Over the past few months, I have spent hundreds of hours taking a very deep look at Ziopharm (ZIOP).
Last week, I posted my detailed thoughts online in a different venue. However,the article was quickly pulled without my knowledge or permission. This was done despite the fact that precisely zero questions or issues were raised with regards to accuracy in the article. As a result, I am now posting all of my comments and the previous article here.
After the article was published, I received a tremendous amount of new information from a variety of new and unexpected sources. I am already evaluating and processing a great deal of new findings, and I hope to be able to share them soon.
Following my article, ZIOP issued a press release stating that my observations were both misleading and “wrong”.
A careful read of this press release is very instructive.
First, although ZIOP says I was “wrong”, they fail to cite a single event, fact or data point which is inaccurate in any way. If ZIOP or anyone else can do so, I continue to state that I will correct any such inaccuracy and explain the discrepancy. So far neither ZIOP nor anyone else has done so.
I am not trying to simply say “I was right”, instead I am trying to point out that ZIOP’s well worded press release actually fails to address any of the many significant issues that were raised, and in fact it turns out that the specific wording used in the press release could cause a reasonable investor to draw some very inaccurate conclusions. Once again, I am coming to the conclusion that ZIOP is selectively disclosing information that will be viewed as positive, while withholding information that would certainly be viewed as negative. As I show below, just a tiny bit more information from ZIOP in that press release would have clearly raised substantially more concerns, rather than soothing investors.
As always, this article is far too long. So I put some key conclusions up front. (Note: a few of these are repeated from the previous article.)
- Under any and all circumstances, the Form 483 / FDA warning letter were both material to investors and should have been disclosed, even if ZIOP was of the opinion that the violations had no impact on the trial.
- Dr. Jonathan Lewis, ZIOP’s dual CEO/CMO in 2009, signed a financing engagement with Rodman just 2 days after learning that Dr. Chawla was facing an FDA audit. This “material contract” engagement letter was not disclosed for almost 2 years, and was in the wrong company filing. After stating that existing cash was adequate in a press release, ZIOP quickly sold stock to investors BEFORE any independent audit could have been completed on Dr. Chawla’s site.
- The “independent audit” of Dr. Chawla’s site provides little to no comfort about the reliability of the data in Phase 2 due because of WHO provided it and WHEN it was provided.
- At the time of the inspection and Form 483, ZIOP had just $1-2 million in cash to support all company operations, pay employees AND fund the substantial ongoing clinical trial expenses. Within 4 weeks, ZIOP stopped the study early, declaring it a success, despite the problems which occurred at Dr. Chawla’s site.
- Ziopharm has not disclosed the ultra short stability of Palifosfamide, and has not incorporated the revenue impact that the short stability will have.
- As expected, the FDA warning letter addresses problems with the data, not the outcome measures themselves. As shown, just because the warning letter does not specifically address the outcome measures does not mean that the data is not problematic.
- In evaluating the “transition” from Phase 2 to Phase 3, the FDA does minimal analysis of the data or the quality of the data. The decision to proceed to Phase 3 was Ziopharm’s decision, not the FDA’s.
- Ziopharm has displayed an ongoing and persistent pattern of failing to disclose material negative events and data. Based on past behavior, it is unclear what information is currently not being disclosed.
- Most of the patients from Phase 2 are by now deceased, such that ZIOP has known the results of Phase 2 for some time. Yet ZIOP has continued to delay releasing any detailed underlying data.
Evaluating the “audit” of the Phase 2 trial
In Ziopharm’s response, they confirm that they were aware of the FDA’s significant problems which occurred at Dr. Chawla’s clinic during the Phase 2 clinical trials for Palifosfamide. When the FDA informed ZIOP of these issues, ZIOP states that they then initiated an independent audit of the data by that site from a former FDA auditor who concluded that “the the study site’s violations had no impact on the PICASSO study or the quality of data.”
This statement seems to be categorical and conclusive and would no doubt provide significant reassurance to investors.
The conclusion one might be tempted to draw is that ZIOP found out about the violations that occurred at the lead investigator’s clinic, determined that they had no impact on the study and then chose not to disclose the FDA’s Form 483 / Warning Letter because the impact was determined to be not material.
