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ZIOP > SEC Filings for ZIOP > Form 10-Q on 7-May-2013All Recent SEC Filings

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Form 10-Q for ZIOPHARM ONCOLOGY INC


7-May-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This quarterly report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. In particular, statements contained in this Form 10-Q, including but not limited to, statements regarding the costs and timing our clinical trials and of the development and commercialization of our pipeline products and services; the sufficiency of our cash, investments and cash flows from operations and our expected uses of cash; our ability to finance our operations and business initiatives and obtain funding for such activities; our future results of operations and financial position, business strategy and plan prospects, projected revenue or costs and objectives of management for future research, development or operations, are forward-looking statements. These statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as "may," "will," "should," "expects," "plans," "anticipates," "intends," "targets," "projects," "contemplates," "believes," "seeks," "goals," "estimates," "predicts," "potential" and "continue" or similar words. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below, under Part II, Item 1A. "Risk Factors" and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

Business Overview

ZIOPHARM Oncology, Inc. is a biopharmaceutical company that seeks to develop and commercialize a diverse portfolio of cancer therapies that can address unmet medical needs through the licensing and development of a synthetic biology platform and proprietary small molecule drug candidates. On March 26, 2013, we announced that our Phase 3 trial of palifosfamide in first-line metastatic soft tissue sarcoma, entitled PICASSO 3, did not meet its primary endpoint of progression-free survival. With this outcome, we have made the decision to immediately terminate development of palifosfamide in first-line metastatic soft tissue sarcoma and place exclusive strategic focus on our synthetic biology programs in the field of cancer, pursuit to a partnership agreement with Intrexon Corporation, or Intrexon. Under the agreement, we obtained rights to Intrexon's effector platform for use in the field of oncology, which includes two existing clinical stage product candidates, DC-RTS-IL-12 + Activator Ligand and Ad-RTS-IL-12 + Activator Ligand. We plan to leverage Intrexon's synthetic biology platform to develop products to stimulate key pathways used by the body's immune system to inhibit the growth and metastasis of cancers, utilizing our capabilities to translate science to the patient setting. More detailed descriptions of DC-RTS-IL-12, Ad-RTS-IL-12, and our small molecule programs, and our clinical development plans for each are set forth below. More detailed descriptions of these product candidates and our clinical development plans for each are also set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and in other reports that we file from time to time with the Securities and Exchange Commission.


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Product Candidates

Synthetic Biology Programs: DC-RTS-IL-12 + Activator Ligand and Ad-RTS-IL-12 + Activator Ligand

General. On January 6, 2011, we entered into an Exclusive Channel Partner Agreement with Intrexon pursuant to which we intend to focus efforts by pursuing the development and commercialization of novel DNA-based therapeutics in the field of cancer treatment using Intrexon's Rheoswitch Therapeutic System®, or RTS®, and UltraVector® synthetic biology technologies. The channel partnering agreement contemplates our using Intrexon's technology directed towards in vivo expression of effectors in connection with the development of DC-RTS-IL-12 and Ad-RTS-IL-12 and generally to research, develop and commercialize products, in each case in which DNA is administered to humans for expression of anti-cancer effectors for the purpose of treatment or prophylaxis of cancer. See "-License Agreements, Intellectual Property and Other Agreements-Exclusive Channel Partner Agreement with Intrexon Corporation." DC-RTS-IL-12 and Ad-RTS-IL-12 are the two clinical-stage products currently in development under this channel partnering agreement. Under the agreement, Intrexon assigned to us all regulatory responsibilities relating to the two product candidates and we assumed sponsorship of the ongoing clinical trials of DC-RTS-IL-12.

Clinical Development Plan for the Synthetic Biology Program. We completed enrollment in a Phase 1b dose escalation study of DC-RTS-IL-12 in the second quarter of 2012 in the United States. DC-RTS-IL-12 employs intratumoral injection of modified dendritic cells from each patient and oral dosing of an activator ligand to turn on in vivo expression of interleukin-12, or IL-12. DC-RTS-IL-12, through the RTS®, controls the timing and level of transgene expression. The RTS ® technology functions as a "gene switch" for the regulated expression of human IL-12 in the patients' dendritic cells which are transduced with a replication incompetent adenoviral vector carrying the IL-12 gene under the control of the RTS®. In addition, another Phase 1 study employs direct injection of Ad-RTS-IL-12 for the regulated expression of human IL-12 for the treatment of patients with stage III or IV melanoma. The binding of the small molecule activator to the fusion proteins of RTS regulates the timing and level of IL-12 expression. In the absence of the activator ligand, the level of IL-12 is below detectable levels.

