Griffin-ZIOP - Going for Gold with Immunotherapies Ziopharm’s R&D programs are on track and should be generating plenty of news before year end. Reiterate BUY and $21 target
Sure Griffin has banking relationship with ZIOP but no analyst has more access to Cooper and Kirk and Crystyna B is working with Kirk almost full time and while she likely can't share much with Markey, Markey is thoughtful and has about the best handle on ZIOP on Wall Street. Do not dismiss his comments. His target was looking good all last yr and then the sector meltdown and the ridiculous shorting % has kept it down - but like CLDA where people made fun of his target until the deal, Markey will ultimately be proven right and that he had the best grasp on the company.
GRIFFIN SECURITIES
Keith A. Markey, Ph.D., M.B.A.
Stock Symbol NYSE: ZIOP
Current Price $5.00
12 mos. Target Price $21.00
August 11, 2016
Ziopharm BUY
Company Update : Biotechnology
Going for Gold with Immunotherapies Ziopharm’s R&D programs are on track and should be generating plenty of news before year end.
¦ AML will soon be the target of two clinical programs.
The Company is preparing to initiate studies in the next few
months with two immune-therapies. One is a CAR T cell
targeting the differentiation antigen CD33 that has the potential
to target cancer progenitor cells. The market will likely extend
well beyond acute myeloid leukemia to include most myeloid
malignancies. The other program will test off-the-shelf primary
natural killer (NK) cells. This therapy has the potential to extend
the lives of medically fragile patients for whom the CAR T cell
may not be appropriate. The Phase 1 studies, which will likely
enroll patients with recurrent/refractory disease, are scheduled
to commence before year end.
¦ Preparations are under way to advance IL-12 into a pivotal
clinical trial. The ongoing study evaluating the therapy has
shown that the lowest dose tested has a survival benefit (8
months and counting vs. 3 – 4 months expected) for patients
with recurrent glioblastoma. The third cohort of patients is
receiving an intermediate dose of activator ligand and so,
the study should conclude soon. The survival benefit and
adverse events associated with the three veledimex doses (20,
30, and 40 mg/m2) will help in designing next year’s pivotal
study. Meanwhile, Ziopharm is preparing to initiate a clinical
trial of IL-12 with a PD-1 antibody, as preclinical research
demonstrated an additive effect with the combination.
¦ Two ongoing clinical trials will report data soon. Results
from the breast cancer study of the IL-12 gene therapy will be
presented at an oncology meeting in early October. And the
trial of the second-generation CD19-CAR T cell therapy may
provide news in December.
The Company is designing new immunotherapies. A T cell that
expresses a chimeric antigen receptor under the control of the
RheoSwitch® is showing promise in preclinical tests. This design
may permit T cell activity to be titrated to avoid toxicities without
curtailing the therapy entirely. An iterative process of design, build,
and test has reduced the time to produce CAR T cells to 14 days
and further improvements are likely. Also, considerable work is
going into employing the Sleeping Beauty transposon system to
create patient-specific immunotherapies based on T cell receptor
technology.
We are maintaining our BUY recommendation and $21 price
target. News from the clinic and the start-up of more trials,
including a pivotal study of IL-12 for glioblastoma, should stimulate
interest in ZIOP shares.
INVESTOR CONSIDERATIONS
We believe Ziopharm will provide a plethora of clinical and preclinical data in the next four months that will demonstrate the breadth and depth of its technology. Specifically, there are three venues where new information will likely be presented:
IL-12 breast cancer trial: European Society for Medical Oncology, October 7 – 11.
IL-12 glioblastoma trial: Society for Neuro-Oncology, November 17 – 20.
Second-generation CD19-CAR T cell trial: American Society of Hematology, December 3 – 6.
And as illustrated in the Figure 1, the Company will have six clinical trials under way later this year and another four studies starting in 2017 that include a registrational trial of IL-12 for recurrent brain cancer (GBM).
Figure 1. An Impressive 2016 R&D Pipeline
The clinical trials are only part of the Ziopharm R&D program, as a variety of other advances that have been made
at a preclinical level:
(i) The Company has been able to reduce the time required to produce CAR T cells (e.g., CD19-targeting) to 14 days using the Sleeping Beauty gene insertion technology. This is an important step toward generating personalized immunotherapies “at the bedside.” Further research will be necessary to reach
the ultimate goal with this type of therapy.
(ii) Ziopharm has already succeeded in producing off-the-shelf, primary natural killer (NK) cells. A key technology is a method for expanding harvested NK cells ex vivo without reducing their potency. This achievement underpins the Phase 1 trial that is scheduled to commence this year in patients with acute myeloid leukemia (AML). The immunotherapy may prove especially relevant for medically frail individuals who cannot tolerate the chemotherapy conditioning that typically precedes T cell infusions.
(iii) A RheoSwitch-controlled CAR T cell has been created to provide an added measure of safety to this type of therapy. At this juncture, we consider the results to be a proof of concept in demonstrating that expression of the receptor in this cell population can be regulated. Further work will likely be conducted to optimize the control/response mechanism.
With sufficient funds to support its operations and clinical development programs through 2017, Ziopharm seems well prepared to make significant headway in the immunotherapy field. As a result, we are maintaining our BUY recommendation and price target of $21. Given the amount of data expected in the months ahead, investors may wish to take advantage of ZIOP’s current valuation.
FINANCIAL REVIEW & VALUATION ANALYSIS
We have updated our model for the June-quarter financial results and made modest changes to our 2017 estimates.
Note that we have treated a non-cash $119.1 million charge related to the issuance of preferred stock to Intrexon under their revised collaboration agreement (see our report dated July 1st) as a non-recurring event and have excluded it from our income statement presentation.
QUARTERLY INCOME STATEMENTS
(Fiscal years end December 31st.)
? Data are in thousands, except for per-share figures. Estimates are in italics.
Excluding the non-cash charge for the preferred stock issuance, Ziopharm’s financial performance was near our estimates for the June quarter. As a result, we have made only slight adjustments to our near-term estimates.
ANNUAL INCOME STATEMENTS
(Fiscal years end December 31st.)
? Data are in thousands, except for per-share figures. Estimates are in italics.
Our projections are unchanged since our July 1st report that discussed the change in the collaboration terms between Ziopharm and Intrexon. We will update our long-range projections as the Company advances the CD33-CAR T cells and NK cells into clinical development. Presently, our financial model is based on the IL-12 gene therapy for glioblastoma (46%) and the CAR T cells for myeloid malignancies (54%).
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VALUATION ANALYSIS
We calculated our price target by employing a discounted future value model. Specifically, we multiplied the projected 2020 share earnings of $1.41 by a price-earnings multiple of 40 and discounted that future value back three years at an annual rate of 37%. That resulted in a $21.93-a-share valuation, which we rounded to $21 for our price target
