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101 Reasons To Own ZIOPHARM Oncology (ZIOP) 19 comments

Author's Note: This is the very first time that I have written a post in collaboration with someone...

I first "met" Rob Cos, virtually, a few months ago, when he posted a couple of very insightful comments to my post, ZIOPHARM (NASDAQ:ZIOP) Is The Stock To Watch!, under the pseudonym, "biothoughts."

We then met a couple of times in Las Vegas...once at his Celgene celebration weekend at the Wynn when some 170 of Rob's followers from Investor Village came to celebrate Rob and his Celgene pick from more than 15 years back(!), and then when Rob came over to my LV apartment and we had dinner and wine together, not necessarily in that order, and basically got to know each other...since then we have gotten together one more time in Dana Point, CA...

About 2 weeks ago, Rob suggested that the two of us collaborate and write a post, "100 reasons to Buy ZIOP." Many years back, Rob had written a similar post, but on Celgene...this is when Celgene was a small biotech company...Since we both believe that ZIOP has Celgene like potential, I thought this was a terrific idea and we decided to put our heads together and ended up doing one better than Celgene...Instead of 100 Reasons, we came up with 101!

This post is from our joint effort...


In 1971, when then President Richard Nixon declared a War on Cancer, little did he know that 40 years after his famous declaration, science would still be battling this dreaded disease.

However, there is light at the end of this long, dark tunnel and this tiny ray of light could be the beginning of a beautiful dawn that scientists believe will turn the tide of this War into a victory march and the word "cancer" may finally be banished from the list of terminal diseases that have plagued the human race for centuries.

That ray of light has a name: Immuno-Oncology and for those not familiar with the term, we suggest that you click on the above link and bring yourself up to speed with this very exciting frontier in medicine.

Since cancer treatments cost governments, insurance companies and individuals worldwide literally 100s of billions of dollars every year, finding a cure for any cancer indication will be worth a lot of money for that fortunate biotech company and its equally fortunate investors. Needless to say, Immuno-Oncology has started a gold rush of sorts and companies big and small along with cancer research hospitals are all vying to get their share of what is sure to be a massive pot of gold.

We are still in the top of the first inning of what will obviously be a very exciting World Series of Cancer Research and Cure, and today there are but a handful of companies that are competing in this space.

This 101 Reasons list has been compiled to bring investors' attention to a particular company in the immuno-oncology space: ZIOPHARM Oncology and it trades on the Nasdaq under the ticker symbol: ZIOP. We believe that when investors, both current and future, read through this list, they will come to appreciate the opportunity that this company represents.

A strong word of caution is in order: Investing in early stage biotech companies is definitely not for the faint of heart because these investments come with inherent risks that may be detrimental to the health of an individual's investment portfolio. Each individual investor should take into account his or her risk tolerance before investing in early stage biotech companies.

In the past 12 months, shares of ZIOPHARM have gone from a low of $2.31 to a high of $14.40 and are currently changing hands around $11. The stock is heavily shorted with more than 35% of the shares currently outstanding having been sold short. Short sellers have used every communication medium to spread fear, uncertainty and doubt "FUD" about the company and its technology and this list has been compiled to present facts and help counter the FUD.

We will start this countdown by highlighting a few important facts that should help the readers, especially those who are new to ZIOP, to understand why we strongly believe that an investment in this company is very compelling. What we have done is try and compile, as best as we can, a list of mostly facts and sprinkled in what we believe to be a few well founded conjectures. We have also shared a few bits and pieces of information that we were able to obtain from a number of well-connected sources who have direct access to XON and ZIOP management. But more than 80% of the information that we have compiled in this document are pure, hard facts gleaned from SEC documents, press releases and various reputable websites. But let there be no doubt that not a single piece of the information shared here has been manufactured by us.

So let us count the ways...

101 Reasons to Own ZIOPHARM Oncology

  1. In order to appreciate the projected market size of immuno-oncology space, ZIOP's main business focus, we will share 2 published forecasts, one from two years ago and the other from just last year. In the 2 year old report, Citigroup analyst Andrew Baum had forecasted that immuno-oncology, which was used in less than 3% of cancer treatment plans back in 2013, was expected to grow rapidly and in less than 8 years would become the biggest drug class in history with over $35 billion in sales. Unfortunately, Baum's forecast was made in 2013 and is already woefully outdated! A more recent forecast predicts that the market size will grow even faster, reaching over $67 Billion by 2018! Talk about torrid growth!

  1. To help set the stage for readers of this "101 Reasons to Own ZIOPHARM" and appreciate some of the reasons discussed down the list, it's important to first understand the core of our investment thesis in ZIOPHARM: Both Rob and I are big fans of billionaire biotech investor, Randal J. Kirk, the CEO of Intrexon and the largest individual shareholder in both XON and ZIOP. What we admire most about him is that he's extremely shareholder friendly, having never ever sold a single share in these 2 companies. The only time Kirk will sell his shares is when he negotiates the sale of the entire company to a large biopharma, netting a big fat profit for himself and his shareholders.

