Full Griffin ZIOP report just out - Advanced Immunotherapies in the Queue - $21 Target - On Griffin Recommended List-Many upcoming Scientific and Clinical Presentations
Thanks to Rob Cos on the IV Board for posting this report
Griffin Securities Equity Research
Ziopharm
BUY
$21 Target
17 State Street, 3rd Floor, New York, NY 10004 • 212.509.9500 • www.griffinsecurities.com
September 15, 2015
Company Update : Biotechnology
Advanced Immunotherapies in the Queue
Ziopharm Oncology and M.D. Anderson are laying the
foundation for future adoptive cell therapies. The Company’s
CEO, Dr. Laurence Cooper, remains in charge of his lab at the
cancer center where his team is defining the properties of safe
and effective therapies for clinical evaluation.
Multiple strategies are under investigation to widen the
therapeutic index of treatments in the R&D pipeline. One
report showed that a receptor’s binding strength may be used to
differentiate between a cell overexpressing a tumor associated
antigen and a normal cell expressing the biomarker at a low level.
In other words, an intermediate binding strength has the potential
to minimize toxicity without impairing efficacy. This design
complements earlier work that demonstrated the feasibility of
producing T cells lacking endogenous T-cell receptors. Combined,
the two studies should reduce the potential for graft-versus-host
disease. Several alternatives are also being considered to avoid
a safety issue called cytokine storm. CAR T cells may be used as
an adjuvant to hematopoietic stem cell therapy for hematological
cancers; for solid tumors, surgery or an alternative treatment
may be appropriate prior to CAR T cell therapy; and other safety
measures may include controlling CAR expression or CAR T cell
activation. Finally, we note that Ziopharm is also preparing to test
CAR T cells that express a cytokine, such as interleukin-12 or -15,
to enhance their effectiveness and/or persistence in vivo.
Several events should increase excitement in the months
ahead. The Company will be presenting at six scientific meetings
before year end, and up to five CAR T-cell therapies will
be in clinical development. Besides any studies that Merck-
Serono might initiate, clinical trials are under way to evaluate
CARs for leukemia and lymphoid cancers, and a next-generation
CD19CAR.
Future clinical trials will test broad range of adoptive cell
therapies. Among the cells that may enter clinical trials in 2016
are CAR T cells with a controllable cytokine (i.e., IL-12 or
IL-15), a CAR targeting myeloid malignancies, a CAR for myeloid
malignancies and solid tumors, off-the-shelf T cells, engineered
T-cell receptor therapies, and NK cells.
Ziopharm shares are on our recommended list. We believe
presentations based on the trials of the intra-tumoral IL-12 gene
therapy Ad-RTS-IL12 and clinical data from CAR T-cell studies
will drive the Company’s valuation higher through 2016. The
data may also lead to a partnering agreement(s) with a major
pharmaceutical company. Meanwhile, Ziopharm has ample cash
to support operations into 2018. We are affirming our BUY rating
and $21 price target.
Table of Contents
Investor Considerations ................................................................................................................................................. 3
Upcoming Scientific & Clinical Presentations ............................................................................................................ 3
Improving Adoptive Cell Therapy Designs ................................................................................................................. 3
Selecting the Best CAR ............................................................................................................................................. 3
Reducing the Likelihood of Cytokine Storm ............................................................................................................. 5
Eliminating Endogenous T-Cell Receptors ............................................................................................................... 6
Enhancing CAR T Cell Performance ......................................................................................................................... 7
Use of Adoptive Cell Therapy ................................................................................................................................... 8
Future Clinical Trials of Adoptive Cell Therapies..................................................................................................... 8
2015 Clinical Trials ............................................................................................................................................... 8
Clinical Trials in 2016 and Beyond ....................................................................................................................... 9
Financial Review & Valuation Analysis ....................................................................................................................... 9
Quarterly Income Statements .................................................................................................................................... 9
Annual Income Statements ...................................................................................................................................... 10
Valuation Analysis .................................................................................................................................................. 10
Balance Sheet .......................................................................................................................................................... 11
INVESTOR CONSIDERATIONS
Dr. Laurence Cooper, who continues his ground-breaking work in immunology at the M.D. Anderson Cancer Center
while serving as Ziopharm’s CEO, is beginning to influence the Company’s commercial product development. This
report discusses areas in which his academic team’s work is optimizing immunotherapy designs to maximize the
therapeutic index. While their results are not headline-grabbers, they lay a sound foundation for the development of
safe and effective immunotherapies.