However an astute investor will quickly realize that ZIOP did not actually make that statement.
Before getting to the real problem, let’s look at a obvious problem first.
Problem #1: Under any and all circumstances, the Form 483 was material, yet ZIOP never disclosed it.
Given the severity of the problems described by the FDA in explicit language along with the rarity of clinical sites receiving such letters, just the fact that this letter was issued is a material event which ZIOP deliberately failed to disclose. Even if ZIOP had come to the conclusion that the impact was not material, the company clearly should have disclosed the event along with the view that view that it was not expected to be material. So under any circumstances, ZIOP clearly hid a material event from investors in all subsequent financings.
By contrast, just last week, St Jude (STJ) came out and disclosed that it MIGHT get an FDA warning letter, even before the letter was issued. The fact that a company discloses just the possibility of getting such a letter illustrates just how material an FDA warning letter really is.
Yes, I know what you’re thinking. You’re thinking that this is just a technicality about disclosure ahead of a financings that happened a few times over the past 2 years. You’re thinking, it’s not a big deal because all that matters now are the current prospects for Palifosfamide.
Actually, it gets worse.
Problem #2: “Auditors” are not even responsible for evaluating the impact of data on the overall study.
First off, ZIOP states in the press release that: “all data from ZIOPHARM’s Phase 2 PICASSO study at this site were reviewed by an independent, former FDA good clinical practice (GCP) auditor, and the auditor concluded that the study site’s violations had no impact on the PICASSO study or the quality of data”.
An astute reader will quickly realize that it is not the job of an auditor in any way to determine the impact of violations on the outcome of the study. In short, an auditor is not even qualified to make such a statement.
The thing to focus on here is “input” vs. “output”.
As shown in this FDA presentation, “GCP is defined as a standard for the design, conduct, performance, monitoring, auditing, recording, analysis and reporting of clinical trials or studies.”
GCP auditors are responsible for evaluating the proper implementation of methods and procedures which will ensure that the study is conducted in a way that generates reliable data. They are responsible for evaluating the input procedures. For example, the FDA warning letter to Dr. Chawla noted violations which would jeopardize the “reliability and integrity of the data” because measurements were taken at the wrong time and side effects were not recorded. In other words, the FDA simply identified areas where violations in input procedures occurred such that data input would be subject to mistakes or omissions. In addition, as part of an audit, the auditor would be expected to perform simple tasks such as doubling checking that data in the database matched the data on various source documents. The FDA auditer did not evaluate the quality of the data itself.
While it definitely sounds good to have the opinion of an FDA auditor, the fact is is that an auditor is not in any position to say that these violations had no impact on the study or the quality of the resulting data. Auditors are not qualified or responsible for expressing an opinion on the output data itself or what it means.
But even if we temporarily forget the fact that an auditor can make such a statement as that, other problems quickly arise.
Problem #3: A substantial audit could not have been completed prior to the early stopping of the Phase 2 trial
Note: I am not suggesting that no audit ever occurred, I am suggesting that it occurred well after the fact, and after ZIOP had already stopped the trial early, claiming it was a “success”.
It is very, very important to note that in its latest reassuring press release, ZIOP cleverly refrains from stating WHEN this independent audit occurred as well as WHEN the auditor conveyed this opinion to ZIOP. The importance of this will become apparent shortly. And this is a much bigger problem.
Was the independent audit of Dr. Chawla’s site completed before the Rodman financing ? Before the Phase 2 trial was concluded early due to its stated success ?
If the audit had been conducted that quickly, ZIOP certainly would have told us so, but of course they did not.
If this audit was completed after the Rodman financing then it is clear that ZIOP would have no basis for any “not material” excuse.
More importantly, if the audit was completed before September 30th, then ZIOP could certainly never justify stopping the trial early and declaring it a “success”.
Based on the information below, I am confidant that ZIOP would not have been able to conduct a thorough audit and receive such a report during that time.
Again, a timeline is helpful.
||FDA commences inspection of Dr. Chawla.
||Ziopharm signs exclusive financing agreement with Rodman & Renshaw
||(Engagement letter not disclosed until almost 2 years later, in the wrong filing)ENGAGEMENT LETTER.
||FDA concludes audit, issues form 483.AUDIT DATES.
||ZIOP prices equity deal
||Dr. Chawla responds to FDA
||Equity offering closes. ZIOP receives proceeds.
||Ziopharm has officially stopped enrollment in Phase 2 due to its “success”
The FDA audit was completed on August 27th, at which time ZIOP was down to just $1-2 million in cash.
