ZIOP Coverage Report

8/8/2019 ZIOP Coverage Report

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Griffin Securities, Inc., 17 State Street, NY, NY, 10004 www.GriffinSecurities.com 1Please Review Disclosures on Page 17 of this Research Report

ZIOPHARMONCOLOGY,INC. (NASDAQCM:ZIOP)

ZIOPHARM-INTREXONPARTNERSHIP TORADICALLYADVANCECANCERMEDICINE

Intrexon: The worldwide channel partnership in oncology with Intrexon Corp., led by billionaire R JKirk, provides ZIOPHARM with exclusive access to potentially disruptive synthetic biologytechnologies for engineering DNA-based cancer therapeutics. Over $200 million has been invested inthese technologies by Intrexon with an established and dominant intellectual property position of over400 patents and/or patents pending. The collaboration also provides exclusive access to all currentand future Intrexon enabled oncology clinical candidates, two of which have been disclosed: DC-IL-12, a cell treatment for melanoma, with low dose data already strongly suggestive of powerful effect;and, Adenovirus-mediated IL-12 (AD-IL-12) therapy in another solid tumor (undisclosed) with an IND

filing expected in 1H 11. Zymafos (palifosfamide): Pivotal randomized, double-blinded, placebo-controlled Phase III trial

underway in front-line metastatic soft tissue sarcoma; Phase I intravenous study of palifosfamide incombination with standard of care addressing small cell lung cancer initiated. An additional study withpalifosfomide in the oral form is expected in 1Q 11.

Zinapar (darinaparsin): A novel mitochondrial-targeted agent (organic arsenic) being developedintravenously for the treatment of peripheral T-cell lymphoma with a pivotal study expected to begin inlate 2011. An intravenous Phase I trial in combination with CHOP began in 4Q 10. An oral form isalso being advanced in a Phase I study in solid tumors, which provides the potential for muchexpanded patient access.

Zybulin(indibulin): A novel, oral tubulin binding agent utilizing Nortons oral dosing is advancingin a Phase I/II metastatic breast cancer trial. Dr. Norton is also encouraged by the potential of two

ZIOP treatments together: a Zymafos + Zybulin combo therapy that could create an oraltreatment option that could open up a gargantuan market opportunity.

We are reiterating our BUY rating on ZIOPHARM Oncology, Inc. (NasdaqCM: ZIOP) andincreasing our 12-month price target to $11.00 for ZIOP shares.

ZIOPHARM Oncology, Inc. (NasdaqCM: ZIOP) is a biopharmaceutical company engaged in the development andcommercialization of a diverse portfolio of cancer drugs. The Company has a worldwide exclusive channelpartnership in oncology with Intrexon for the development and commercialization of DNA-based therapeutics.

Share Price (1/19/11) $5.60

52-Week Price Low / High $2.72 $6.30

Mkt. Capitalization (issued) $269 MM

Shares Outstanding (issued)* 48.8 MM

12-month Target Price $11.00

Cash & Equiv. (9/30/10)* $66.5 MM

Fiscal Year Ends Dec. 31th

Website ziopharm.com

*Excludes 2.4 million shares issued for $11.6 million in January 2011and 3.6 million shares i ssued for the Intrexon partnership.

12-Month Price Chart

Source: BigCharts.com

U.S. Research: Biotechnology/Pharmaceuticals January 20, 2011

UPDATE AND BUY RECOMMENDATION

CHRYSTYNA BEDRIJ212-509-9500

[email protected]

KEITH A.MARKEY,PH.D.212-514-7914

[email protected]

MARK MERRILL646-442-1441

[email protected]


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GRIFFIN SECURITIES EQUITY RESEARCH 2

ZIOPHARM Oncology, Inc. January 20, 2011

ZIOPHARMPIPELINE

Source: ZIOPHARM Oncology Presentation January 2011

KEY NEAR-TERM MILESTONES

ZYMAFOS(PALIFOSFAMIDE)

1Q 11 Initiate Phase I trial with the oral formulation2H 12 First-look at data from the Phase I trial in small-cell lung cancer (SCLC)

ZINAPAR(DARINAPARSIN)

Late 11 Initiate Phase III pivotal registration trial as a front-line therapy in patients withperipheral T-Cell lymphoma (PTCL)

ZYBULIN(INDIBULIN)2Q 11 Initial data expected from Phase I/II trial in metastatic breast cancer2011 Initiate Phase II portion of the Phase I/II trial in metastatic breast cancer

INTREXONS TECHNOLOGY PLATFORM1H 11 File an Investigational New Drug Application (IND) for the adenovirus-mediated

IL-12 (AD-IL-12) program2H 11 Preliminary data expected from the Phase Ib DC-IL-12 trial for melanoma.


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HIGHLIGHTS:ZIOPHARM-INTREXON PARTNERSHIPOn January 6, 2011, ZIOPHARM established an exclusive channel partnership in oncology with Intrexon,a synthetic biology and technology company, to develop and commercialize DNA-based therapeutics. Weexpect the Intrexon collaboration to broaden and accelerate ZIOPHARMs current business model byproviding the technological capabilities to develop more targeted (less toxic) therapies, as well as

engineer and commercialize first in class high-value drugs. We believe that the ZIOPHARM- Intrexonpartnership will lead to major breakthroughs in cancer medicine.

Intrexons UltraVector engineering based platform features modular DNA control systems andtechnologies that produce transgenes which direct specific production of therapeutics that combined withactivator ligands (in pills taken orally) tightly control the delivery, targeting, activation, regulation andlocation of biologics. This provides exquisite controls on a cellular level, thereby regulating the in-bodyproduction of therapeutic proteins with precision and optimizing immunological response.

Highlights of the Intrexon technologies:

Rational Design:Intrexons UltraVector Platform provides extraordinary capability for the design andgeneration of complex transgenes, which can be continually engineered until they are doing exactlywhat a drug developer, wants them to do. It is a versatile and fast platform with advancedcomponentry.