A review of the upcoming milestones the Company has set for itself suggests that the investor community will have
ample reasons to bid up the price of ZIOP shares through 2016. This year we will get some data from clinical trials
of the interleukin-12 therapy (Ad-RTS-IL12) that is being tested as a treatment for breast cancer and glioblastoma.
Meanwhile, preparations are well under way to evaluate adoptive cell therapies for a variety of hematological
cancers and solid tumors. Perhaps the most exciting will involve an allogeneic, off-the-shelf CAR T-cell, a CAR Tcell
that expresses a cytokine under the control of the RheoSwitch, and an engineered T-cell receptor that recognizes
intracellular antigens presented on the cell surface by the the major histocompatibility complex. These significant
advances underpin our BUY recommendation and $21 price target.
UPCOMING SCIENTIFIC & CLINICAL PRESENTATIONS
Sept 16 – 19 CRI-CIMT-EATI-AACR International Cancer Immunotherapy Conference
Nov 4 – 8 Society of Immunotherapy of Cancer Meeting
Nov 12 – 13 CAR-T Summit
Nov 19 – 23 Society for Neuro-Oncology Annual Meeting
Dec 5 – 8 American Society of Hematology Annual Meeting
Dec 9 – 12 San Antonio Breast Cancer Symposium
IMPROVING ADOPTIVE CELL THERAPY DESIGNS
Ziopharm is pursuing three types of immunotherapies based on CARs, engineered T cell receptors (TCRs), and
natural killer (NK) cells that are designed to target a specific tumor type. Each constitutes a different approach and
may ultimately be used in combination. CARs are only able to identify and bind with antigens found on the surface
of cells, while TCRs, which are normally created in response to antigens presented by sentinel cells (e.g.,
macrophages and dendritic cells), are the immune system’s mechanism for assessing the intracellular milieu through
fragments of proteins presented by the major histocompatibility complex. NK cells, which are members of the innate
immune system, can target malignant cells via natural cytotoxicity receptors, some of which are constitutively
expressed while others are expressed only after the cells are activated. Then, too, NK cells can be engineered to
express CARs.
M.D. Anderson has published important findings that help to optimize the therapeutic index of adoptive cell
therapies and that are likely to shape Ziopharm’s clinical development program in the near term. The following
sections summarize the results, which we believe distinguish the Company’s efforts in the field of immunotherapy.
SELECTING THE BEST CAR
The commercial success of CAR T-cells will hinge at least partly on the specificity of the therapy in recognizing
malignant growth from normal tissue. As a result, many companies working on immunotherapies have begun by
targeting CD19, a molecule that is expressed on malignant blood cells. The results have been very encouraging in
that the immunotherapies have resulted in complete remissions. But they have also come with certain unwanted
toxicities, including graft-vs-host disease (i.e., on-target, off-site destruction evidenced by elimination of normal B
cells that produce antibodies) and cytokine storm (i.e., excessive production of immune-stimulating cytokines that
can be lethal).
The M.D. Anderson team recently published one of only a few reports that examine a basic aspect of receptor-ligand
interaction that is relevant to optimizing the safety and efficacy of CARs.1 They investigated how the binding
affinity of two antibodies to a common physiological target (in this case, epidermal growth factor receptor or EGFR)
affects T cell activation. The binding elements of the antibodies cetuximab (sold as Erbitux® by Bristol-Myers
Squibb and Eli Lilly) and nimotuzumab (not commercialized in the United States) were used as CARs and tested for
their ability to activate T cells. The two antibodies are known to bind to similar sites on EGFR, but with different
affinities – cetuximab binds strongly, while nimotuzumab displays a much weaker affinity. The results were
noteworthy.