A clinical study of Ad-RTS-IL-12 is currently ongoing in a Phase 1/2 study for metastatic melanoma. The Phase 1 portion of the study is evaluating safety in addition to immunological and biological effects and efficacy of the therapeutic candidate in patients with advanced melanoma. Enrollment in the Phase 1 portion of the study is complete.

In the Phase 1 portion of the study, clinical activity was observed at the two highest dose levels. The data also showed a correlation between T-cell immune responses and clinical outcome. We expect to submit full results of the study for presentation at a major medical meeting.


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Based on early activity, and a determination of a biologically effective dose, we advanced to Phase 2 in which the first patient has been dosed. The Phase 2 study is a multi-center, single-arm, open-label expansion study that will enroll approximately 15 patients with unresectable Stage III or IV melanoma and further evaluate the safety and efficacy of intratumoral injections of Ad-RTS-IL-12 in combination with an oral activator ligand. Data from this study are expected in the second half of 2013.

Part one of a two-part study will consist of a safety assessment for Ad-RTS-IL-12 and palifosfamide, alone or in combination. Part two will consist of an efficacy evaluation of the Ad-RTS-IL-12 only arm and the combination arm. The primary endpoint of the study is rate of progression-free survival at 16 weeks. Secondary endpoints include objective response rate, duration of response and evaluation of pharmacodynamic tumor markers.

We initiated this Phase 2 trial of Ad-RTS-IL-12 and palifosfamide for breast cancer in the first quarter of 2013. This two-part multi-center U.S. study will enroll up to 68 patients with non-resectable, recurrent or metastatic breast cancer who have visible lesions or lesions accessible by injection. The study is designed to assess the safety and efficacy of the drug combination of Ad-RTS IL-12 and a chemotherapy agent. Although this study was initiated with palifosfamide as the chemotherapy and second investigational therapy, we may substitute palifosfamide with an FDA-approved chemotherapeutic agent.

Furthermore, we are evaluating other potential preclinical candidates and continuing discovery efforts aimed at identifying other potential product candidates under our Channel Agreement with Intrexon.

Palifosfamide, ZIO-201

General. Palifosfamide, or isophosphoramide mustard, referred to as IPM, is a proprietary active metabolite of the pro-drug ifosfamide. Ifosfamide, like the related drugs cyclophosphamide and bendamustine, is a DNA alkylating agent, which is a form of cancer therapy to treat a wide range of solid tumors and hematological malignancies. Ifosfamide has been shown to be effective in the treatment of sarcoma and lymphoma, either by itself or in combination with other anti-cancer agents. Ifosfamide is approved by the U.S. Food and Drug Administration, or FDA, as a treatment for testicular cancer and often used in combination to treat sarcoma, although it is not approved for this indication by the FDA.

Our preclinical studies have shown that, in animal and laboratory models, palifosfamide evidences activity against leukemia and solid tumors. These studies also indicate that palifosfamide may have a better safety profile than ifosfamide or cyclophosphamide, in part because it does not appear to produce known toxic metabolites of ifosfamide, such as acrolein and chloroacetaldehyde. Acrolein, which is toxic to the kidneys and bladder, can mandate the administration of a protective agent called mesna, which is inconvenient and expensive. Chloroacetaldehyde is toxic to the central nervous system, causing "fuzzy brain" syndrome for which there is currently no protective measure. Similar toxicity concerns pertain to high-dose cyclophosphamide, which is widely used in bone marrow and blood cell transplantation. Because palifosfamide is the stabilized active metabolite of ifosfamide and a distinct pharmaceutical composition without the acrolein or chloroacetaldehyde metabolites we believe that the administration of palifosfamide may be a more effective and well tolerated agent to treat cancer.

In addition to anticipated lower toxicity, palifosfamide may have other advantages over ifosfamide and cyclophosphamide. Palifosfamide cross-links DNA differently than the active metabolite of cyclophosphamide, resulting in a different activity profile.


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Small-Cell Lung Cancer. SCLC is almost exclusively associated with smoking. Similar to sarcoma, standard of care for SCLC, which is etoposide and platinum therapy, has changed little in decades. Published studies of ifosfamide in combination with standard of care have evidenced enhanced efficacy but also with enhanced side effects, providing for an unfavorable benefit to risk association. We believe that combining palifosfamide with standard of care could offer a separation of enhanced efficacy from increased toxicity.

