Sarcoma Drugs: Does Small Cap ZIOPHARM Oncology (ZIOP) Have What MRK and ARIA Failed At?

On Tuesday, small cap cancer focused biopharmaceutical stock ZIOPHARM Oncology (NASDAQ: ZIOP) surged 17.54% to $4.69 and was rising in after hours or pre market trading after it announced results from its Phase 3 study for Palifosfamide, a treatment for soft tissue sarcoma – an area where Ariad Pharmaceuticals (NASDAQ: ARIA) and Merck & Co., Inc. (NYSE: MRK) failed early last year with their drug Taltorvic. So does that mean ZIOPHARM Oncology will ultimately produce another big win for investors or should they keep the failure of Ariad Pharmaceuticals and Merck & Co., Inc. in mind?

What is ZIOPHARM Oncology (ZIOP) and Will it Keep Rising?

ZIOPHARM Oncology’s Palifosfamide is being targeted as a first-line treatment for soft tissue sarcoma. Seeing that phrase sent me running to an online medical dictionary which revealed that soft tissue sarcoma is a cancer that begins in the muscle, fat, fibrous tissue, blood vessels or other supporting tissue of the body. According to Cancer.gov, sarcomas are more common in adolescents and young adults than most other cancers with the number of life years loss being substantial. Last year, approximately 11,280 Americans were diagnosed with soft tissue sarcomas and 2,890 with bone sarcomas while 3,900 and 1,410 people were estimated to have died from from soft tissue and bone sarcomas, respectively.

What got reported by ZIOPHARM Oncology was that Palifosfamide had reached its targeted number of progression-free survival (PFS) events in the blinded study – meaning the data will be reviewed by an independent data monitoring committee for efficacy. Those results should be reported during the last week of March and that’s something investors need to wait for as ZIOPHARM Oncology is still very much a roll of the dice when it comes to Palifosfamide’s safety and effectiveness.

Investors should be aware that ZIOPHARM Oncology has produced revenues of $0.20M (most recent reported quarter), $0.20M, $0.20M and $0.20M for the past four quarters along with net losses of $17.82M (most recent reported quarter), $23.61M, $24.47M and $13.24M; but it did have $95.33M in cash to cover $46.61M in total liabilities at the end of last September. ZIOPHARM Oncology also has a market cap of $373.4 million and the stock is down 11.2% over the past year and up 57.9% over the past five years – meanings its been a bit of a rollercoaster.

Why Was Ariad Pharmaceuticals’ (ARIA) and Merck’s (MRK) Sarcoma Drug Rejected?

Earlier last year, an advisory panel of outside experts to the FDA recommended rejecting Taltorvic, Ariad Pharmaceuticals’ and Merck’s drug that was intended as a maintenance treatment for soft tissue and bone sarcoma. The panel had voted 13 to 1 in favor of rejection after data linked Taltorvic with serious side effects such as hospitalization or death while only showing a small improvements in the amount of time before a cancer worsened.

Merck had licensed all development and marketing rights to the drug from Ariad Pharmaceuticals, which had two more major drugs in the pipeline and would only be getting royalties from Taltorvic if it were approved – meaning the rejection would hardly kill the stock. In fact, Ariad Pharmaceuticals is up 35.9% over the past year and up 526.4% over the past five years – an impressive run up for a small cap that is now more of a mid cap with a market cap of $3.32 billion.

 
For the record, Merck said it would work with the FDA to figure out the next steps for Taltorvic, which included getting approval in Europe plus it was testing the drug in other cancers such as lung, breast, endometrial and ovarian cancer. However and in November, Merck sent a letter to the European Medicines Agency to say it was pulling back its filing because the available data are not sufficient to permit a license for the drug.

The Bottom Line. If you are looking at rolling the dice on a potentially good trade, you might want to try small cap biopharmaceutical ZIOPHARM Oncology in the coming weeks. Just keep in mind what happened to Ariad Pharmaceuticals’ and Merck’s soft tissue and bone sarcoma treatment.