The Rodman financing was priced just 8 business days after the FDA completed its audit. This time span included Labor Day Weekend. And presumably the marketing of the deal started a few days earlier.
The FDA audit took 3 full weeks to be completed. And in fact, the independent auditor’s job is actually much more difficult than the FDA’s job in auditing Dr. Chawla’s site. All the FDA had to do was review the practices, procedures and data and then flag any problems found. By contrast, the task of the independent auditor was to review all of the extensive data and source documentation gathered from 216 subject appointments (12 patients x 18 appointments each) and then ENSURE that they were accurate and reliable enough to make the categorical statement that the violations “had no impact on the PICASSO study or the quality of data”. The burden on the independent auditor of ensuring reliability is clearly much heavier than the burden of the FDA, which was simply identifying problems. In addition, the independent auditor would certainly have to produce a written report which would document and verify these findings. The auditor would have to be extremely confidant to make such statements in a written report regarding a Phase 2 trial.
Could ZIOP find an independent auditor, get them to the site, perform all of the work and then complete a written report in just 8 business days ? For now, I am quite confidant that the answer is no.
Looking further, we can see that Dr. Chawla issued his response to the FDA on September 14th, yet the FDA makes no note of any audit occurring when evaluating his responses. It hadn’t happened yet.
Then just 12 business days later, ZIOP stopped the trial early due to its apparent “success”. So the next question is, could the independent auditor have completed this work and then written and issued his final report in just 12 business days ? Could ZIOP then incorporate that new information to make such an important decision about stopping the trial ?
Again, I am confidant that the answer is no.
Even worse, if it turns out that ZIOP did receive a clean opinion in a written report in just 12 days, then we need to give serious consideration to how thoroughly that audit was conducted. If the FDA took 3 weeks just to spot the problems, then how could ZIOP verify that the data and the trial were “bullet proof” in just 12 business days ? So bullet proof that they could then immediately halt the trial.
As a point of reference, with 216 subject appointments, the auditor would have to be reviewing all of the underlying data regarding effectiveness and side effects from source documents and verifying it against a database. This review and analysis would need to be done for 18 appointments every day.
Looking at additional dates is also revealing.
The FDA commenced their inspection of Dr. Chawla’s site on Wed, August 5th.
Perhaps by coincidence, just two days after learning that Dr. Chawla’s site was being inspected, on August 7th, ZIOP CEO/CMO Jonathan Lewis quickly signed an exclusive financing agreement with Rodman & Renshaw to complete an equity offering. Also a coincidence, this engagement letter was not disclosed by ZIOP until almost 2 years later (March 2011) and in the wrong filing (Disclosed in 2010 10K, not in 2009 10K).
On Thursday, August 27th, the FDA completed its inspection and presented and discussed Form 483 and its findings with Dr. Chawla. ZIOP was notified. At this time, ZIOP was down to $1-2 million in cash with which to run the entire company, pay its employees and pay for the trial expenses. (And as we know, clinical trials are phenomenally expensive.)
By Monday, September 7th, ZIOP would have begun marketing the Rodman equity offering which priced on Wednesday, Sep 9th. PRICING DATE. Note, this offering was priced BEFORE Dr. Chawla had even responded to the FDA.
The stock offering was set to close on Tuesday, September 15th at which time, ZIOP would receive their money. In addition to the signing and non-disclosure of the Rodman engagement letter, this is now a 3rd coincidence that the response to the FDA came at the last minute (Monday, September 14th, just 1 day prior to ZIOP receiving their money from investors. RESPONSE DATE
However, by September 30th (at the latest), the Phase 2 trial had been stopped early due to the “positive” findings.
The conclusion to be reached here is that given what we know, it seems very apparent that there was no audit of any substance conducted prior to the early stopping of the Phase 2 trial. If any actual audit did occur within that time, then its thoroughness would be very questionable given how quickly it was completed. Investors would most likely want significantly more detail about the timing and specific tasks performed in any such audit.