Other Indications. Palifosfamide may be useful to treat many other solid tumors, including pediatric cancer, and hematological malignancies. Oral palifosfamide could also offer not only a significant advancement to current therapies but also greater patient access and convenience.

SCLC, Significant Unmet Medical Need. Metastatic SCLC represents a significant unmet medical need with standard of care considerably dated. The estimated U.S. annual incidence is 30,000 - 35,000 patients and 250,000 patients worldwide. Approximately 70% of patients have metastatic disease. Platinum and etoposide are standard of care in the first-line setting. A formal retrospective mortality study also suggests that the SCLC population in China is substantial and projected from the study to be greater than 150,000 patients and growing.

Clinical Development Plan for Palifosfamide. Following review of preclinical combination studies, we initiated a Phase 1 dose escalation study of palifosfamide in combination with doxorubicin, primarily in patients with STS. We reported favorable results and safety profile from this study at the 2009 annual meeting of the American Society of Clinical Oncology, or ASCO. In light of reported favorable Phase 2 single agent clinical activity data, and with the combination being well tolerated in the Phase 1 trial, we initiated a Phase 2 randomized controlled trial in the second half of 2008, which we refer to as PICASSO, to compare doxorubicin plus palifosfamide to doxorubicin alone in patients with first-and second-line metastatic or unresectable STS. The study generated positive top-line interim data in 2009. We subsequently presented further positive interim data from the trial at the 15th Annual Connective Tissue Oncology Society meeting held in November 2009 and again at the 2010 ASCO annual meeting in June 2010, where the presentation was selected for "Best of ASCO." With guidance from the FDA, we initiated a Phase 3 trial in first-line metastatic STS entitled PICASSO 3, an international, randomized, double-blinded, placebo-controlled trial that enrolled 447 patients. In March 2013, we announced that this study did not meet its primary endpoint of progression-free survival (PFS) and that we would terminate our development program in metastatic soft tissue sarcoma. Palifosfamide was well tolerated, with a safety profile in combination with doxorubicin observed in the study comparable with other palifosfamide clinical trials in soft tissue sarcoma. PICASSO 3 study data has been submitted for presentation at an upcoming major scientific meeting.


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A Phase 1 trial has been completed with palifosfamide in combination with etoposide and carboplatin. Data informed appropriate dosing for initiating a potentially pivotal, adaptive Phase 3 trial in first-line, metastatic SCLC. In June 2012, the Company initiated an international, multi-center, open-label, adaptive, randomized study of palifosfamide in combination with carboplatin and etoposide, or PaCE, chemotherapy versus carboplatin and etoposide, or CE, alone in chemotherapy naïve patients with metastatic small cell lung cancer, which we refer to as MATISSE. The MATISSE study is designed to enroll up to 548 patients. The trial's primary endpoint is overall survival. MATISSE is being conducted at centers in North America, Europe, Australia, Africa and Asia. In the first quarter of 2013, the IDMC for the MATISSE study conducted an early analysis of safety data after 20 patients had received at least two chemotherapy cycles and recommended the study proceed as planned.

The study's adaptive design includes a prospectively planned opportunity for modification of the study protocol by adjusting one or more specified components of the design in order to optimize statistical power. Evaluation of the study's powering will be conducted following 125 events. At the interim analysis, we will review all efficacy and safety data and decide whether to: 1) halt the study for efficacy or futility, 2) continue the study to its planned enrollment of 548 patients, 3) decrease sample size, or 4) increase event size. Based on the outcome of PICASSO 3 in soft tissue sarcoma and the resulting revision in the company's development plans for palifosfamide, enrollment in this study was suspended with 188 patients enrolled. The interim analysis of Overall Survival events in MATISSE is forecasted to be reached in the first half of 2014.

Indibulin, ZIO-301

General. Indibulin is a novel, small molecule inhibitor of tubulin polymerization that we acquired from Baxter Healthcare in 2006, and is the subject of numerous patents worldwide, including those in the United States, the European Union and Japan. The microtubule component, tubulin, is one of the more well-established drug targets in cancer. Microtubule inhibitors interfere with the dynamics of tubulin polymerization, resulting in inhibition of chromosome segregation during mitosis and consequently inhibition of cell division. A number of marketed IV anti-cancer drugs target tubulin, such as the taxane family members, paclitaxel (Taxol®), docetaxel (Taxotere®), the Vinca alkaloid family members, vincristine and vinorelbine, and new classes of tubulin inhibitors including the epothilones. This broad class of agents is typically the mainstay of therapy in a wide variety of indications. In spite of their effectiveness, the use of these drugs is associated with significant toxicities, notably peripheral neurotoxicity.

