Short ZIOP. Undisclosed FDA warning letter

October 21, 2012 | RP

Ziop: Undisclosed FDA Warning Letter, Palifosfamide Instability And More

[Authors note: This article appeared online on Friday, October 19th, 2012 in a different location. A few hours later the story was taken down from that website without any notice or explanation to the author. The website in question raised precisely zero questions or issues regarding the accuracy of the piece.  The author apologizes for any inconvenience. Throughout this article, the author has emphasized that upon notification of any confirmed factual errors from any reader, he will quickly correct any such error and explain any discrepancy.]

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On September 24th, shares of Peregrine Pharmaceutical (PPHM) plunged from $5.37 to as low as $0.80 (85%) in a single day when management announced that there were major discrepancies in the Phase II data for its cancer treatment of Small Cell Lung Cancer. Even though Peregrine appears to have been prompt in disclosing these errors upon discovery by management, the usual crowd of law firms were quick to compete for filing the fastest and biggest lawsuit against the company.

By contrast, the serious problems at Ziopharm Oncology (ZIOP) have never been disclosed to investors and the problems at Ziopharm appear to be dramatically worse than those at PPHM.

Over the past few months I have spent hundreds of hours conducting extensive due diligence on Ziopharm and I have spoken with over 100 knowledgeable experts is various scientific and medial fields as well as senior FDA officials and biotech executives.

However even though these many individuals were extremely helpful, the reality is that all of my findings could have been assembled by any investor who conducted a thorough review of publicly available online documents such as those provided by the SEC, the FDA and Ziopharm itself.

Please note, today I called CEO Jonathan Lewis on his cell phone to discuss the issues raised in this article. He declined to answer or respond to any questions and suggested I direct any questions regarding Ziopharm to Investor Relations.

UNDISCLOSED FDA WARNING LETTER

During 2009, Dr. Jonathan Lewis served in dual roles for Ziopharm as both CEO and CMO simultaneously, despite the fact that the dual role creates an obvious appearance of conflict of interest. This dual role and conflict of interest should be kept closely in mind when considering Ziopharm’s activities during 2009 and 2010.

In August 2009, while Lewis was serving as CEO/CMO, an FDA audit uncovered very serious “deficiencies” in the conduct of the lead investigator (Dr. Sant Chawla, SarcomaOncologyCenter, Santa Monica, CA) for the Phase II trials of Palifosfamide. A scathing FDA warning letter was subsequently issued which specifically questioned the “reliability and integrity of the data” in the Phase II trials.

Upon the FDA’s completion of the audit, the FDA issued a Form 483 to document the specific “deficiencies” found. In particular, the FDA specifically challenged “the reliability and integrity of the data” in the Phase II trials for Palifosfamide. However, because the words “Ziopharm” and “Palifosfamide” were redacted on the FDA’s website, Ziopharm has never disclosed this warning letter to investors. Dr. Chawla’s office has now confirmed all of the details in thewarning letter, noting that Ziopharm was notified in writing by the FDA at every stage. FDA officials also confirmed that warning letters and Forms 483 regarding clinical trial investigators are always shared with the sponsor in writing.

It seems almost inconceivable that such a blatant “smoking gun” document could have existed on an FDA website for nearly three years without anyone figuring it out. As a result, I exercised excessive scrutiny and skepticism before coming to any conclusion.

Because of the redaction, FOUR important elements needed to be verified beyond any conceivable shred of doubt. Nothing less than 100% certainty on ALL of these points would be acceptable. The FOUR elements are:

1. Was this letter actually issued in connection to Palifosfamide and Ziopharm ?

2. Had the letter ever been publicly disclosed in even a single place, however obscure, at any time whatsoever by Ziopharm ?

3. Was Ziopharm informed about the audit, the Form 483 and the FDA warning letter ? Is there any possible way that Ziopharm did not know about these issues ?

4. Is there any conceivable way that the FDA’s comments in this letter could be perceived by any reasonable person to not be material, and therefore not require disclosure ?