The research used two types of cells that were genetically modified to resemble tumors that overexpress EGFR, such
as glioblastoma, and normal cells that express EGFR at a low level. The experimental CAR T cells shared basic
properties, including expansion rates, cell surface markers, production of interferon-? in the presence of a cancer cell
overexpressing EGFR, and lack of lytic activity against a cell lacking EGFR. However, the two CAR T cells
differed in their activities against malignant cells that expressed EGFR at moderate levels. The cetuximab-CAR+ Tcells
lysed the cancer cells that expressed moderate levels of EGFR in vitro and in vivo, while nimotuzumab-CAR+
T-cells exhibited significantly less lytic activity, as shown in Figure 1. Hence, a CAR with low binding affinity
responded only when the tumor associated antigen was above a certain threshold. These results are consistent with
results reported elsewhere.2,3
Another important difference between the high-affinity cetuximab- and the low-affinity nimotuzumab-CAR+ T cells
was identified – the binding strength of the CAR also altered the T cell’s ability to respond to a subsequent exposure
to the antigen. As shown in Figure 2 (left chart), cetuximab- and nimotuzumab-CAR+ T cells responded
1 Caruso, HG, et al. Tuning sensitivity of CAR to EGFR density limits recognition of normal tissue while maintaining potent antitumor activity.
Cancer Res (2015); 75(17): 3505.
2 Chmielewski, M, et al. T cell activation by antibody-like immunoreceptors: Increase in affinity of the single-chain fragment domain above
threshold does not increase T cell activation against antigen-positive target cells but decreases selectivity. J Immunol (2004); 173(12): 7647.
3 Johnson, LA, et al. Rational development and characterization of humanized anti-EGFR variant III chimeric antigen receptor T cells for
glioblastoma. Sci Transl Med (2015); 7(275): 275ra22.
Figure 1. A comparison of in vivo CAR-T
cell activity against the glioblastoma cell
line U87, engineered to express EGFR at
three incremental levels over baseline – low,
medium, and high.1 (Note that the parental
U87 cells express the antigen at a low basal
level.) Five different ratios of Experimental
U87 cells-to-T cells were used to assess
lytic activity. The cetuximab-CAR+ T cells
lysed the cancer cells across the entire
EGFR gradient, while the activity of
nimotuzumab-CAR+ T cells correlated
directly with the level of EGFR expressed.
Little/no difference between the two CAR T
cells was observed at the medium and high
EGFR levels, indicating that they were
equally effective against cells
overexpressing the tumor associated
antigen. However, only the low-affinity
nimotuzumab-CAR+ T cells were able to
distinguish between the experimental
models of normal and malignant cells.
differentially to exposure to U87, with the cetuximab-CAR+ T cells producing significantly more interferon-?, whiel
the two CAR T cells responded similarly to U87high. (Note that “no target” and PMA/ionomycin are negative and
positive controls employed to show that the cells are alive and responded as expected to a placebo and a stimulating
agent.) After pre-exposure to U87 and U87high, a rechallenge to low and high levels of ERGF yielded a significantly
greater response from the nimotuzumab-CAR+ T cells versus the cetuximab-CAR+ T cells, regardless of whether
they were first conditioned with U87 (center panel) or U87high cells (right).
Figure 2. INF-? Production in Response to Rechallenge1
The importance of this research to Ziopharm is not simply identifying an opportunity to create a more efficacious
and less toxic CAR T-cell therapy. It may also differentiate the Company’s programs from those of would-be
competitors. By way of example, we note overexpression of EGFR by glioblastoma cells may be considered a
starting point for the expression of variants, including EGFRvIII. As a result, variant III, which is the most common
being found in approximately 25% of glioblastoma tumors. In contrast, EGFR is overexpressed in about 60% of the
cases.4,5 Hence, companies targeting EGFRvIII would address a smaller patient population than Ziopharm.
The market for a EGFR-CAR+ T cell therapy extends well beyond brain cancer, as the tumor associated antigen is
overexpressed in bladder, breast, cervical, colorectal, endometrial, esophageal, gastric, head and neck squamous cell,
non-small cell lung, ovarian, and prostate cancers.6,7 But the M.D. Anderson team considers glioblastoma to be an
attractive indication for the first clinical trial of an EGFR-CAR+ T cell. The central nervous system lacks notable
EGFR expression, which minimizes the potential for on-target, off-site toxicity, and high-grade glioma patients have
a very poor prognosis with the standard of care, which may render any therapeutic efficacy readily observable.