Preclinical studies with indibulin demonstrate significant and broad antitumor activity, including activity against taxane-refractory cell lines. The cytotoxic activity of indibulin was demonstrated in several rodent and human tumor cell lines derived from prostate, brain, breast, pancreas, lung, ovary, and cervical tumor tissues and in rodent tumor and human tumor xenograft models. In addition, indibulin was effective against multidrug resistant tumor cell lines (breast, lung, and leukemia) both in vitro and in vivo. Indibulin is potentially safer than other tubulin inhibitors as no neurotoxicity has been observed at therapeutic doses in rodents and in the Phase 1 trials. Indibulin has also demonstrated synergy with approved anti-cancer agents in preclinical studies.


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Indibulin has a different pharmacological profile from other tubulin inhibitors currently on the market as it binds to a unique site on tubulin and is active in multi-drug-resistant (MDR-1, MRP-1) and taxane-resistant tumors. Indibulin binding causes destabilization of microtubules in vitro, an effect similar to that of the vinca alkaloid family or colchicine, but opposite to that of paclitaxel and related drugs and different from the epothilones.

Testing of indibulin for in vitro growth inhibitory activity against a panel of human and rodent tumor-derived cell lines revealed that the drug candidate is active in a broad spectrum of cell lines derived from different organs. In vivo, indibulin is active in a number of xenograft and rodent tumor models. Its unique pharmacodynamic properties demonstrated in preclinical studies, as well as an excellent safety profile observed to date in ongoing Phase 1 studies, warrant further evaluation in the clinic.

Clinical Development Plan for Indibulin. Phase 1 study as a single agent in patients with advanced solid tumors has been completed. We have reported clinical activity at well-tolerated doses using a continuous dosing scheme without the development of clinically relevant peripheral neuropathy. Following encouraging preclinical results obtained with indibulin in combination with other chemotherapies, two Phase 1 combination studies were initiated with TarcevaTM and XelodaTM, respectively. The favorable activity and safety profile of oral indibulin with oral XelodaTM was reported at ASCO's annual meeting in May 2009. In all studies, a maximum tolerated dose, or MTD, has not been established. Preclinical work established a dosing schedule to enhance activity, while managing toxicity and that regimen, five days on drug and nine days off, is now in Phase 1 study in late stage metastatic breast cancer. In light of the difficulty in establishing an MTD and the need to administer many capsules several times a day, we have modified the dosage form to administer once a day dosing in the Phase 1 trial with the five days on and nine days off schedule.

Darinaparsin , ZIO-101

General. Darinaparsin is an anti-mitochondrial (organic arsenic) compound covered by issued patents and pending patent applications in the United States and in foreign countries. A form of commercially available inorganic arsenic (arsenic trioxide [Trisenox®], or ATO) has been approved in the United States, the European Union and Japan for the treatment of acute promyelocytic leukemia, a precancerous condition. In the United States, ATO is on the compendia listing for the therapy of multiple myeloma, and has been studied for the treatment of various other cancers. Nevertheless, ATO has been shown to be toxic to the heart, liver, and brain, which limits its use as an anti-cancer agent. ATO carries a "black box" warning for electrocardiogram abnormalities since arsenic trioxide has been shown to cause QT interval prolongation and complete atrioventricular block. QT prolongation can lead to a torsade de pointes-type ventricular arrhythmia, which can be fatal. Inorganic arsenic has also been shown to cause cancer of the skin and lung in humans. The toxicity of arsenic is generally correlated to its accumulation in organs and tissues. Our preclinical and clinical studies to date have demonstrated that darinaparsin is considerably less toxic than ATO, particularly with regard to cardiac toxicity.

In vitro testing of darinaparsin using the National Cancer Institute's human cancer cell panel demonstrated activity against a series of tumor cell lines including lung, colon, brain, melanoma, ovarian, and kidney cancer. Moderate activity was shown against breast and prostate cancer tumor cell lines. In addition to solid tumors, in vitro testing in both the National Cancer Institute's cancer cell panel and in vivo testing in a leukemia animal model demonstrated substantial activity against hematological cancers (cancers of the blood and blood-forming tissues) such as leukemia, lymphoma, myelodysplastic syndromes, and multiple myeloma. Results indicate significant activity against the HuT 78 cutaneous T-cell lymphoma, the NK-G2MI natural killer-cell NHL, KARPAS-299 T-cell NHL, SU-DHL-8 B-cell NHL, SU-DHL-10 B-cell NHL and SU-DHL-16 B-cell NHL cell lines. Preclinical studies have also established anti-angiogenic properties of darinaparsin, providing support for the development of an oral form of the drug, and established synergy of darinaparsin in combination with other approved anti-cancer agents.