The first thing I did was to verify that the redacted letter was in fact issued in connection to the Palifosfamide trials. I spoke to Dr. Chawla’s office, and a member of senior management who was there at the time of the audit and the reciept of the letter confirmed with me on two separate occasions that a) the FDA warning letter was specifically issued regarding Palifosfamide trials, including Phase II, and b) that Ziopharm had been fully informed as per FDA standard procedures on Form 483. In addition, the specific details which were not redacted, such as dates, dosages, infusion times, etc) make it instantly apparent that this letter was for Palifosfamide. So it can be said with 100% certainty that this letter is specifically for Ziopharm’s Palifosfamide trial and nothing else.

The second thing I did was to verify and re-verify that this letter had never been disclosed anywhere. Google searches make no mention of it ever and I have tried it many times. For those wishing to test this point, I suggest doing so immediately because upon publication of this article, I expect that Google searches will begin showing quite a few new results within 1 hour once these issues come to light in the press. Still in doubt, I conducted an electronic search for the term “FDA warning letter” in all of Ziopharm’s SEC filings. As shown, the only reference to FDA warning letters comes from the disclosure that Ziopharm states it had not”received” one.

The third thing I did was to speak with two senior people from the FDA, including Diane Van Leeuwen who had conducted the audit in 2009, as well as a senior departmental official in WashingtonDC. Because the letter has been redacted, they would not comment on any specifics relating to it. However both of them categorically confirmed beyond any shred of doubt that the sponsor is always notified in writing and provided with the Form 483 at the conclusion of the inspection (ie. August 2009) as well as with the final warning letter (March 2010). I asked the FDA why such important information had been redacted and their answer (verbatim) was “to protect the drug company”. Dr. Chawla’s office also confirmed that Ziopharm was fully informed at every step of the way.

Finally, I personally called CEO Jonathan Lewis on his cell phone. I explained to him that I was writing an article which would appear on Forbes.com and asked him:

“Dr Lewis, could you please tell me why Ziopharm never disclosed the FDA warning letter given to Dr. Chawla in 2009 / 2010”.

He declined to give me any answer and suggested that if I had any questions about Ziopharm I should contact their IR department. It was certainly notable that Dr. Lewis did not seem surprised about this question and he certainly didn’t say anything like “what letter ?”. It struck me that if a total stranger were to call me on my cell phone and make such an alarmist statement, that I would certainly be shocked, I would certainly question this statement or clarify that it wasn’t true, or give any form of meaningful response. Instead I got no surprise, no response, no questions. I would strongly encourage any interested to party to contact Dr. John Lewis of Ziopharm to ask him this question directly. But for the avoidance of doubt, Dr. Lewis did not confirm or deny any details regarding the the FDA warning letter.

Finally, this letter is clearly and undeniably material.

The details contained in the warning letter / Form 483, as well as the severity of the language used by the FDA would certainly cause any reasonable investor to view them as “material”.

In the warning letter FDA makes clear that for 7 out of 12 subjects, samples were collected at substantially incorrect times by the lead investigator in the clinical trial. In addition, during 2009 there were roughly 13,000 clinical trials ongoing but the FDA issued just 18 warning letters to clinical trial investigators, many of which were only due to administrative issues. So the extent of the errors and the rarity of this event also add to the conclusion that the warning letter should be considered “material”.

Several key quotes from this letter further demonstrate its materiality to investors, particularly in light of the fact that it was directly pertaining to the lead (co-principal) investigator of the clinical trial.I encourage readers to read each of these twice.

  • “You failed to conduct the studies or ensure they were conducted according to the investigational plans”
  • “The administration of this miscalculated dose unnecessarily exposed the subject to an overdose, with the potential for increased adverse events.”
  • “Your failure to collect PK samples as specified in the protocol significantly undermines the reliability and integrity of the data captured at your site”
  • “The inspection revealed that there were numerous adverse events recorded in progress notes of subjects’ records that had not been reported on the case report forms”
  • “lack of timely adverse event information in the electronic CRFs may have jeopardized subject safety as well as the reliability and integrity of the data”
  • “we are concerned that you did not properly understand the protocol”

VIOLATIONS OF SECTION 10B-5 ?

The FDA audit took place from August 5th, 2009 until August 27th, 2009. Upon completion of the audit, Diane Van Leeuwen of the FDA presented and discussed the findings on Form 483 with Dr. Chawla. As standard procedure the FDA notes that it shares the Form 483 with the sponsor (ie. Ziopharm). On September 14th, 2009 Dr. Chawla provided a written response to the FDA. And then on March 17th, 2010 the FDA issued a formal warning letter.