Accordingly, this may be one of the solid tumor trials that Ziopharm will initiate in 2016.
ELIMINATING ENDOGENOUS T-CELL RECEPTORS
The other source of graft-versus-host disease involves the recognition of “non-self” by donor-derived T cells’
endogenous aßTCRs that recognize major histocompatibility antigens in the recipient. The M.D. Anderson team has
demonstrated the feasibility of producing allogeneic CAR+ T cells that lack aßTCRs using zinc-finger nucleases.8
The resulting cell population was further enriched to eliminate ?dTCR+ T cells. The cells properly expressed a
CD19CAR, but were TCR negative. Moreover, they retained their proliferative capacity (equivalent to parental
cells) in response to stimulation.
4 Shinojima, N, et al. Prognostic value of epidermal growth factor receptor in patients with glioblastoma multiforme. Cancer Res (2003); 63(20):
6962.
5 Gan, HK, et al. The EGFRvIII variant in glioblastoma multiforme. J Clin Neurosci (2009); 16(6): 748.
6 Nicholson, RI, et al. EGFR and cancer prognosis. Eur J Cancer (2001); 37(suppl 4): s9.
7 Mimeault, M and Batra, SK. Molecular biomarkers of cancer stem/progenitor cells associated with progression, metastases, and treatment
resistance of aggressive cancers. Cancer Epidemiol Biomarkers Prev (2014); 23(2): 234.
8 Torikai, H, et al. A foundation for universal T-cell based immunotherapy: T cells engineered to express a CD19-specific chimeric-antigereceptor
and eliminate expression of endogenous TCR. Blood (2012); 119(24): 5697.
These modifications address the endogenous pathway that could lead to graft-versus-host disease and therefore
complements efforts directed at designing CARs capable of distinguishing between low and high expression levels
of biomarkers associated with normal and malignant cells, respectively.
REDUCING THE LIKELIHOOD OF CYTOKINE STORM
One of the toxic side effects identified in studies to date, called cytokine storm, is caused by a sudden surge in
inflammatory cytokines upon interaction of CAR T cells with the malignant cells. The M.D. Anderson team recently
determined that this potentially lethal condition can be avoided in lymphoma and leukemia patients by first
conducting a hematopoietic stem cell transplant.9 Donor-derived CD19-CAR+ T cells created with the Sleeping
Beauty transposon and employed as an adjunct to hematopoietic stem cell transplant avoided cytokine storm in the
16 patients treated. The therapy was also associated with manageable graft-versus-host disease in three of the
patients. Just as important, 50% of the patients, who were at a high risk of relapse, remained alive and in complete
remission at a median of 7.2 months (range: 2.1 – 21.3 months) following the hematopoietic stem cell therapy.
To avoid excessive cytokine release in treating solid tumors, we believe an adoptive cell therapy will be employed
as an adjunct to debulking surgery and/or treatment with Ziopharm’s Ad-RTS-IL12. (Ad-RTS-IL12 is a adenoviral
vector engineered to express IL-12 under the control of the RheoSwitch and designed to be injected directly into a
solid tumor where an oral activator ligand controls cytokine expression.) Figure 3 illustrates the different ways in
which the cytokine normally stimulates an immune attack.10 When released by an activated antigen presenting cell
(APC), the cytokine stimulates cytotoxic T and NK cells, antibody formation from B lymphocytes, and the
formation of Th1 cells that release inflammatory cytokines (e.g., IL-2, interferon-?, tumor necrosis factor-ß).
Figure 3. Antitumor Activity of Interleukin-1210
9 Kebriaei, P, et al. Donor-derived, CD19-directed, CAR-modified T cells infused after allogeneic hemaopoietic stem cell transplantation as preemptive
donor lymphocyte infusion in patients with CD19+ malignancies. Abstract #s802. Presented at the 20th Congress of the European
Hematology Association, June 11-14, 2015.