His other trait we admire is that he usually telegraphs his companies' moves to his investors well in advance. Let's share an example to help illustrate this point:

In November 2014, on Intrexon's 3rd quarter conference call, Kirk, replying to an analyst's question on CAR-T and ZIOPHARM, said the following: "As you know, it's a field of intense interest around the world. We alluded in the press release to significant transactions underway and I think we'll just leave it - we'll just leave the statement with that."

If we parse his statement, he revealed to those paying close attention, that there were a number of significant "transactions," not discussions, "transactions" underway. Two months later, Kirk, in rapid succession, revealed not 1, but 3 significant transactions! Those who were paying close attention to Kirk's comments, bet on ZIOP and XON and in a matter of months ended up with significant profits.

  1. One of the most important reasons ZIOPHARM makes such a compelling investment: It owns the rights (and 50% of all related profits) to every cancer drug RJ Kirk's Intrexon (NYSE:XON) will ever make, in perpetuity! With the MD Anderson and Merck deals this now will also include every drug made in collaboration with these organizations and using their in-house technologies, like MDA's Sleeping Beauty technology.This very important fact has not been priced into ZIOP's current market cap.

    NOTE: We shall be remiss if we did not thank ZIOP's former CEO, Dr. Jonathan Lewis for his foresight in obtaining an agreement from Intrexon on such favorable terms for ZIOP shareholders.

  1. In addition to ZIOP's value due to its 50% ownership rights to every cancer drug that Intrexon makes, ZIOP shareholders also get to enjoy the fruits of i) the incredible gene therapy science / platform / Intellectual Property / developed by Intrexon over many years and also its vast body of pre-clinical work, ii) the very deep and seasoned executive management team at Intrexon and iii) the incredible RJ Kirk investment track record in biotech and billions of dollars in shareholder value that he has created over the years.

One must bear in mind that when it comes to immuno-oncology, XON / ZIOP are interchangeable and for all practical purposes, one and the same company. They are like two peas in a pod.

  1. XON and its executives have extensive experience in DNA technology, synthetic biology and gene therapy starting from the earliest days in the space in 1998 when Dr Tom Reed (Current Chief Science Officer) founded Intrexon 17 yrs ago. Dr. Reed is a molecular geneticist with over twenty years of experience in recombinant DNA technology. He has developed sophisticated transgenic model systems for studying the role of gene products in neuronal, cardiovascular, and cancer systems. Dr. Reed has published numerous peer-reviewed articles in the fields of subcellular modulation, gene regulation and cardiac function and is an inventor on numerous patents. There are few in the world with as much experience in genetic and synthetic biology as Dr Reed.

  1. The addition of RJ Kirk to Intrexon as Chairman in February 2008 and CEO in April 2009 brought the company, its commitment and vision to a new level...Kirk's track record in biotech investing is almost unprecedented with sales of Scios (to JNJ) , New River (to Shire) and Clinical Data (to Forest Labs) as well as appreciation in XON, HALO, ZIOP and FCSC bringing those who follow him incredible returns...But what amazes even the most seasoned biotech investors, biotech executives and cancer clinic executives is Kirk's vision and knowledge of synthetic biology….We have personally heard 2 of the most accomplished gene therapy experts say that they need to do their homework by brushing up on their science knowledge before going to meet with Kirk. While he has surrounded himself with top tier executives in the space, Kirk is not a figurehead chairman but a visionary that drives science and deals with partners most on Wall Streets could never imagine.

  1. While grading the performance of Intrexon's health sector during its recent 1st quarter earnings conference call, Kirk gave his company an "A" and remarked "we're totally smoking hot!" Having established Kirk's credibility in #2 above, one must not take his supremely confident pronouncement lightly. When Kirk says that in health, Intrexon / ZIOP are "smoking hot" we should take him at his word. For those who are skeptical you should at least dig further to try and unearth as to why is he so supremely confident. Once you have read the rest of this document, we are confident that even the hardened skeptic will become a believer and understand the reason(s) behind Kirk's boast.

  1. In January 2015, Kirk delivered Transaction #1 when in a precedent setting move, MD Anderson (MDA), the world's most respected cancer research hospital, dodged every Big Pharma and biotech company dangling all kinds of inducements for a partnership, and decided to ink an "Exclusive XON / ZIOP Licensing Agreement for CAR T Cell, TCR, NK Cell Programs and Associated Technologies for the Development of Non-Viral Adoptive Cellular Therapies."

  1. Let there be no mistake: this MDA / XON / ZIOP joint-venture is a real BIG deal! Quoting further from the press release: "Combined Technologies to Leapfrog Clinical Pipeline of Next Generation Therapies Using Synthetic and Personalized Immunology."