Better Control: Intrexons vectors provide control over the quantity and timing of the proteins thevector expresses unmatched control over the function and output of living cells.

Scalability: Intrexon expects to produce complex transgenes in 2011 at a rate that is more than thenumber produced by the rest of the world combined. Intrexons approach progresses drugdevelopment to mass customization, modularity, and an interchangeable parts hierarchy.

Speed and Cost Efficiency: The partnership provides the ability to maximize success very costefficiently. For example, to produce in-vivo data today, without the Intrexon platform, it can take yearsand $3-4 million, but with the Intrexon capability, the same in-vivo data could potentially be producedin days at potentially 1/30th of the cost.

Aggressive Intellectual Property Strategy: Intrexon has an established and dominant intellectual

property position with over 400 patents and/or patents pending.

Highlights of the partnership agreement terms:

ZIOPHARM issued to Intrexon 3,631,391 shares of its common stock, representing 7.495% ofZIOPHARM's currently outstanding shares.

ZIOPHARM agreed to issue to Intrexon additional shares of its common stock, representing anadditional 7.495% under certain conditions upon dosing of the first patient in a ZIOPHARM-conductedU.S. Phase II clinical trial of a product candidate created, produced or developed by ZIOPHARMusing Intrexon technology.

Intrexon purchased 2,422,542 shares of ZIOPHARM's common stock at $4.80 per share for a total

investment of $11,628,202 (representing 5% of ZIOPHARM's currently outstanding shares). Intrexon has agreed to purchase up to $50 million in conjunction with securities offerings that may be

conducted by ZIOPHARM in the future, subject to certain conditions and limitations.

Subject to certain expense allocations, ZIOPHARM will pay Intrexon 50% of the cumulative netquarterly profits derived from the sale of products developed from the channel partnership.


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OTHER INVESTMENT HIGHLIGHTS

ANALYST DAY PROVIDED IN-DEPTH UPDATE ON ZIOPS CLINICAL PROGRAMS FORZYMASFOS, ZINAPAR, AND ZYBULIN. ZIOP received positive opinions from thedistinguished expert panel, which included Dr. Larry Norton, Dr. Mark Thornton, Dr. Robert Maki, Dr.Susan Knox, and Dr. James Armitage.

ZYMAFOS(PALIFOSFAMIDE)CONTINUES AS A CORE FOCUS OF THE COMPANY.PIVOTALPHASE IIITRIAL IN METASTATIC SOFT TISSUE SARCOMA (STS)(FIRST-LINE, COMBINATIONTHERAPY) INITIATED. On July 19, 2010, ZIOPHARM initiated enrollment in an international,randomized, double-blind, placebo-controlled pivotal Phase III clinical trial of Zymafos to assess theclinical efficacy of palifosfamide-tris administered with doxorubicin in combination, compared withdoxorubicin administered with placebo in front-line patients (treating patients who have never beentreated with chemotherapy for metastatic disease) diagnosed with metastatic soft tissue sarcoma(STS). The pivotal trial is expected to enroll approximately 424 patients across 150 centers in NorthAmerica, Europe, South Korea, Israel, Australia and South America. The Primary OutcomeMeasures: Progression Free Survival (primary endpoint for potential accelerated approval) followedby Overall Survival [Time Frame: assessed every 6 weeks for 22 weeks, then 8 weeks for 6months/until progression, then every 12 weeks until then death ]. Zymafos has produced strong

data in its randomized Phase II trial in soft tissue sarcoma that was closed out early as a result ofreaching a key efficacy milestone. In the Phase II trial, out of a total of 61 evaluable patients forprogression-free survival (PFS), there were 20 documented PFS events compared to 14 events fordoxorubicin alone. This analysis of all randomized and eligible patients, with a hazard ratio of 0.63favoring palifosfamide + doxorubicin to doxorubicin alone (two-sided Wilcoxon-Gehan p-value =0.026), statistically supports that palifosfamide prolongs PFS by at least 50%. We believe Zymafosin soft-tissue sarcoma has a high chance of success in Phase III with an estimated $1 billion incommercial potential.

SMALL-CELL LUNG CANCER COULD MORE THAN DOUBLE VALUE OF ZYMAFOS(PALIFOSFAMIDE) FRANCHISE. As with Soft Tissue Sarcoma (STS), ZIOPHARMs strategy forapproaching Small Cell Lung Cancer (SCLC) with Zymafos (palifosfamide) is to provide a friendlier

less toxic ifosfamide that delivers the cancer fighting component of ifosfamide but because of itsnovel composition does not have the toxic metabolites of ifosfamide that cause the debilitating sideeffects which can limit dosing and treatment. An open-label study to define the safety profile and themaximum tolerated dose and confirm the clinical effective dose of palifosfamide-tris givenintravenously in combination with etoposide and carboplatin in a wide range of cancers withetoposide and carboplatin are normally given has been initiated. Once the maximum dose ofpalifosfamide-tris is determined, a Phase II study using the 3 agents combined is expected tocommence. Dr. Larry Einhorn and HOG are the PI which is expected to be followed by a subsequentrandomized Phase II trial +/- palifosfamide in front-ine extensive-stage SCLC. The commercialopportunity for SCLC is relatively straightforward (since it is tied almost exclusively to cigarettesmoking) with an estimated $1 billion in commercial potential, comparable to our estimatesZymafos in soft-tissue sarcoma. SCLC affects approximately 200,000 new patients per yearworldwide. Over the past several years, cisplatin plus etoposide (VP) has become one of the mostcommonly used regimens for the treatment of patients with extensive stage SCLC. Ifosfamide hasalso shown major activity in previously untreated patients with SCLC. The Eastern Cooperative

Oncology Group has previously demonstrated a 45% response rate in 44 previously untreatedpatients with extensive disease. Based on this single-agent activity and effectiveness whenifosfamide was combined with cisplatin and etoposide (VIP) in recurrent tumors, a trial using thesethree drugs in patients with extensive SCLC was conducted by the Hoosier Oncology Group, whichalso showed significant improvement in survival over VP in patients with extensive-stage SCLC.