Within 2 weeks of the completed FDA inspection and receipt of Form 483,Ziopharm completed a $5 million equity offering via Rodman & Renshaw without disclosing the FDA’s written concerns about the data. Any reasonable investor who views the FDA warning letter as “material” must clearly view this omission of disclosure as a 10b-5 violation.

The sequence of events leading up to the Rodman offering also presents clear problems.

On August 7th, 2009, Ziopharm signed an exclusive financing engagement letter with Rodman & Renshaw to raise up to $10 million. Exactly one week later (after engaging Rodman), Ziopharm issued a press release disclosing Q2 results.Despite the recent appointment of Rodman to manage the stock offering, ZIOP stated, “The Company ended the June 2009 quarter with cash of approximately $4.5 million which is expected to support operations into the second quarter of 2010.” The engagement letter (which shows the date of engagement), was not disclosed until March 2011, where it was listed as a “material contract” in the 10K for 2010 (the wrong year). One week after the press release, Ziopharm filed a registration statement covering the issuance of up to $75 million in stock. The stock offering occurred less than one month after the press release was issued. On a separate note, Ziopharm board member Tim McInerney happened to be an officer at Riverbank Securities which co-led the stock offering.Riverbank notes it may “allocate of portion” of offering compensation directly to McInerney.

Viewing this sequence of events, it seems clear that any reasonable investor would come to the conclusion that Ziopharm management signed the engagement letter with Rodman with the intention of completing a near term financing. As a result, the press release stating that its cash balance would support operations for an additional 8-10 months would be viewed as extremely misleading to investors.

The Rodman offering only ended up raising $5 million so by the end of September Ziopharm would have had no more than $6-7 million in cash. (The $4.5 million previous balance was as of June 31st, 2009) Within 1 month (October 14th),Ziopharm abruptly stopped its Phase II trials early, citing “positive” data on Palifosfamide. Again, no mention was made of the data concerns cited by the FDA. A reasonable investor would likely come to the conclusion that Ziopharm should have extended the clinical trial to further validate and expand the data whose reliability and integrity had been explicitly questioned by the FDA. A reasonable investor might also come to the conclusion that with only $6-7 million in cash remaining that extending the trial was not financially possible even if it was necessary. As a result, a reasonable investor could easily come to the conclusion that the dual roles of Jonathan Lewis in serving as both CEO and CMO presented a meaningful conflict of interest. A reasonable investor would also likely view the results of the accelerated trial with significant skepticism given that the abrupt completion of the trial coincided with Ziopharm basically running out of money.

As shown below, it can be seen that in early December, Ziopharm was down to just $3 million in cash. So in early November, cash on hand would have amounted to around $4 million. Jonathan Lewis was still enjoying a $420,000 base salary and Richard Bagley was earning a $315,000 base salary. Meanwhile, payments to board members amounted to around $200,000 per year.

On November 6th, with only $3-4 million in cash left, Ziopharm issued another press release, and this time the data from the Phase II trial was not just “positive” as it was in the previous month, but instead it was described as “compelling” and it was “sufficient to proceed to a pivotal study in support of product registration”.

On the back of these “compelling” developments, ZIOP rose to nearly $4.00, double where it was at the time of the Rodman offering. The cash strapped Ziopharm then quickly completed another stock offering at $3.10, raising $45 million in net proceeds. The company reported a year end cash balance of $48 million, so it stands to reason that Ziopharm was down to just $3 million in cash before the successful offering which raised $45 million.

Moving forward a few months, the final FDA warning letter was then issued in March 2010, citing various responses given by Dr. Chawla as not adequate. Just one month after the formal issuance of the FDA warning letter, in April 2010, Ziopharm announced that it had been selected for “Best of ASCO” based on the data from the Phase II trial. Once again, no disclosure of the FDA’s concerns had been made, so presumably that would not create difficulties with ASCO.