Hopefully ZIOP will disclose this information as soon as possible. Until then, investors have no idea as to whether any such audit was even conducted at a relevant time. (And of course, let’s now un-forget Problem #1, the fact that auditors are not the ones to even give an opinion as to the impact of the data on the overall trial.)
IN MY OPINION, Ziopharm halted the trial early simply because they were out of money and for no other reason. IN MY OPINION, Ziopharm could not have completed any independent audit of substance prior to stopping the Phase 2 trial early.
Who “received” the Form 483 / FDA warning letter ?
Anyone who has read ZIOPs disclosure in its many equity offerings will remember that ZIOP states explicitly that is has not “received” any Form 483 or FDA warning letter. ZIOP could have helped its own case by rewording this language to say something like “The FDA has not issued any Form 483 / Warning Letter to ZIOP”.
But since they did not say that, they now have a problem because they did in fact “receive” the Form 483 and FDA warning letter that were issued in connection with the clinical trial.
In the press release, they try to make this distinction.
“The Form 483 was issued directly to the independent investigator, not to ZIOPHARM.”
I will leave it up to the lawyers to determine whether or not ZIOP can be deemed to have “received” a Form 483 / Warning Letter. If the word “received” is deemed to mean that they, well…”received” the Form 483 and Warning letter, then one would expect significant repercussions.
And please note, in my article I specifically mentioned that BECAUSE the letter was issued to Dr. Chawla and not ZIOP, that ZIOP was able to have their own name redacted on the FDA website.
Do the violations in the letter even matter ?
The ZIOP press release also notes that the warning letter and Form 483 “had nothing to do with any outcome measures of the Phase 2 PICASSO study”.
That is certainly very reassuring, however it is probably a good idea to clarify what the “outcome measures” were, just to be sure.
According to Clinicaltrials.gov, the only outcome measure listed in Picasso 2 is this:
“The primary efficacy analysis will be conducted on the intent-to-treat (ITT) population. All attempts will be made to conduct assessment of disease status every 6 weeks until progression of disease or initiating off protocol anti cancer therapies. [ Time Frame: Every 6 weeks until progression ] [ Designated as safety issue: No ]”
Clearly this doesn’t even tell us what the outcome measures are, which is notably odd.
Since this doesn’t even tell us what the So the question is, what are the outcome measures ? Let’s assume we are interested in OS and PFS.
The FDA warning letter and Form 483 did not make any explicit statement about OS or PFS (the outcome measures), nor would we ever expect it to, because that is not what warning letters do. Warning letters are issued in response to violations by investigators in conducting clinical trials which could jeopardize data or patient safety. They do not evaluate outcome measures, so this it is not a surprise that this was not mentioned by the FDA.
In addition, we might want to assume that we are interested in “safety” as well, especially since Pali is said to have far fewer side effects. Clearly the failure to record side effects would have an impact on knowing the side effect profile for the drug. So if this happens to be one of the outcome measures, then the press release should probably be reworded. Quickly.
The fact is, that by measuring PK samples at substantially wrong times, it affects the ability of ZIOP to prove that a certain dosage is achieving certain results. When the FDA reviews this in Phase III, it could prove to be an issue because of the small size of the Phase II study and the large (7/12) number of patients who were measured at incorrect times. So now we need to ask, how confidant are we that the dosage is correct and can be statistially linked to OS and PFS ?
Was it OK to keep using Dr. Chawla ?
ZIOP states that: All regulatory matters raised in Mr. Pearson’s blog entry were resolved by the investigator in full in 2010, and had no impact on the Company’s transition from Phase 2 to Phase 3.
Um, so wait a second…so the FDA audit happened in August of 2009. Then at some time ZIOP had an independent audit done to verify the quality of data and eliminate the possibility of and problems with the trial. But the issues weren’t “resolved” until 2010 ?
The fact is, this does not mean that the data had been fixed, only that the FDA had accepted Dr. Chawla’s proposed corrective actions, such as “implementing” a new policy of “double checking” patient doses before administering chemotherapy and making it a point to understand the protocol. The FDA agreed that this was a good idea and accepted that, so the regulatory aspect of this issue was then closed, because presumably Dr. Chawla had corrected the problems going forward.