1


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ZINAPAR SHOWS PROMISE IN THE TREATMENT OF PERIPHERAL T-CELL LYMPHOMAARARE AND AGGRESSIVE NON-HODGKIN LYMPHOMA. Peripheral T-cell lymphoma (PTCL)comprises a group of rare and aggressive non-Hodgkin lymphomas that develop from T-cells indifferent stages of maturity. PTCL lymphomas generally do not respond well to currently availabletreatments. Zinapar (darinaparsin) is a novel organic arsenic compound that has demonstratedclinical efficacy and a favorable safety profile in hematological cancers and solid tumors. Its

mechanism of action includes disruption of mitochondrial functions and induction of apoptosis.1

Previous intravenous Phase II study results of Zinapar demonstrated an overall response rate of37% in lymphoma and 60% in peripheral T-cell lymphoma (PTCL) patients. An additional Phase Icombo trial with CHOP-based therapy (cyclophosphamide, doxorubicin, vincristine and prednisone)began in the 4Q 10, setting the stage for the pivotal Phase III trial . An oral formulation of Zinapar isalso advancing in an ongoing Phase I trial which provides the potential for much expanded patientaccess.

ZYBULIN PHASE I/II TRIAL IN BREAST CANCER UTILIZING NORTONS DOSINGSCHEDULE. Indibulin is a novel oral tubulin binding agent that targets both mitosis and cancer cellmigration. It is an anti-mitotic agent, like the taxanes, in an oral formulation with no neurotoxicity. Dr.Larry Norton from Memorial Sloan Kettering and Dr. Murray Brennan, who is also Emeritus Chairmanof Surgery, Memorial Sloan-Kettering Cancer Center and widely regarded as being one of the bestand most famous surgeons in the world, have been guiding the development of Zybulin. A PhaseI/II study in breast cancer using Nortons novel dosing scheduling strategy is underway at MemorialSloan Kettering under their guidance with the teams of Dr. Clifford Hudis and Dr. Jose Baselga.Zybulin is not only an interesting drug because it is active against taxane resistant cells without theneurotoxicity seen with all the other tubulin binding agents, but also because mathematical modelingby Dr. Larry Norton has revealed a novel dose-schedule that promises to maximize efficacy andminimize toxicity in the clinic. Also, it is oral, so it is potentially of value to the entire worldspopulation. We believe that given the prevalence of solid tumors, the commercial opportunity of suchan anti-mitotic in an oral formulation and with no neurotoxicity is significant.

VALUATION SUMMARYWe believe that ZIOP shares continue to offer an attractive investment as the Intrexon platform provides

the opportunity for ZIOPHARM to dramatically and efficiently expand its pipeline at a relatively low costand as progress in all three core programsZymafos, Zinapar, and Zybulin remain on track. Oursum-of-the-parts valuation model based on (i) a discounted cash flow model for the three core oncologyprograms using a discounted rate of 12.5% and weighting the cash flows from each program by theestimated probability of occurrence based on the current stage of clinical development and (ii) acomparable transaction model for the Intrexon technology platform supports a valuation of $11.00 pershare over the next 12 months. We reiterate our BUY rating and establish a new 12-month pricetarget of $11.00 for ZIOP shares. We believe EACH additional compound that ZIOP advances to theclinic using the Intrexon technology could increase our valuation by approximately $3.00 per share. Asthe Intrexon platform is very scalable and has the potential to generate numerous clinical compoundswithin the next 12-36 months, our price target could increase substantially.

1 Elena Kolobova, M. Cecelia Larocca and James R. Goldenring, Evaluation of RNA-stress granules formation as an indication ofresponse to Darinaparsin in cancer cell lines, April 2010, AACR
http://en.wikipedia.org/wiki/Cyclophosphamidehttp://en.wikipedia.org/wiki/Cyclophosphamide


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UPDATE FROM THE ANALYST MEETINGZIOPHARM held its annual analyst/institutional investor meeting on November 29, 2010. The Companyprovided a brief review of its product pipeline and an update of its clinical development plans followed byshort presentations made by a panel of oncology experts on each of ZIOPHARMs pipeline candidates.

ZYMASFOS(PALIFOSFAMIDE)

Palifosfamide remains on track in its pivotal Phase III clinical trial in front-line metastatic soft tissuesarcoma. The trial was designed as a close follow-on to the completed Phase II clinical trial in soft-tissuesarcoma. According to Robert Maki, M.D., Ph.D., a leader in the Adult Sarcoma Program at the MemorialSloan-Kettering Cancer Center, an anticipated hazard ratio of 0.60 and median progression-free survival(PFS) of three months from the pivotal trial are expected to provide clinically-meaningful results.Importantly, Mark Thornton, M.D., Ph.D., founder of the Sarcoma Foundation of America and previously amember of the FDA, and now ZIOPs new Chief Medical Officer, added that in his opinion PFS greaterthan three months improvement should help gain accelerated approval as the FDA has indicated thatthey are looking for months, not weeks of PFS improvement. Also, Section 740 of the 2010 FDAappropriations bill (the Brownback-Brown Amendment) stipulated that the FDA must create industryguidance for pathways to development drugs that treat rare diseases, such as soft tissue sarcoma.Vincent Miller, M.D., an Associate Attending Physician at the Memorial Sloan-Kettering Cancer Center,added that palifosfamide may hold therapeutic potential in the treatment of small-cell lung cancer (SCLC).

Currently, etoposide/cisplatin is the standard first-line regimen for SCLC, and topotecan is the onlyapproved therapeutic agent for second-line therapy. Ifosfamide in combination with etoposide andcisplatin has demonstrated improved efficacy in previous studies. Based on the experience of ifosfamide,palifosfamide has a strong biological rationale for treating SCLC, especially because of its excellentsafety profile.