In addition, 4 members of Ziopharm’s Scientific / Medical Advisory Boardhappen to be past ASCO presidents. As it turns out, so is Dr. Larry Norton, a paid consultant to Ziopharm who has developed the “Norton Dosing” schedule for Palifosfamide. With 5 past presidents of ASCO on the SMA board of Ziopharm, it stands to reason that Ziopharm would have little difficulty securing this honor even though only the most preliminary and cursory Phase II data had been released at that time. Presumably none of these Ziopharm insiders was aware of the recently issued FDA warning letter, otherwise they would have certainly notified ASCO.

(Note: In my next article I will be exploring the criteria and methodology used by ASCO in selecting the “Best of ASCO” winners. One would assume that due to the prestige and importance of such an honor, that these criteria are rigorous and that the rationale for the final selections are well documented and based on compelling medical evidence. One would assume.)

On April 30th, 2010, Ziopharm’s Q12010 earnings press release draws particular attention to the prestige of the “Best of ASCO” award. On May 21, Ziopharm presented a small sample of preliminary data at ASCO, again highlighting its “Best of ASCO” designation. Meanwhile the ASCO buzz helped propel ZIOP’s stock price to nearly $6.00. And then on May 26, just 5 days after the prestigious ASCO conference, Ziopharm announced a common stock offering which raised $32.8 million.

In July 2010, Ziopharm announced that the initiation of its Phase III trials for Palifosfamide, despite the fact that none of the data from the Phase II trial had been independently reviewed, and of course the FDA warning letter still remained undisclosed.

At this time, it becomes notable that Ziopharm elected to continue using Dr. Chawla in Phase III, despite the significant “deficiencies” cited by the FDA, and their potentially significant impact on the overall Phase II clinical trial data. Since investors did not know about the FDA letter, this very curious and very important decision would not need to be explained to them. However the notion that the FDA might apply greater scrutiny and skepticism to a Chawla trial would hopefully have occurred to management.

With a now ongoing phase III trial, Ziopharm was able to attract the interest of much esteemed biotech billionaire Randal J Kirk. In January of 2011, Kirk invested $10 million dollars, purchasing 2.4 million shares at a notional price of $4.80. However Kirk was also given an additional 3.6 million shares at “no additional consideration” making his effective in price just $1.92. In addition, if any of Kirk’s DNA therapy projects with Ziopharm even get past Phase I, Kirk is entitled to receive an additional 3.6 million shares, lowering his in price to just $1.20 on 9.7 million shares, representing the lowest offering price for a Ziopharm stock issuance in several years, even though the company now had over $60 million in cash and a drug in Phase III clinical trials.

Kirk was recently described by Forbes as “the best biotech investor ever”, and the facts certainly demonstrate this to be the case. Yet in Kirk’s recent interview with Forbes, it is stated clearly that “he says he didn’t even bother to do due diligence on the sarcoma drug. His real interest is in pushing forward a new type of cancer treatment from Intrexon”. The reason he did no due diligence on Palifosfamide is that Kirk has longer term ambitions for Ziopharm and he is only focused on Intrexon. As Kirk puts it, “If Intrexon’s new DNA treatment method works, Ziopharm’s current lead sarcoma drug “will be a rounding error.

It may be the case that Intrexon has tremendous revenue potential at some uncertain date in the future, but even optimists would agree that such prospects are highly uncertain and are at least 5-10 years away. Unlike most investors, Kirk can clearly afford to wait for 5-10 years to see if Intrexon will ever generate revenues, and even if it doesn’t, the loss of $50 million invested in Ziopharm represents less than 2% of his net worth. Hence Mr. Kirk’s description of Palifosfamide as just a “rounding error”.

I continue to be a strong admirer of Mr. Kirk and the technology that Intrexon is developing. While current prospects for the technology are still uncertain, I am confidant that by 2020 it has the potential to start showing meaningful results.

However, the fact that Randal Kirk did not even bother to conduct due diligence on Palifosfamide certainly raises the concern that he may not have much of an understanding of the practical implications for the drug in a real world (non clinical trial) setting.

PALIFOSFAMIDE’S INHERENT CHEMICAL INSTABILITY

Ziopharm’s own internal documents demonstrate that its “stabilized” Palifosfamide appears to be so unstable that delivering it could prove difficult or impossible outside of a clinical trial setting. Ziopharm has never disclosed the stability problem nor has it described how this will impact the drug’s commercial viability. Fortunately it turns out that the Ziopharm’s Protocol Documents for Palifosfamide are occasionally able to be found online in various places. These links seem to disappear frequently, so those who are interested might want to save a copy. I have also come across a number of hospitals which post all of their FDA trials protocols on their websites, which I found quite interesting.