Clinical Development Plan for darinaparsin: Phase 1 testing of the IV form of darinaparsin in solid tumors and hematological cancers was completed and we reported clinical activity and, we believe importantly, a safety profile from these studies as predicted by preclinical results. We subsequently completed Phase 2 studies in advanced myeloma, primary liver cancer and in certain other hematological cancers. At the May 2009 annual meeting of ASCO, we reported favorable results from the IV trial in lymphoma, particularly peripheral T-cell lymphoma, or PTCL. A Phase 1 trial in solid tumors with an oral form of darinaparsin has completed enrollment. Data from the Phase 1 oral study will guide further study. We have obtained Orphan Drug Designation for darinaparsin in the United States and Europe for the treatment of PTCL and have entered into a licensing agreement with Solasia for the Asia/Pacific territory with a focus on IV-administered darinaparsin in PTCL. Further, clinical studies are currently ongoing with Solasia.


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Development Plans

We are currently pursuing several clinical programs for our synthetic biology and small molecule candidates which include:

• DC-RTS-IL-12- completing a Phase 1b trial in patients with metastatic melanoma.

• Ad-RTS-IL-12- completing a Phase 1b trial in patients with late-stage melanoma, continuing enrollment in our Phase 2 trial in patients with late-stage melanoma and enrolling a Phase 2 trial of Ad-RTS-IL-12 and palifosfamide for breast cancer.

• palifosfamide (ZIO-201) - collecting data for overall survival in our Phase 3 trial in SCLC, entitled MATISSE.

• indibulin (ZIO-301) - completing a Phase 1 trial in patients with metastatic breast cancer.

• darinaparsin (ZIO-101) - working with Solasia in the licensed territory; assessing future oral/IV opportunities.

We are also evaluating additional potential preclinical candidates and continuing discovery efforts aimed at identifying other potential product candidates under our Channel Agreement with Intrexon. In addition, we may seek to enhance our pipeline in synthetic biology through highly focused strategic transactions, which may include acquisitions, partnerships and in-licensing activities. We may also seek to out-license some or all of our small molecule programs to further support our synthetic biology efforts.

Our current plans involve using our principal internal financial resources to develop the synthetic biology program, with the intention of ultimately partnering or otherwise raising additional capital to support further development activities for our strategic product candidates. As of March 31, 2013, we had approximately $55.7 million of cash and cash equivalents. In April 2013, we implemented a workforce reduction plan and other cost-cutting measures in an attempt to extend our cash resources as long as possible, though there are no assurances that such efforts will be effective. Based upon our current plans, we anticipate that our cash resources will be sufficient to fund our operations into the first quarter of 2014. This forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses over the next twelve months could vary materially and adversely as a result of a number of factors, including the factors discussed in the "Risk Factors" section of this report and the uncertainties applicable to our forecast for the overall sufficiency of our capital resources, which are discussed under "-Liquidity and Capital Resources" below. We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate.

Furthermore, the successful development of our product candidates is highly uncertain. Product development costs and timelines can vary significantly for each product candidate, are difficult to accurately predict, and will require us to obtain additional funding, either alone or in connection with partnering arrangements. Various statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of each product. The lengthy process of seeking approval and the subsequent compliance with applicable statutes and regulations require the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could materially, adversely affect our business. To date, we have not received approval for the sale of any product candidates in any market and, therefore, have not generated any revenues from our product candidates.


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Financial Overview

Overview of Results of Operations

Three months ended March 31, 2013 compared to three months ended March 31, 2012

Revenue. Revenue during the three months ended March 31, 2013 and 2012 was as follows:

Three months ended March 31, ($ in thousands) 2013 2012 Change Collaboration revenue $ 200 $ 200 $ - 0 %

Revenue for the three months ended March 31, 2013 was the same as the three months ended March 31, 2012. This is due to the continued recognition of income related to our entry into the collaboration agreement with Solasia Pharma K.K. on March 7, 2011. Under this agreement we received $5.0 million in research and development funding which we are recognizing over the estimated period of performance under the agreement, currently 75 months.

Research and development expenses. Research and development expenses during the . . .

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