ZINAPAR(DARINAPARSIN)

Darinaparsin is currently in an oral Phase I trial in solid tumors. A Phase I trial of the intravenousformulation in combination with CHOP began in the 4Q 10, and a pivotal study in combination with CHOPin peripheral T-cell lymphoma (PTCL) is expected to begin in late 2011. James Armitage M.D., Professorof Medicine at the University of Nebraska Medical Center, indicated that the Company may also conducta second clinical trial in PTCL in the relapsed setting, as there is a significant unmet medical need in bothfirst-line and relapsed disease, and potential partners have indicated that they have interest in a

therapeutic agent that works in relapsed disease. Susan Knox, M.D., Ph.D., Associate Professor atStanford University School of Medicine, presented new darinaparsin preclinical data which demonstratedpotent efficacy effects in various solid tumor models. The preclinical work was designed to studydarinaparsins cytotoxic and radiosensitizing effects against different solid tumor cell lines under bothnormoxic (NO) and hypoxic (HO) conditions. Dr. Knox stated that Darinaparsins multiple mechanisms ofaction and potency provide for cytotoxicity and radiosensitization in a variety of tumor cell lines andenvironments. Dr. Knox also said that the activity suggests a broad potential applicability for dariniparsinin the treatment of chemo- and radio-resistant solid tumors, with near term translational potential.

ZYBULIN(INDIBULIN)

The oral formulation of indibulin is in a Phase I/II trial in breast cancer using the Norton -dosing schedule.Larry Norton, M.D., Deputy Physician in Chief, Memorial Hospital, Memorial Sloan-Kettering CancerCenter, reviewed his Norton-dosing hypothesis and described how it applies to all cancer therapies,including indibulin, by slowing tumor growth using more frequent, dose-density administration of drugs.Dr. Norton reiterated his excitement about the prospects of the drug.

ZYMAFOS+ZYBULINCOMBO THERAPY POTENTIAL REVEALED

Larry Norton also presented evidence that Norton-dosing could also work for palifosfamide in a breastcancer model, and palifosfamide could potentially be combined with indibulin to improve breast canceroutcomes. He used the example of palifosfamide + docetaxel and indicated that indibulin could potentiallyserve as a replacement for docetaxel since they have similar mechanisms as antimitotic agents andbecause indibulin has such an excellent safety profile to date. Dr. Norton was very excited and said thatthe combination could potentially create an oral treatment option that could open a gargantuan marketopportunity and increases by a log of where one could go.


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FINANCIAL FORECASTS &VALUATION ANALYSISVALUATION SUMMARY AND BASIS FOR 12-MONTH PRICE TARGET

Using the sum-of-the-parts valuation combining the value of just one compound generated utilizingIntrexons platform with the value of ZIOPs existing oncology pipeline (Zymafos, Zinapar, andZybulin), we are setting a 12-month price target of $11.00 for ZIOP shares. The summary calculation is

presented in the table below:

Value per Fully-Diluted Share

Valuation of a 50% share of first compound with Intrexon: $3.19

Valuation of Zymafos, Zinapar, and Zybulin: $7.90

Total $11.09

VALUATION OF THE FIRST COMPOUND GENERATED USING INTREXONS PLATFORM

Below is a table of publically disclosed transactions that closed within the last 30 months involvingtechnology/R & D drug development platforms.

The table shows that price paid per drug in development ranged from $48 million to $560 million with amedian of $196 million. The larger valuations were attributed to novel platforms that are being utilized todevelop potential blockbuster drugs. We believe Intrexons platform has the potential to engineernumerous blockbuster drugs and, accordingly, to command higher value metrics. Thus, we assigned atechnology valuation of $3.19 per share price per compound generated with the Intrexon platform ($500million per drug divided by an estimated 78.27 million fully diluted FY2014E shares outstanding divided by50% share to ZIOP). More importantly, the Intrexon platform is very scalable and has the potentialto generate numerous compounds within the next 12-36 months, which would add substantialupside value to ZIOPHARM shareholders.

Recent Licensing Deals and Acquisitions

Target Company Acquirer/Licensee Date Technology/R&D Pipeline Price ($ mill.)

Price per Drug

($ mill.)Seattle Genetics Pfizer 1/6/2011 antibody-drug conjugate (ADC) platform $200 $200

Lpath Pfizer 12/20/2010 Bioactive lipid-targeting mAb platform $497 $497Trubion Pharmaceuticals Emergent 10/28/2010 Protein therapeutics platform $96 $48ImmunoGen Novartis 10/11/2010 Tumor-targeting mAb technology N/A $200Zymogenetics Bristol-Myers Squibb 9/7/2010 Protein therapeutics platform $885 $221Alnara Eli Lilly 7/21/2010 Enzyme replacement platform $388 $388TargeGen Sanofi 6/30/2010 JAK2 inhibitor platform $560 $560CGI Pharma Gilead 6/25/2010 Small molecule kinase inhibitors $120 $120Seattle Genetics GlaxoSmithKline 12/21/2009 antibody-drug conjugate (ADC) platform N/A $390CuraGen Celldex 5/29/2009 antibody-drug conjugate (ADC) platform $94 $94Micromet Bayer 1/12/2009 BiTE antibody technology platform $290 $290Arius Research Roche Holdings 7/23/2008 Antibody selection platform $191 $191Mirus Bio Corp. Roche Holdings 7/22/2008 RNAi ploymer delivery technology $125 $125Kosan Biosciences Bristol-Myers Squibb 6/26/2008 HSP90 inihibitor & epothilone platforms $190 $95Coley Pharmaceuticals Pfizer 11/16/2007 TLR therapeutic platform $164 $55Ablynx Boehringer Ingelheim 9/7/2007 10 antibody fragment-based drugs $1,800 $180

Valuation Analysis Price Price per DrugAverage ($ mill.): $400 $228Median ($ mill.): $196 $196


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VALUATION OF ZYMAFOS,ZINAPAR, AND ZYBULIN

Our DCF model suggests a value of $7.90/fully-diluted share for ZIOPs existing pipeline of oncologycandidates (Zymafos, Zinapar, and Zybulin) using a 12.5% discount rate. Annual cash flows areprobability weighted, according to the proportionate annual revenue contributions from eachdrug/indication and the probability of commercialization, based on each drugs stage of development. Thisdoes not include the Intrexon-related synthetic biology platform or pipeline.

