL-12 plus veledimex for malignant glioma.
Reported Phase 2 results were preliminary and based on small evaluable patient groups: breast cancer disease control was 43% among seven evaluable subjects, and melanoma disease control was 39% among 18 evaluable subjects. The filing described Grade 3 or higher treatment-emergent adverse events, with events reported as reversible after stopping veledimex. Neither candidate had regulatory approval.
Key risks include clinical and regulatory uncertainty for novel gene and cell therapies; potential toxicity, manufacturing and scale-up challenges; competition; dependence on Intrexon and licensed intellectual property; MD Anderson funding and other contractual commitments; and the need for future financing, which could dilute shareholders. ZIOPHARM also noted its historical losses and accumulated deficit of $465.1 million. Management reported disclosure controls were effective and no material change in internal control over financial reporting. It reported no legal matters expected to have a material adverse effect as of June 30, 2015.
Important facts for investors to verify
- Confirm the registrant and corporate identity: this filing is for ZIOPHARM Oncology, Inc., despite the request metadata naming Alaunos Therapeutics.
- Track receipt and terms of the $57.5 million Ares-related payment, plus any research funding, milestone, and royalty receipts.
- Reconcile cash runway assumptions with clinical spending and the MD Anderson quarterly funding obligations.
- Assess the effect of the $67.3 million noncash license charge separately from recurring R&D spending, and monitor share-count dilution.
- Verify subsequent clinical data, safety results, regulatory progress, and whether management’s 2015–2016 development timelines were met.