10 Lasek, W, et al. Interleukin 12: still a promising candidate for tumor immunotherapy? Cancer Immunol Immunother (2014); 63(5): 419.
ENHANCING CAR T CELL PERFORMANCE
Ziopharm is investigating an interleukin-12 gene therapy for breast cancer and glioblastoma. But cytokines may also
be employed to enhance the performance of CAR T cells. Based on recent presentations by Dr. Cooper and others at
M.D. Anderson Cancer Center, it appears that the Company will soon investigate a CAR T cell that expresses
interleukin-15 (IL-15) under the control of Intrexon’s RheoSwitch®.8,11 As shown in Figure 4, the cytokine plays a
central role in enhancing immune function by increasing the activation of B, T, NK, and dendritic cells.
Figure 4. Antitumor Activity of Interleukin-1512
This general stimulatory activity has attracted considerable attention to IL-15 as an immunotherapy candidate. Dr.
Cooper’s lab has also tested the cytokine as an element of an artificial antigen presenting cell that has been used in
processing CAR T cells.13 More recently, a different approach has been used – CAR T cells have been modified to
express IL-15 attached to its full-length receptor to enhance the cells’ activity (see Figure 5A on the next page).
Cells with that construct exhibited improved anti-tumor activity in a preclinical model, as shown in Figure 5B. Thus,
expression of the cytokine-receptor complex (Modified 2 CAR + mIL15) probably serves to counter the influence of
any Treg cells that downregulate the immune system and are frequently found in the vicinity of solid tumors.
Engineering CAR T cells to express the IL-15 bound to its receptor may serve another purpose – it should increase
the cells’ persistence in vivo. In fact, the improved performance of the CAR T cells exhibited in Figure 3B have not
been attributed exclusively to either the cytokine’s pleiotropic effects illustrated in Figure 4 or an improved
persistence of the T cells.
11 Cooper, LJN. Presentation at the Wells Fargo Healthcare Conference, September 10, 2015.
12 Jakobisiak, M, et al. Interleukin 15 as a promising candidate for tumor immunotherapy. Cytokine Growth Factor Rev (2011); 22(2): 99.
13 Forget, MA, et al. Activation and propagation of tumor-infiltrating lymphocytes on clinical-grade designer artificial antigen-presenting cells for
adoptive cell immunotherapy of melanoma. J Immunother (2014); 37(9): 448.
Figure 5. IL-15-Receptor Moiety Enhances the CAR T Cell14
USE OF ADOPTIVE CELL THERAPY
Cancer patients may eventually be treated multiple times with an adoptive cell therapy. In an early study, a patient
who had a population of tumor-infiltrating lymphocytes recognizing a mutated protein, ERBB21P, showed that
administration of those T cells were successful in reducing the tumor burden starting about two months after
treatment and in shifting the disease from a progressive to a stable condition.15 Upon relapse, the patient received
autologous T cells (>95% pure) targeting ERBB21P and once again tumor regression was observed. This time,
regression was noticeable sooner, at one month after treatment, and further improvement continued through the last
follow-up at 6 months. Hence, it seems likely that multiple administrations of an adoptive cell therapy will be
utilized to effect long-lasting remission and/or to convert many cancers into a chronic, treatable disease.
FUTURE CLINICAL TRIALS OF ADOPTIVE CELL THERAPIES
Ziopharm plans to initiate multiple clinical studies of adoptive cell therapies, including CAR T cells, engineered T
cell receptor-based T-cell therapies, and NK cell immunotherapies. New receptors are under development to treat
hematological and solid tumors, and at least some will involve receptors with their binding affinities fine-tuned to
distinguish between “normal” tissue and a “malignant growth.” Other modifications may include the use of an
inhibitory receptor that recognizes normal tissue, another that recognizes a combinatorial epitope (i.e., an antigen
formed, for instance, by the dimerization of two receptors such as HER1 and HER3), and an inducible receptor
whose expression is regulated by a gene switch. Finally, Ziopharm and its collaborators at the M.D. Anderson
Cancer Center are working toward the creation of off-the-shelf CAR-T cells.