Notes to the Valuation Model

Assumes international partner(s) will assume all the drug manufacturing costs related toZymafos, Zybulin, and Zinapar upon commercialization.

Assumes Research and Development (R&D) expenses of $15.75 million in 2010, $35 million in2011, and $30 million in 2012. Assumes Zymafos and Zinapar are partnered internationallyby 2012, reducing R&D to $15 million in 2013 and 2014 as new candidates are advanced.

$ in thousands, except per share data

FY ending December 31

2010 2011 2012 2013 2014

Revenue -$ 3,600$ 7,600$ 49,545$ 64,377$

Operating income (26,250) (42,425) (33,976) 21,390 35,411

Net income (28,463) (41,925) (33,526) 19,175 22,203

Depreciation/amortization 350 350 350 350 350

Stock-based compensation 1,600 1,600 1,700 1,700 1,800

Tax loss carryforwards - - - 2,615 29,622

Capital gain (expenditures) (400) (400) (425) (425) (800)Total cash flow adjustments 1,550 1,550 1,625 4,240 30,972

Free cash flow (26,913)$ (40,375)$ (31,901)$ 23,415$ 53,175$

Gross profit weighted probability 100.0% 100.0% 100.0% 29.0% 26.6%

Risk-adjusted free cash flow (26,913)$ (40,375)$ (31,901)$ 6,793$ 14,142$

Discount Rate 2.0% 3.0% 4.0% 2.0% 3.0% 4.0%

7.5% $508,460 977,600$ 1,206,559$ 1,566,351$ $1,486,060 $1,715,018 $2,074,811

10.0% $377,724 476,070$ 549,414$ 647,206$ $853,794 $927,138 $1,024,930

12.5% $280,897 258,925$ 288,986$ 326,120$ $539,821 $569,882 $607,016

15.0% $208,526 150,397$ 164,528$ 181,227$ $358,923 $373,053 $389,753

17.5% $153,977 91,359$ 98,617$ 106,950$ $245,336 $252,594 $260,927

Discount Rate Net Debt 2.0% 3.0% 4.0% 2.0% 3.0% 4.0%

7.5% (48,839)$ $1,534,899 $1,715,018 $2,123,650 19.61$ 21.91$ 27.13$

10.0% (48,839) $902,633 $975,977 $1,073,769 11.53$ 12.47$ 13.72$

12.5% (48,839) $588,660 $618,721 $655,855 7.52$ 7.90$ 8.38$

15.0% (48,839) $407,762 $421,892 $438,592 5.21$ 5.39$ 5.60$

17.5% (48,839) $294,175 $301,433 $309,766 3.76$ 3.85$ 3.96$

Discount Rate 2.0% 3.0% 4.0% 2.0% 3.0% 4.0%

7.5% 65.8% 70.4% 75.5% 11.50 14.20 18.43

10.0% 55.8% 59.3% 63.1% 7.91 9.13 10.75

12.5% 48.0% 50.7% 53.7% 6.03 6.73 7.59

15.0% 41.9% 44.1% 46.5% 4.87 5.32 5.87

17.5% 37.2% 39.0% 41.0% 4.08 4.41 4.78

Value per Diluted Share

Implied EBITDA Multiple

Discounted

Cash Flows

(2008 - 2023)

PV of Terminal Value at a

Perpetual growth rate of rFCF Enterprise Value

Total Equity Value

Terminal Value as % Enterprise Value


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Assumes General and Administrative (G&A) expenses of $11.025 million in 2011. We assumeG&A expense will increase at an annual rate of 5% thereafter.

Assumes the company books tax liabilities at a rate of 38% for financial reporting purposes.

The Company currently has 48.8 million common shares issued, 3.6 million options outstanding,15.9 million warrants outstanding, and 1.5 million unvested shares of restricted stock. Our shareestimates take into account the 6,053,933 million new shares issued upfront plus the additional

7.495% of outstanding shares issuable upon initiation of the first Phase II trial through thetechnology license from Intrexon and new shares issued through the exercise of options andwarrants.

(Intentionally left blank)


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ZYMAFOS,ZINAPAR, AND ZYBULINREVENUE ESTIMATES

Zymafos (palifosfamide)

Zymafos stopped enrollment early in a randomized Phase II clinical trial in soft -tissue sarcoma. Apivotal study began in July 2010. We assume the following:

Soft-Tissue Sarcoma: The patient population is estimated to be 34,000 patients. This includes approximately 10,000 in

the U.S., approximately 20,000 in Europe, and approximately 4,000 in Japan.2, 3

75% of the patient population is considered eligible for chemotherapy, based upon their general

health status. The patient population is expected to grow roughly in line with the worlds population. We assume that the first marketing approval for this indication in the U.S. is received in 2H 2013

and that a good therapeutic index of the drug results in 15% of the patient population treated in itsfirst 12 months. We also assume that European and Japanese launches will trail by 12 and 18months, respectively.

2Surveillance Epidemiology and End Results (SEER), National Cancer Institute, 2009.

3 Casali et al. Clinical Recommendations: Soft Tissue Sarcomas: ESMO Clinical Recommendations for Diagnosis, Treatment, andFollow-up. European Society for Medical Oncology (ESMO). 2009.