Ziopharm’s Phase III (“Picasso”) trial for Palifosfamide involved 162 locations, with additional locations also involved in the “Matisse” trial for Palifosfamide. Each of the investigators involved is given the trials Protocol Document, which provides in depth information about every aspect of Palifosfamide as disclosed by Ziopharm.

Between the various trial sites involved, it stands to reason that there are thousands of people not employed by Ziopharm who have seen this information including oncologists, chemo nurses, pharmacists and sometimes even patients who demand to see it. In addition, there are trial locations all across theUSandEurope.

When reading the Protocol for the “Picasso III” trial, it is immediately clear that Ziopharm’s “stabilized” form of Palifosfamide appears to actually be extremely unstable in practice. Stabilizing Palifosfamide (chemical name: “isophosphoramide mustard”) is necessary because “isophosphoramide mustard is not suitable for administration because of chemical instability“.

The “stabilized” version is what Ziopharm has worked so hard on for the past 6 years, and it is referred to as Palifosfamide-tris.

Yet as shown below, relative to virtually every comparable chemotherapy treatment, Palifosfamide-tris appears to be highly unstable to the point that even delivering the drug in a real world hospital could prove to be unfeasible.

Ziopharm’s Palifosfamide-tris Protocol Documents (Section 10.2) specifically state the following requirements when administering Palifosfamide to patients,

“Palifosfamide-tris or matching placebo will be given by IV infusion over approximately 30 minutes on Days 1-3”.

“Note: Each palifosfamide-tris/placebo administration must be completed within 1 hour of reconstitution in IV bag.”

If the 30 minute infusion must be completed within 1 hour, that only leaves 30 minutes to put the solution into the IV bag, get it to the patient, hang the bag, find a suitable vein and then begin the administration. Ziopharm’s documents spell this out quite clearly. This certainly could be achieved in a clinical trial setting with very few patients per clinic and where it is possible to get one-on-one simultaneous attention from an oncologist, a chemo pharmacist and one or more chemo nurses. But it is difficult to imagine how this could possibly be done in a real world hospital, where facilities are large, staff are stretched thin and unexpected patient wait times can often run for several hours. In addition, for a clinical trial the cost of discarding the quick-to-expire Palifosfamide is not an issue because it is provided for free by Ziopharm. But in the real world it stands to reason that a drug which costs up to $50,000 per patient and which expires in just 30 minutes would face some fairly severe hurdles in administration.

So how does Palifosfamide compare to other chemotherapy drugs ?

As shown in the Cytotoxics Handbook, comparable drugs for similar indications such as IfosfamideCyclophosphamidedoxorubicin, Carboplatin and Etoposide remain stable in 0.9% sodium for anywhere from 2-7 days at room temperature. In each of these cases, stability is measured in days not minutes.

In some cases, manufacturers have arbitrarily set a limit of 24 hours on their drugs, which has resulted in a backlash from both practitioners and academics. Further clarity on this issue can be obtained from a number of recent studies, including this one:

“Guidelines for the practical stability studies of anticancer drugs: a European consensus conference”.

As shown, the study finds that 24 hour stability times create clear logistical difficulties when serving many patients and results in significant amounts of expensive drugs being discarded upon expiration. This by no means suggests that 24 hours is undoable, but instead it means that 24 hours is enough of a problem that doctors, pharmacists and academics do find it to be sufficiently problematic that they are willing to give reports and presentations on the subject.

There are some chemotherapy drugs which have a reconstitution stability of even shorter than 24 hours. In these cases (such as with Palifosfamide), it is not arbitrary or due to bacteriological concerns, but rather is due to the fact that the drug is simply less chemically stable. As the stability time drops, the problems become more severe. For example, with a stability time of less than 12 hours, a given drug would clearly not be able to be prepared in advance for next day dosing. At 6 hours, it would require multiple batches to be prepared each day because the first batch wouldn’t even last until the end of the day. Considering the logistics and constraints of delivering chemotherapy, if a drug has a stability of only 3-4 hours, it quickly starts looking almost impossible to deliver in a real world setting.