The Company’s clinical programs for 2015 and for 2016 and beyond are summarized as follows:
2015 Clinical Trials
Therapy Indication Trial Site(s) Milestone
Ad-RTS-IL12 Glioblastoma Multicenter Early data in Q4,’15
Breast cancer Memorial Sloan Kettering Early data in Q4,’15
CAR T cells Hematological cancers M.D. Anderson Interim data in Q4,’15
Next-gen CD19-CARs M.D. Anderson Initiate Phase 1 study
14 Cooper, LJN. The Future of Cancer Therapy. Presented June, 2015.
15 Tran, E, et al. Cancer immunotherapy based on mutation-specific CD4+ T cells in a patient with epithelial cancer. Science (2014); 344(6184):
641.
Clinical Trials in 2016 and Beyond
Ad-RTS-IL12: Multicenter
CAR-T cells: Multicenter
CARs & Interleukin: M.D. Anderson Cancer Center
T-cell receptors: M.D. Anderson Cancer Center
NK cells: Multicenter
FINANCIAL REVIEW & VALUATION ANALYSIS
Ziopharm’s financial results for the first half were unremarkable. The Company recognized $544,000 in revenue
from the amortization of funding received from a $5 million R&D collaboration agreement that will end in the first
quarter of 2016. R&D expenditures totaled $14.4 million, down slightly from last year’s $14.9 million. G&A costs
came in at $11.3 million, up 74% from the 2014 tally of $6.5 million. (Note that we have treated a $67.3 million
charge taken in the first quarter for stock issued for the M.D. Anderson agreement.)
In the remainder of 2015, we estimate that operating expenses will increase moderately on a sequential basis as the
clinical development program advances. Next year, we figure R&D costs will continue to trend upward at a
moderate pace, while G&A expenses remain fairly level. Note that our estimates are consistent with the Company’s
expectation that it has sufficient cash on hand to support operations into the first quarter of 2018.
Our long-range projections are based on commercial launch of a CD19-CAR+ T cell therapy and Ad-RTS-IL12 for
glioblastoma in 2019. We’ve increased the starting market penetration rate estimates to 25% and 14% respectively,
based on the likelihood of less frequent/severe side effects from these therapies. We’ve included licensing fees in the
amount of $10 million in 2017 and a milestone of $6 million in 2018. Operating costs are projected to rise as the
Company’s adoptive cell therapies advance in clinical trials. In 2019, we’ve included an additional expense, a
royalty payment to Intrexon as required under the companies’ exclusive channel collaboration.
Our estimates of the number of shares outstanding reflect the recent issuance of stock to M.D. Anderson. We have
also assumed the Company raises capital in 2017 via an equity offering, though data from its clinical studies may
well support a lucrative licensing agreement thereby precluding the need to raise additional cash.
QUARTERLY INCOME STATEMENTS
?
(Fiscal years end December 31st.)
? Data are in thousands, except for per-share figures. Estimates are in italics.