1st & 2nd Line Soft-Tissue Sarcoma

Year penetration starts 2013 Incidence 34000

Starting penetration rate (first 12 months) 15.0% Percent addressable 75%Years between penetration start and peak 5 Market growth rate 1%

Peak penetration 60% Price per patient $48,000

Duration of peak penetration in years 3 Treatment price growth 3%

Retention rate in decline years 100% Royalty rate 15%

Stage of development Phase III Probability of commercialization 70%

2nd and 3rd Line Small-Cell Lung Cancer (SCLC)


Starting penetration rate 3.0% Percent addressable 90%

Years between penetration start and peak 5 Market growth rate 1%Peak penetration 15% Price per patient $48,000



Stage of development Phase I Probability of commercialization 15%

1st Line Pediatric Sarcoma



Years between penetration start and peak 5 Market growth rate 1%

Peak penetration 60% Price per patient $48,000Duration of peak penetration in years 3 Treatment price growth 3%




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Five years after Zymafos approval, its sales peak, with a market penetration of 60%. This takesinto account the drugs favorable efficacy and side effect profiles, and an established marketbased on the use of doxorubicin and ifosfamide, which are major players in the therapy.

Sales remain stable after peaking. The average patients cost of therapy is $48,000 per annum ($8,000 per cycle), followed by 3%

price increases.

ZIOPHARM partners selectively regional rights to Zymafos in exchange for milestone paymentsand a 15% royalty rate. The probability of commercialization is 70%, reflecting Zymafos stage of clinical development

and historical drug development success rates.

Small-Cell Lung Cancer: The patient population is estimated to be 150,000 patients, (approximately 35,000 in U.S.,

approximately 50,000 in Europe, approximately 15,000 in Japan, and approximately 50,000in the rest of Asia)4.

90% of the patient population is eligible for treatment. We expect the product to begin generating revenue in 2015 following U.S. approval, with

peak penetration in the market of 15% in 2021. The market growth rate is expected to grow about 1% per year.

Sales remain stable after peaking. The average patients cost of therapy is $48,000 per annum ($8,000 per cycle)

5, followed by 3%price increases.

ZIOPHARM partners selectively regional rights to Zymafos in exchange for milestone paymentsand a 15% royalty rate.

The probability of commercialization is 15%, reflecting Zymafos stage of clinical developmentand historical drug development success rates.

Pediatric Sarcoma: There are approximately 1,600 children per year treated for Sarcoma

6.

The addressable market is considered to be 75% of the patient population. We assume that regulatory approval for this treatment in the U.S. will be carried out in 2014.

In 2019 we expect sales to peak at a penetration rate of 60%. Sales remain stable after peaking. The average patients cost of therapy is $48,000 per annum ($8,000 per cycle)

7, followed by 3%

price increases. ZIOPHARM partners selectively regional rights to Zymafos in exchange for milestone payments

and a 15% royalty rate. The probability of commercialization is 15%, reflecting Zymafos stage of clinical development


4Surveillance Epidemiology and End Results (SEER), National Cancer Institute, 2009.

5An estimate derived from comparable drugs including trisenox, Treanda (bendamustine), and Folotyn (pralatrexate)

6U.S. Department of Health, National Institutes of Health, National Cancer Institute, Report of the Sarcoma Progress Review Group,

A Roadmap for Sarcoma Research, January, 20047 An estimate derived from comparable drugs including trisenox, Treanda (bendamustine), and Folotyn (pralatrexate)


12/18



Zinapar (darinaparsin)

Zinapar has completed a Phase II trial in lymphomas with favorable data in peripheral T-cell lymphoma(PTCL). Zinapar is currently in a Phase I trial evaluating oral dosing, and a Phase I trial using Zinaparin combination with CHOP for the treatment of lymphomas is currently in advanced planning stages. ThePhase I study in combination with CHOP is expected to be used as a basis for a pivotal trial in first-linePTCL. We assume the following:

Front-Line Peripheral T-cell lymphoma:

The incidence population is estimated at 30,000 patients (approximately 7,000 in the U.S., 12,000in Europe, 3,700 in Japan, and 10,000 in China). All patients are considered eligible for Zinapartherapy, given the aggressiveness of the disease and the lack of alternative therapies.

The patient population is expected to grow roughly in line with the total population.

We assume that the first regulatory approval for this indication in the U.S. is received in early2015, and that the drugs efficacy and minimal competition enable it to penetrate 25% of themarket in its first year and to reach 85% of the patient population four years later.

The drugs sales remain at their peak for four years before declining with the advent of additionaltherapies.

The price of treatment is $48,000 ($8,000 per cycle)8

in its initial year on the market, followed by3% annual price increases.

ZIOPHARM out-licenses Zinapar to a marketing partner(s) for global development anddistribution in exchange for milestone payments and a 15% royalty rate.

The probability of commercialization is 40%, reflecting Zinapars stage of clinical developmentand historical drug development success rates.

8 An estimate derived from comparable drugs including trisenox, Treanda (bendamustine), and Folotyn (pralatrexate)

Front-Line Peripheral T-Cell Lymphoma


Starting penetration rate 25% Percent addressable 100%





Stage of development Phase II Probability of commercialization 40%

Other Non-Hodgkin's Lymphomas







Stage of development Phase II Probability of commercialization 20%


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Other Non-Hodgkins lymphoma The new incidence is estimated at 125,120, including Non-Hodgkins Lymphoma, B-cell

lymphoma, T-cell lymphoma, cutaneous T-cell lymphoma, and marginal zone lymphoma indeveloped countries, with peripheral T-cell lymphoma treated as a separate indication.

9

The addressable market is considered to be 50% of the patient population, since non-Hodgkins

lymphoma is comprised of a wide variety of lymphoid malignancies, some of which, includingmarginal zone lymphoma and diffuse large B-cell lymphoma, are more responsive tochemotherapy than others.

The market is expected to grow faster than the worlds population, as recent incidence rates havebeen accelerating. The disease is most common in the United States, Europe, and Australia, andless common in Asia.10

We assume that the first regulatory approval for this indication is received in 2016, and that theinitial penetration rate is 1%, reflecting the current level of competition and the drugs gradualintroduction into major markets.

Sales peak five years after approval of the non-Hodgkins lymphoma indication and remain atpeak levels for three years before declining with the entry of new therapies.

The price of treating a patient for one year is $48,000 ($8,000 per cycle) 11 in its initial year on themarket, followed by 3% annual price increases.

ZIOPHARM out-licenses Zinapar to a marketing partner(s) for global distribution in exchangefor milestone payments and a 15% royalty rate.