A continuing read of the Protocol Documents reveals that Ziopharm is aware of these challenges and has made efforts to mitigate the practical effects of Palifosfamide’s instability. By using a non-standard diluent (14.6% sodium chloride) to reconstitute the drug, it is possible to leave the drug in a vial with 14.6% sodium chloride for up to 2 hours before it is introduced to the IV bag, giving a total of 2 ½ hours. (Hint: the higher salt content increases the stability). Obviously some of this time is consumed by the 15 minute shaking process and in physically delivering it to the patient, so it leaves roughly 2 hours.

Unfortunately, even a quick Google search for “14.6% sodium chloride” (with no other search terms) instantly highlights 14.6% sodium chloride as a product which has been in shortage for several years. When I called the various suppliers of the 14.6% such as Hopspira, I was told that due to the shortage, they no longer sell directly to hospitals or clinics, but instead sell to distributors who can then break up the packages into smaller packages of 5-10 vials to ensure that more end users are at least getting some small amount.

Ziopharm is clearly well aware of the possibility that in real world hospitals 14.6% sodium chloride may not be available and the Company addresses this problem accordingly. The Protocol Document (Section 10.2, page 32) makes it a point to note what to do when it is unavailable.

“In the event that 14.6% Sodium Chloride for Injection is not available at the time of vial reconstitution, you may use 5% or 0.9% Sodium Chloride for Injection, however,please note that in this case, the reconstituted vial should be introduced into the 250 mL 0.9% sodium chloride IV infusion bag within one hour.”

We now have 1 hour to get the chemo into the IV bag, and then 30 minutes in which to begin the infusion so that the infusion is completed within 1 hour. This is explicitly clear in the documents.

As many people already know, 0.9% sodium chloride is a very standard diluent in hospitals because it is matches very closely with the salt content of human blood. Medical professionals must take special care to avoid administering 14.6% in place of 0.9% because accidentally doing so can be fatal or cause brain damage, as was shown in this lawsuit against Abbott Labs.

The 14.6% sodium chloride is by no means a dangerous chemical in and of itself, but it is certainly not a standard like the 0.9% solution, particularly in the world of chemotherapy.

Looking back to the Cytotoxics Handbook, an electronic search results in precisely100 hits on for “0.9% sodium chloride” whereas a search for “14.6% sodium chloride” results in precisely zero hits.

Yes, this was a fairly long winded digression, but my only point is, while 14.6% sodium chloride will slightly improve the stability specifically for Ziopharm’s only near term drug, it is not commonly used with other chemotherapy drugs. It is a “wingnut” solution, which adds one more complication for its administration. Of course in a clinical trial setting, providing the trial sites with free 14.6% sodium chloride alleviates this short coming. But as shown in the Protocol Document, each patient will receive 18 infusions of Palifosfamide, meaning that Ziopharm will need to locate and distribute as many as 180,000 vials of this shortage product every year. If this issue has been contemplated by management, then I certainly have not seen it disclosed.

Even though real hospitals (non clinical trial setting) would likely end up using 0.9% sodium chloride and get only one hour of stability, I continue to evaluate Palifosfamide on the basis that is stable for 2 hours because it can in fact be done in the clinical trial setting.

Two hours seems challenging, but if Palifosfamide can be proven to extend the life of a terminal patient, then I am 100% confident that doctors would insist on finding a way to deliver it. Of course if the true benefits of Palifosfamide turn out to be less than absolutely compelling, then it would certainly be something the doctors might give serious second thoughts to in light of the alternatives available, the cost of wasting the $50,000 treatment as well as the impact on the patient of having to wait for a pharmacist to mix a new dose in the event the first one expires and the impact of these disruptions on the other patients who are waiting for treatment. Clearly this drug would have to significantly justify the amount of disruption it would cause in any real world chemo ward.

So the question now becomes, “is 2 hours a problem ?”

Several recent studies on improving chemotherapy wait times illustrate the challenge that a 2 hour stability time presents, and a flow chart helps to explain the complexity of what seems like a simple scheduling task.