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Revenue $ 200 $ 200 $ 633 $ 340 $ 272 $ 272 $ 272 $ 272 $ 272 $ - $ - $ -
Operating expenses
R&D expense $ 6,542 $ 8,346 $ 9,733 $ 8,085 $ 6,964 $ 7,424 $ 7,500 $ 7,512 $ 7,500 $ 7,500 $ 8,000 $ 8,000
G&A expense 3,442 3,031 2,842 2,851 4,250 7,073 6,000 6,027 6,050 6,100 6,100 6,150
Total operating costs 9,984 11,377 12,575 10,936 11,214 14,497 13,500 13,539 13,550 13,600 14,100 14,150
Operating profit/(loss) $ (9,784) $ (11,177) $ (11,942) $ (10,596) $ (10,942) $ (14,225) $ (13,228) $ (13,267) $ (13,278) $ (13,600) $ (14,100) $ (14,150)
Other income (expense) net ( 9) 1 2 1 (4) 14 700 600 5 00 500 400 400
Warrant valuation adj 8 2 5,600 5,847 194 - - - - - - - -
Pretax profit/(loss) $ (9,711) $ (5,576) $ (6,093) $ (10,401) $ (10,946) $ (14,211) $ (12,528) $ (12,667) $ (12,778) $ (13,100) $ (13,700) $ (13,750)
Income taxes - - - - -
Net profit/(loss) from ops $ (9,711) $ (5,576) $ (6,093) $ (10,401) $ (10,946) $ (14,211) $ (12,528) $ (12,667) $ (12,778) $ (13,100) $ (13,700) $ (13,750)
Non-recurring profit/(loss) - - - - (67,285) - - - - - - -
Net profit/(loss) $ (9,711) $ (5,576) $ (6,093) $ (10,401) $ (78,231) $ (14,211) $ (12,528) $ (12,667) $ (12,778) $ (13,100) $ (13,700) $ (13,750)
Earnings/(loss) per share $ (0.10) $ (0.06) $ (0.06) $ (0.10) $ (0.10) $ (0.11) $ (0.10) $ (0.10) $ (0.10) $ (0.10) $ (0.10) $ (0.10)
Shares outstanding 1 00,229 1 00,422 1 00,429 1 02,879 113,410 128,413 131,000 132,000 133,000 134,000 134,500 135,000
2014 2015 2016
ANNUAL INCOME STATEMENTS
?
(Fiscal years end December 31st.)
? Data are in thousands, except for per-share figures. Estimates are in italics.
VALUATION ANALYSIS
We’ve used a discounted future value method to set our price target. Specifically, we applied a price-earnings
multiple of 40 to our 2019 share earnings estimate of $1.13 and discounted the product, $45.20, back three years
using a 30% annual rate. The result was $20.57, which we rounded to $21 for our price target.
2014 2015 2016 2017 2018 2019
Gross Profit $ 1,373 $ 1,088 $ 272 $ 10,000 $ 6,000 $ 741,375
Operating expenses
R&D expense 32,706 $ 29,400 $ 31,000 $ 34,000 $ 37,500 $ 133,448
Royalty expense - - - - - 370,688
G&A expense 12,166 23,350 24,400 25,000 25,500 37,069
Total operating costs 44,872 52,750 55,400 59,000 63,000 541,204
Operating profit/(loss) $ (43,499) $ (51,662) $ (55,128) $ (49,000) $ (57,000) $ 200,171
Other income (expense) net (5) 1,310 - - - -
Warrant valuation adj 11,723 - - - - -
Pretax profit/(loss) $ (31,781) $ (50,352) $ (55,128) $ (49,000) $ (57,000) $ 200,171
Income taxes - - - - - 28,024
Net profit/(loss) $ (31,781) $ (50,352) $ (55,128) $ (49,000) $ (57,000) $ 172,147
Earnings/(loss) per share $ (0.31) $ (0.40) $ (0.41) $ (0.36) $ (0.41) $ 1.13
Shares outstanding 100,990 126,206 134,125 137,000 140,000 153,000
Ziopharm September 15, 2015
Griffin Securities Equity Research 10
BALANCE SHEET
(Fiscal years end December 31st.)
? Data are in thousands.
Note that the $118.6 million of cash on the balance sheet as of June 30th is expected to finance operations into the
first quarter of 2018.
ASSETS 6/30/2015 12/31/2014
Current Assets
Cash & equivalents 118,550 42,803
Accounts Receivable 89 145
Prepaid expenses & other 4,441 1,139
Total Current Assets $ 123,080 $ 44,087
Property & equipment $ 321 $ 531
Deposits 128 128
Other 509 491
Total Assets $ 124,038 $ 45,237
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 3,143 $ 2,004
Accrued expenses 8,752 7,182
Other 1,215 1,640
Total Current Liabilities $ 13,110 $ 10,826
Long-term debt $ - $ -
Deferred revenue - -
Deferred rent & other 487 570
Warrant liabilities - -
Total Liabilities $ 13,597 $ 11,396
Shareholders Equity
Common Stock, par value $ 131 $ 104
Additional Paid-In Capital 575,364 406,349
Accumulated Deficit (465,054) (372,612)
Total Shareholders Equity $ 110,441 $ 33,841
Total Liabilities & Equity $ 124,038 $ 45,237