The probability of commercialization is 20%, reflecting Zinapars stage of clinical developmentand historical drug development success rates.


9Global Cancer Facts & Figures 2009. Published by the American Cancer Society.

10 DeVita, VT, TS Lawrence, SA Rosenberg. Cancer: Principles & Practice of Oncology. Philadelphia: Lippincott Williams & Wilkins,2008.11

An estimate derived from comparable drugs including trisenox, Treanda (bendamustine), and Folotyn (pralatrexate)


14/18



Zybulin (indibulin)

On November 3, 2006, ZIOPHARM acquired Zybulin from Baxter Healthcare Corporation for an upfrontcash payment of $1.25 million, and has agreed to pay future milestones totaling approximately $7 millionplus an undisclosed royalty based on net sales. We assume the royalty payable to Baxter to be 6%.Currently, Zybulin is in clinical trials in various solid tumors; however, we have modeled the financialsbased on the assumption that the Company will pursue 2

ndand 3

rdline breast cancer as its approval

indication. We assume the following:

2nd & 3rd Line Breast Cancer: The patient population reflects the estimated number of deaths related to breast cancer in

developed countries.12

40% of the patient population is considered eligible for chemotherapy, based upon their generalhealth status.

The patient population is expected to grow roughly in line with the total population. We assume that the first regulatory approval for this indication is received in 2015 and that the

drug is used by 1% of the patient population in its first year. Five years after Zybulins approval for breast cancer, its sales peak, with a total market

penetration of 10%. This takes into account the drugs good side effect profile, its oral availability,and the ready-made market based on use of other taxanes, notably docetaxel.

Sales remain stable for three years after peaking and then enter a period of slow decline, due tonew competition.

The average patients cost of Zybulin therapy is $48,000 per annum ($8,000 per cycle)13. ZIOPHARM out-licenses all marketing rights to Zybulin in exchange for milestone payments

and a 15% royalty rate. The probability of commercialization is 20%, reflecting Zybulins stage of clinical development


12 Global Cancer Facts & Figures 2008. Published by the American Cancer Society.13

An estimate derived from comparable drugs including trisenox, Treanda (bendamustine), and Folotyn (pralatrexate)

2nd and 3rd Line Breast Cancer









15/18



BALANCE SHEET


$ in thousands, except per share data

FY ending December 31

ASSETS 9/30/2010

Current Assets

Cash & equivalents (1) 66,471

Other 352

Total Current Assets 66,823$

Property & equipment 230$

Other 397

Total Assets 67,450$

LIABILITIES

Current Liabilities

Accounts payable 1,088$

Other 3,018

Total Current Liabilities 4,106$

Long-term debt -$

Other 21,140

Total Long-Term Liabilities 21,140$

Shareholders Equity

Common Stock, par value 49$

Additional Paid-In Capital 154,118

Accumulated Deficit (111,963)

Total Shareholders Equity 42,204$

Total liabilities & equity 67,450$

Notes:

(1) Cash & equivalents excludes approximately $11.6 million raised in

January 2011


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INVESTMENT CONCERNS AND RISKSFor a complete description of risks and uncertainties related to ZIOPHARMs business, see theRisk Factors section in ZIOPHARMs SEC filings, which can be accessed directly from the SECEdgar filings at www.sec.gov. Potential risks include:

Stock risk and market risk:There is a limited trading market for the Companys common stock. Therecan be no assurance that an active and liquid trading market will develop or, if developed, that it will besustained, which could limit ones ability to buy or sell the Companys com mon stock at a desired price.Investors should also consider technical risks common to many small-cap or micro-cap stockinvestments, such as small float, risk of dilution, dependence upon key personnel, and the strength ofcompetitors that may be larger and better capitalized.

New and rapidly changing field: The pharmaceutical and biotechnological markets are rapidly evolving,and research and development are expected to continue at an accelerated pace with increasedfrequency. Other companies are also actively engaged in the development of therapies to directly orindirectly treat those disorders being pursued by ZIOPHARM. These companies may have substantiallygreater research and development capabilities, as well as significantly greater marketing, financial, andhuman resources abilities than ZIOPHARM.

Products still in development phases: Although the Company intends to continue with clinical

development of palifosfamide for advanced sarcoma and other indications, darinaparsin for variousindications, and indibulin in solid tumors, the successful development of the Companys productcandidates is highly uncertain. Product development costs and timelines can vary significantly for eachproduct candidate and are difficult to accurately predict. In addition, products in development that appearto be promising may not reach commercialization for various reasons, including failure to achieveregulatory approvals, safety concerns, and/or the inability to be manufactured at a reasonable cost.

Funding requirements:It is difficult to predict the Companys future capital requirements. The Companymay need additional financing to continue funding the research and development of its products and toexpand its business. There is no guarantee that it can secure the desired future capital or, if sufficientcapital is secured, that current shareholders will not suffer significant dilution.

Regulatory risk: Various statutes and regulations also govern or influence the manufacturing, safety,labeling, storage, record keeping and marketing of each product. The lengthy process of seeking

approval and the subsequent compliance with applicable statutes and regulations require the expenditureof substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals couldmaterially adversely affect ZIOPHARMs business. There is no guarantee that ZIOPHARMS products willbe approved by the U.S. Food and Drug Administration (FDA) or international regulatory bodies formarketing in the U.S. or abroad.

The Company may need to raise additional capital, which may not be available on termsacceptable to them, if at all: As the Company continues to expand their research and developmentactivities, they may need to raise additional capital, which may not be available on terms acceptable tothem, if at all. If the Company cannot raise necessary additional capital on acceptable terms, they maynot be able to increase sales, develop or enhance their products and services, take advantage of futureopportunities, or respond to competitive pressures or unanticipated requirements, any of which couldcause their business to suffer.

Competitive risk: The biotechnology industry is extremely competitive, mainly due to its large marketpotential. Many companies are developing products for the same therapeutic indications targeted byZIOPHARM. These companies may have substantially more resources than ZIOPHARM, which couldadversely affect the Companys position in the market place.