From a regulatory standpoint there is no problem going forward, but clearly the decision to continue using Dr. Chawla in Phase 3 could be of concern to investors, had they known about the letter. The concern would be that the FDA might place extra scrutiny on a trial which used an investigator who received one of just a very few warning letters. From an investors point of view, there would certainly be no advantage to including Dr. Chawla in the next trial after the warning letter. Since no investors ever saw the letter, ZIOP clearly didn’t feel that investor unease with these problems even mattered. The failure to disclose the letter to investors and the decision to use the same doctor who received a warning letter in Phase 2 should be of significant concern to investors. ZIOP had choices in these matters and the decisions they made were clearly not in the best interests of investors.
Part of the problem here is that investors would expect the Chief Medial Officer to stay on top of the situation at the clinic and with the FDA warning letter, while the CEO would be responsible for the disclosure to shareholders. Because Jonathan Lewis was filling the unusual dual role of CEO/CMO simultaneously, none of this happened.
So the answer is no. It is not OK to continue using an investigator in a subsequent trial after he received an FDA warning letter in the previous trial where he was a major enroller.
Does “passing” Phase 2 mean that there is no problem ?
The fact that regulatory matters “had no impact on the Company’s transition from Phase 2 to Phase 3” is self apparent. We all know that Palifosfamide is already in Phase 3, so pointing this out is just stating the obvious. What is not obvious to some is the fact that the FDA conducts virtually no analysis of the data when a company wants to move from phase 2 to phase 3, and it certainly does not perform detailed analysis on the quality of that data. So anyone who is thinking that the FDA came to the conclusion that this drug showed promising results and then advanced it to phase 3, is clearly mistaken. When I spoke with the FDA on this matter, they made it clear that the only reason that they would halt a clinical trial due to investigator errors was if the trial was creating a significant risk to public health. So the fact that the regulatory issues “had no impact” getting to phase 3 doesn’t really mean anything. The only real hurdle for ZIOP to take their drug from Phase 2 to phase 3 is the willingness of ZIOP to keep paying for clinical trials. Because they are willing to keep doing this, they got to phase 3. Period. For anyone who thinks that a drug “passes” phase 2, they should quickly recheck the facts. Drug companies know this, and to imply anything otherwise is certainly misleading. Implying that a drug has “passed” Phase 2 trials is quite similar to using a “Best of ASCO” designation to increase the perception that the drug is being externally validated and approved in situations which are clearly not serving that function.
Does ZIOP have “issues” with drug stability ?
Press release: “Further, the Company has no issues with drug stability.”
The fact that ZIOP has “no issues” with a drug that must be administered to a patient within 30 minutes of the time it is introduced into an IV bag is a real problem. Comparable drugs for comparable indications remain stable for DAYS after reconstitution, not minutes. As I pointed out very clearly in the article, if Palifosfamide can be proven to be extremely effective in delivering a meaningful benefit to Overall Survival or a massive benefit to PFS, then doctors would certainly find a way to make this happen in just 30 minutes. And I am still certain that they would.
However no one, including ZIOP, is even claiming or expecting benefits of that magnitude. So even if Palifosfamide were to get approved by the FDA as showing some level of effectiveness, in the real world, doctors will still consider how well this drug works vs. alternative drugs. If alternative drugs are even similar to Palifosfamide, then one could safely assume that doctors would not be spending up to $50,000 for a drug that goes bad in 30 minutes and is very difficult to administer in a chemo ward due to the scheduling problems created by a 30 minute cut off. For those who need more information, my original article has numerous links to support this.
Does this mean that Palifosfamide is “unsellable” ? Certainly not. However it is undeniable that the combination of ultra short stability, extremely high price and relatively marginal benefit of the drug will make it less attractive relative to many other chemotherapy drugs. So even if we assume that Palifosfamide gets approval after its phase 3 trials are completed, these factors will have a significant impact on any ultimate revenues from selling it. Because management never disclosed the ultra short stability or the need to use a non standard diluent to extend it stability, analysts and investors have greatly overestimated the real world revenue potential for the drug. And that of course still assumes the best case that it even gets approved.