No Time to Waste: Decreasing Patient Wait Times for Chemotherapy

Improving Wait Time for Chemotherapy in an Outpatient Clinic at a Comprehensive Cancer Center

Chemotherapy Operations Planning and Scheduling

Chemotherapy Scheduling Flow Chart

Key takeaways are as follows:

At Johns Hopkins, a 75 minute unexpected wait time is still considered “on time”, even after a massive upgrade to systems and procedures. Prior to the upgrade, the already sophisticated Johns Hopkins saw 41% of patients receiving chemotherapy more than 75 minutes after their scheduled time. Even after the upgrade, 24% of patients still received their chemotherapy more than 75 minutes after the schedule time.

At MD Anderson Cancer Center, which treats just 41 patients per day, average wait times improved from 105 minutes to 89 minutes following the upgrade. However even after the upgrade, roughly 34% of patients can expect to see a wait time that is up to 2 1/2 hours. A complicated flow chart is included to help patients understand why chemotherapy scheduling is far more complicated than just showing up for a scheduled appointment and getting immediate treatment.

“Chemotherapy Operations Planning and Scheduling” notes the use of liner programming models to help optimize the many interdependent variables involved in delivering chemotherapy in a real world setting. The report also notes describes the problem in this way: “Chemotherapy operations planning and scheduling in oncology clinics is a complex problem due to several factors such as the cyclic nature of chemotherapy treatment plans, the high variability in resource requirements (treatment time, nurse time, pharmacy time) and the multiple clinic resources involved.”

Whether or not the roughly 60-120 minute stability has any impact on the commercial viability of Palifosfamide in the real world clearly remains to be seen. The fact that Ziopharm has never addressed this issue with investors creates the possible concern that it has not been properly factored into their projections for penetrating the “$1 billion market”. I for one would be eager to hear what Ziopharm thinks the impact will be, because at present it appears that zero impact is being anticipated in connection with the combination of extremely high cost and extremely short stability.

Wall St. analysts collect 6 and 7 figure salaries based on their perceived ability to tell investors how well a drug might work, what its safety profile might look like and what its odds might be of getting FDA approval. All of their analysis is (by necessity) based upon shreds of statistical data supplied directly by the company and from educated guesses based on FDA precedents.

It is now quite apparent to me that when it comes down to the practical potential for a drug such as Palifosfamide to be used in the real world, a more useful opinion can be readily obtained from any practicing chemotherapy nurse (Average salary $58,000) who is familiar with the actual use of that drug.

As should be clear by now, I have spent an excessive number of hours spanning several months to conduct my own due diligence on Ziopharm. It is also clear that I have found a number of significant issues that I feel are cause for extreme concern. Note that I have deliberately not waded into the nonsensical debate about Palifosfamide’s completely unknown effects on patient Overall Survival or Progression Free Survival, because based on the information above, I believe that those metrics are now entirely an irrelevant and hypothetical distraction.

My final observation is that I notice that despite their bullish statements to investors, Ziopharm management continues to avoid owning shares of Ziopharm while taking home significant cash compensation every year. The total share and option holdings of ZIOP management (including CEO John Lewis) collectively amount to just 2% of the company, almost all of which has been obtained through option grants. Even though ZIOP has never generated any real net income or revenue, CEO John Lewis will be taking home nearly $800,000 in cash in 2012 and has already taken home nearly $3 million in cash over the past 5 years. Just sayin’.

IMPORTANT NOTE:

The information that I present in this article will certainly be alarming to most readers and investors. I have made a monumental effort to ensure that the facts and fact patterns below are presented in a way that accurately reflects how these events and data points occurred in a completely factual way. As I have uncovered and absorbed this information over the past few months, I have come to a number of significant conclusions regarding Ziopharm. I strongly encourage readers to simply evaluate the facts and fact patterns below and then form their own conclusions.

And for the avoidance of doubt, I firmly believe and stand behind every statement and fact presented in this article and to the extent that even the smallest inaccuracy is found by anyone in any part of this article I will immediately correct it and publicly explain any discrepancy.

I am always eager to hear views of readers and investors and I am always willing to publish well informed comments and opinions from readers, even when they run contrary to my own. So I encourage any interested readers or investors to send me an email with any thoughts.

Disclosure: Based on the facts presented above, I am currently short ZIOP. In fact, I went short the day I uncovered the FDA warning letter quite some time ago.

The author can be reached at comments@pearsoninvestment.com

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.