17/18



DISCLOSURESANALYST(s) CERTIFICATION: The analyst(s) responsible for covering the securities in this report certify that theviews expressed in this research report accurately reflect their personal views about ZIOPHARM Oncology, Inc. (theCompany) and its securities. The analyst(s) responsible for covering the securities in this report certify that no partof their compensation was, is, or will be directly or indirectly related to the specific recommendation or view containedin this research report.

MEANINGS OF RATINGS: Our rating system is based upon 12 to 36 month price targets. BUY describes stocksthat we expect to appreciate by more than 20%. HOLD describes stocks that we expect to change plus or minus20%. SELL describes stocks that we expect to decline by more than 20%. SC describes stocks that Griffin Securitieshas Suspended Coverage of this Company and price target, if any, for this stock, because it does not currently havea sufficient basis for determining a rating or target and/or Griffin Securities is redirecting its research resources. Theprevious investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon.NR describes stocks that are Not Rated, indicating that Griffin Securities does not cover or rate this Company.

DISTRIBUTION OF RATINGS: Currently Griffin Securities has assigned BUY ratings or NO RATINGS on all of thecompanies it covers. The Company has provided investment-banking services for 17% of companies in which it hashad BUY ratings in the past 12 months, 0% for companies in which it has had NR or no coverage in the past 12months or has suspended coverage (SC) in the past 12 months.

MARKET MAKING: Griffin Securities does not maintain a market in the shares of this Company or any otherCompany mentioned in the report.

COMPENSATION OR SECURITIES OWNERSHIP: The analyst(s) responsible for covering the securities in thisreport receive compensation based upon, among other factors, the overall profitability of Griffin Securities, includingprofits derived from investment banking revenue. The analyst(s) that prepared the research report did not receive anycompensation from the Company or any other companies mentioned in this report in connection with the preparationof this report. The analysts responsible for covering the securities in this report currently do not own common stock inthe Company, but in the future may from time to time engage in transactions with respect to the Company or othercompanies mentioned in the report. However, an account in which a member of an analysts household has afinancial interest holds warrants to purchase shares of the Company common stock. Griffin Securities from time totime in the future may request expenses to be paid for copying, printing, mailing and distribution of the report by theCompany and other companies mentioned in this report. Griffin Securities has received compensation from theCompany in the past 12 months for non-investment banking services. Griffin Securities expects to receive, or intendsto seek, compensation for investment banking services from the Company in the next three months.

PRICE CHART

Source: BigCharts.com

6/26/2006 Initiating coverage: share price: $5.05; rating: BUY; 12-month price target: $18.00. 12/07/2006 Research update: share price $6.36; rating: BUY; 12-month price target: $20. 5/03/2007Research update: shareprice $5.80; rating: BUY; 12-month price target: $20.00. 3/13/2008Research update: share price: $2.52; rating:BUY; 12-month price target: $15.00. 7/02/2008Research update: share price: $1.87; rating: BUY; 12-month pricetarget: $15.00. 5/18/2009 Research update: share price: $0.77; rating: BUY; 12-month price target: $3.00.6/09/2009Research update: share price: $1.87; rating: BUY; 12-month price target: $3.00. 3/4/2010 Researchupdate: share price: $3.53; rating: BUY; 12-month price target: $8.00. 1/20/2011Research update: share price:$5.60; rating: BUY; 12-month price target: $11.00.

BUY

BUYBUY

BUY

BUYBUY


18/18



FORWARD-LOOKING STATEMENTS: This Report contains forward-looking statements, which involve risks anduncertainties. Actual results may differ significantly from such forward-looking statements. Factors that might causesuch a difference include, but are not limited to, those discussed in the Risk Factors section in the SEC filingsavailable in electronic format through SEC Edgar filings at www.SEC.gov on the Internet.

GENERAL: Griffin Securities, Inc. (Griffin Securities) a FINRA member firm with its principal office in New York,New York, USA is an investment banking firm providing corporate finance, merger and acquisitions, brokerage, and

investment opportunities for institutional, corporate, and private clients. The analyst(s) are employed by GriffinSecurities. Our research professionals provide important input into our investment banking and other businessselection processes. Our salespeople, traders, and other professionals may provide oral or written marketcommentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressedherein, and our proprietary trading and investing businesses may make investment decisions that are inconsistentwith the recommendations expressed herein.

Griffin Securities may from time to time perform corporate finance or other services for some companies describedherein and may occasionally possess material, nonpublic information regarding such companies. This information isnot used in preparation of the opinions and estimates herein. While the information contained in this report and theopinions contained herein are based on sources believed to be reliable, Griffin Securities has not independentlyverified the facts, assumptions and estimates contained in this report. Accordingly, no representation or warranty,express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness orcorrectness of the information and opinions contained in this report.

The information contained herein is not a complete analysis of every material fact in respect to any company, industryor security. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security inany jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on thismaterial. It is for the general information of clients of Griffin Securities. It does not take into account the particularinvestment objectives, financial situations, or needs of individual clients. Before acting on any advice orrecommendation in this material, clients should consider whether it is suitable for their particular circumstances and, ifnecessary, seek professional advice. Certain transactions - including those involving futures, options, and otherderivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for allinvestors. The material is based on information that we consider reliable, but we do not represent that it is accurate orcomplete, and it should not be relied on as such. The information contained in this report is subject to change withoutnotice and Griffin Securities assumes no responsibility to update the report. In addition, regulatory, compliance, orother reasons may prevent us from providing updates.

DISCLOSURES FOR OTHER COMPANIES MENTIONED IN THIS REPORT: To obtain applicable current

disclosures in electronic format for the subject companies in this report, please refer to SEC Edgar filings atwww.SEC.gov.In particular, for a description of risks and uncertainties related to subject companies businesses inthis report, see the Risk Factors section in the SEC filings.
http://www.sec.gov/http://www.sec.gov/

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