So it is very safe to say that in the event that Palifosfamide does eventually get approved by the FDA, it will generate significantly less revenues than are currently projected due to the difficulty in administering it coupled with the high cost. If it were expensive and easy or perhaps difficult but cheap and effective, there would be less of a problem. But as of now, Palifosfaide’s specific difficulties are simply not being factored in. As with the other points, I believe I made this clear in my article as well. I leave it up to individual readers to make their own estimates about how much of the “$1 billion” market” can be conquered by a drug which clearly has these “issues”.
So even if ZIOP does not have any “issues” with Palifosfamide stability, investors who care about realizing revenues in the real world probably should.
Is there a pattern of non-disclosure here ?
There is such an extensive and persistent pattern of non-disclosure of material negative events that investors now need to wonder what ZIOP currently knows an not disclosing.
In each case, ZIOP has not disclosed meaningful negative information until much later at which time it comes out with a statement that effectively says “Something bad happened a long time ago, but don’t worry because it’s all fine now”.
As always, I have multiple very specific examples to prove this.
- ZIOP failed to disclose the FDA warning letter which described significant problems with the Phase 2 trials of Palifosfamide until I revealed them last week. Only at that time did they tell us not to worry because they felt that those issues had no effect on the outcome measures.
- ZIOP failed to disclose that it had terminated its CMO for cause until months later when it issued a press release announcing the hiring of a new CMO. Once again, something bad happened a while ago, but it’s all fine now.
- ZIOP failed to disclose an SEC investigation into potential violations of securities law in connection with the trials for Palifosfamide for 4 months after it was notified by the SEC. ZIOP noted that it felt that the former CMO who had been terminated was the source of the allegations. Only in December when ZIOP noted it was filing a legal complaint did ZIOP inform investors that there had been an SEC inquiry some months before, but it was all fine because the SEC was no longer seeking information “at this time”.
- ZIOP failed to disclose to investors a 2009 material contract with Rodman & Renshaw which was signed just days before putting out a press release which described its existing cash balance as adequate until well into the following year. Shortly after the press release came out, ZIOP issued stock. Curiously, this contract with Rodman was eventually disclosed as a material contract, but only in the March of 2011, as part of the 2010 10K (ie. the wrong year). It makes precisely zero sense for this document to be disclosed in the 2010 10K. But it does help to conceal the fact that ZIOP was already preparing for a stock offering when it announced that it had sufficient cash to last into the following year.ZIOP’s current (2012) statement that cash is sufficient to last well into 2013 is effectively the same as the one they made right before the Rodman offering.
Aside from obvious failures to disclose any material negative information, ZIOP has not been forthcoming with the data from its Phase 2 trial. A press release in January 2012 noted that “70% of events had occurred” (ie. the subjects are now deceased) along with some very positive headline numbers. Ten months later even more of the patients are deceased, meaning that by now ZIOP certainly would be able to release reliable detailed data on Overall Survival. By now it is absolutely certain that ZIOP knows the detailed results (both PFS and OS) of the Phase 2 trial, because at least 90% of the patients are by now deceased.
The data is there, and ZIOP knows what the data says.
So although ZIOP definitely has detailed information internally, it has refrained from releasing these numbers publicly. If the numbers were great, or even just good, ZIOP would certainly have released them by now. That should not be the subject of much debate. However, given the patterns we have seen in the past, it seems quite safe to say that we should expect a press release at some unknown future date which announces some positive new development at the company, along with a mention of old Phase 2 data that no longer matters. Perhaps there will be some new breakthrough with Intrexon technology, or perhaps they will stop enrollment early in another trial and declare it to be “compelling”.
While there have been some very exciting and promotional press releases and abstracts, including “Best of ASCO”, the existing data has not been well reviewed by independent doctors and scientists. The “data” refers to the detailed data underlying the headline numbers and also includes things like the photographs of tumors so that independent judgment can be made on tumor growth. Without the underlying data being externally validated, it is very easy to draw erroneous conclusions. For example, in summarizing the data for a small set of just 62 patients in Phase 2, it is clear that just a few individual outliers could skew the results dramatically, leading to a false conclusion of effectiveness simply because of a very small number of exceptional results. For example, among the 62 subjects, if 2 Pali subjects happened to live much longer than expected, while 2 non-Pali subjects died very early, it could easily be concluded that Pali delivered a significant result. This result would seem true even if the remaining 58 subjects saw very little difference between Pali and non-Pali. This cannot be determined by reading the press releases and abstracts.