  1. Hailing the MDA / XON / ZIOP partnership in the white-hot CAR-T space, MDA's President, Dr. Ron DePinho said, "Genetically engineering our patients' immune-system T cells to efficiently attack and destroy cancer cells represents one of the most exciting approaches with curative potential in oncology today. We believe coupling MD Anderson's unique CAR T cell approach with the powerful technologies of ZIOPHARM and Intrexon will allow us to build T cells that hit cancer harder, with greater precision, under tighter control and with potentially fewer side effects for patients. This agreement ranks as one of MD Anderson's most substantial collaborations and will provide significant resources to fuel its mission of Making Cancer History®."

  1. Furthermore, as a show of confidence in the 2 companies' technology, MDA opted to take ZIOP and XON stock instead of cash, in exchange for sharing its treasure trove of data compiled over decades of research in cancer immunotherapy.

  1. MDA's decision to take XON / ZIOP stock in lieu of cash has already earned the cancer hospital very impressive dividend as the value of its stake in ZIOP alone has more than doubled in just 6 months, from $50 million when the deal was announced to more than $130 million today! Its stake in XON has almost doubled, from $50 million to $97 million today.

  1. Based on their January 2015 press release, MDA / XON / ZIOP plan to leverage the combined synergies between their platforms "to accelerate a promising synthetic immunology pipeline, with up to five CARs expected to enter the clinic in 2015."

  1. The partnership with MD Anderson allows XON / ZIOP unprecedented access to the world's most extensive database on cancer research. This competitive advantage cannot be matched, neither by JUNO or KITE and therefore should catapult XON / ZIOP ahead of their competitors in the not too distant future.

  1. Another advantage of their partnership with MDA is that XON / ZIOP now have access to a very significant population of cancer patients, allowing the companies to take their targeted CAR-T therapies into the clinic in a relatively short(er) period of time, potentially resulting in faster development of drugs for those who are fighting life threatening illnesses and don't have the luxury of time.

  1. By piggybacking on MDA's decades of advanced research, XON / ZIOP should, in a relatively short period of time, a) Identify a mryiad of cancer targets that they should develop treatment protocols for, and b) Start clinical trials in less time than their competitors.

  1. It has been about 6 months since MDA / XON / ZIOP announced their ground-breaking partnership and they have yet to announce their first CAR. Therefore, it stands to reason that the 3 organizations should unveil their first CAR-T target any day now...

  1. After the MDA agreement, Griffin Securities said Sleeping Beauty was a sweet deal for XON / ZIOP. "The licensing agreement with the MD Anderson Cancer Center and the University of Minnesota garnered the companies access to the most well defined nonviral gene insertion technology for oncology related immunotherapeutics. It also came with a clinical-stage therapy for hematological malignancies, preclinical therapies for other cancers, and the right to use the technology for additional applications. Moreover, scientists at MD Anderson will collaborate with Intrexon's partner, Ziopharm Oncology, over the next three years. Hence, we believe the deal has catapulted Intrexon into the forefront of immunotherapeutics development".

  1. ZIOP stock has been undergoing textbook consolidation since its very impressive 500%+ run in just 5 months: from the October 8th, 2014 low of $2.31 to March 20th, 2015 high of $14.40 . Based on the technicals, the stock seems to be getting ready to run again. An MDA / XON / ZIOP announcement of their first CAR, could serve as the perfect spark to put this rocketship back into "lift-off" mode...

  1. When acclaimed money manager Bill Miller of Legg Mason, attending ZIOP's February roadshow for its secondary offering, inquired of Dr. Laurence Cooper, the world renowned scientist at MD Anderson, as to why MDA choose ZIOP / XON instead of one of the more established companies with active CAR-T clinical programs, Dr. Cooper replied that ZIOP / XON technology was so impressive that he was "salivating."

  1. Dr. Cooper's response clearly made an impression, because Miller decided to splurge during ZIOP's secondary and purchased more than 3,000,000 shares, increasing his fund's ZIOP position by a whopping 628%!

  1. In an interview on CNBC, Bill Miller reiterated his excitement in XON and ZIOP as seen in this video replay.

  1. Bill Miller will be speaking at CNBC's "Delivering Alpha" conference this coming Wednesday, July 15th. Being that recently, every time Miller has come on CNBC, he has mentioned ZIOP and XON, chances are good that he will mention both companies again. Over the past 5 years as this conference has grown in stature, so has its viewership. Companies mentioned there have seen a pop in their stock price. Should ZIOP and XON get mentioned, we can expect a pop in their stock prices. Edit 7/15/2015 : Since this post we now have Bill Miller's interview video from Delivering Alpha conference:

  1. Samuel Isaly, who runs the nation's largest and most respected biotech fund with more than $11 billion under management, came away just as impressed as Bill Miller and decided to make ZIOP his fund's largest new investment in the first quarter reporting period ending March 31, 2015, buying more than 2.5 million shares!

  1. Another big...