ZIOP has been very quick to make headlines with ASCO presentations and in noting the progression into Phase 3 trials. But the fact remains that none of thedetailed underlying Phase 2 data has been subject to a detailed and thorough review by independent doctors and scientists. Or if it has, then the results of that have not been disclosed.
As I pointed out in my article, ZIOPs scientific and medical board consists of 4 former ASCO presidents. ZIOP consultant Larry Norton is also a former ASCO president. The close involvement of these people would likely give ZIOP a tremendous advantage in securing a prestigious title such as “Best of ASCO – 2010”, even though there was very little data to substantiate such a designation, relative to other candidates for “Best of ASCO”.
After “winning” this honor, ZIOP continues to highlight it even in recent presentations, 2 1/2 years after the fact. So ZIOP highlights this high profile positive event from 2010, while still not releasing any new data from a now mature study in 2012.
In short, if the data were good, we would have seen it by now. But the data is in all likelihoods not good, so we probably won’t see it until something positive occurs in a different study so that the positive news can be released at the same time. Clearly that is just on OPINION, so please take it as nothing more.
What is the BIG PICTURE ?
How should investors evaluate the future prospects for ZIOP ?
Will Pali get approved ?
Can it be sold in the real world ?
What other risks are there ?
The big picture items which need to be considered at ZIOP are as follows:
- Based on what we have seen from the preliminary headline data that has actually been released, is it even possible to accurately handicap the odds of Palifosfamide getting through Phase 3 trials? In my opinion, the answer is “no” due to the fact that not enough data has been externally validated, so it is premature to try to handicap.
- If it were even possible to handicap based on currently released data, just how good are those odds ? Very good, average, below average ? Again, many people like to think they can handicap FDA approvals based on precedents and trends with other companies and drugs. In reality, the only real comparison we can make is the design of Phase 2 vs. the design of Phase 3. Phase 2 was open label so doctors knew which patients were receiving the drug, so are subject to some subconscious bias. To eliminate this known bias, Phase 3 is double blind, so doctors won’t know either. This alone could likely be expected to result in a slight deterioration of the already small PFS benefit that Pali has stated.|
- In the event that Palifosfamide does eventually get Phase 3 approval, what impact will the ultra short stability have on its commercial viability ? Will a drug with these characteristics really be able to conquer a “$1 billion” market ?
- Will ZIOP face any legal risks due the omission of disclosure of numerous material events prior to raising over $100m over the past 2-3 years in public offerings ? If so, what will the financial impact be ?
Questions for ZIOP
- When was the independent audit of Dr. Chawla’s site conducted, how long did it take, what procedures were performed ?
- Why were the material Form 483 and FDA warning letter not disclosed to investors ? Did ZIOP receive a legal opinion that this was not material ?
- In evaluating the commercial potential for Palifosfamide, how is the short stability being factored in to revenue projections ?
- What was the justification for stopping the Phase 2 trial early and what internal documentation is there to support this decision?
When considering these major points, it is worth noting that in response to my article, ZIOP and many others have been quick to state very simply that I was “wrong”. I repeatedly encouraged readers to point out any facts or data points that they viewed as being incorrect and that I would quickly correct any inaccuracies and public explain post any discrepancy. I also included links to all of the source data so that readers could quickly verify both content and context, along with specific dates. These links included several years worth of online documents from the SEC, the FDA and from ZIOP’s own website.
So far I have not received a single correction on any facts whatsoever from anyone, including ZIOP.
As a result, I believe that all of the facts I stated still point to the conclusion that ZIOP is not disclosing information which could help investors accurately project the commercial potential for Palifosfamide. This includes both the data we need to handicap the Phase 3 trial, as well as the practical data we need to estimate market share of this drug vs. others.
Instead, ZIOP continues to issue streams of positive press releases and attend biotech conferences to promote the story, without substantiating the reasons for the excessive optimism in any way.
Disclosure: Based on the information presented above, I am short ZIOP.
Disclosure: I am short ZIOP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.Additional disclosure: All of the data in this article is well substantiated by publicly available information which can be found online. If I am notified of any factual errors, I will correct them promptly and note any discrepancies.