Ziopharm Goes Lean to Stretch Funds for New Synthetic Biology Focus

Xconomy New York — 

New York-based Ziopharm Oncology (NASDAQ: ZIOP), which once seemed on the runway toward its first product approval for a relatively conventional cancer drug, is now buying itself time to sell Wall Street on a new mission to pioneer a cutting-edge technology.

Ziopharm, which has an office in the Boston area, slashed its workforce by about half last week in the wake of a failed late-stage trial for its leading drug candidate, and it is mulling other cost-cutting moves to conserve its remaining cash to support a new core focus in synthetic biology.

The restructuring was expected after the company announced March 26 that its experimental chemotherapy drug, palifosfamide, failed to meet the goals set for a Phase 3 clinical trial in metastatic soft tissue sarcoma. Ziopharm ended patient follow-up on the unsuccessful trial, and also halted enrollment on another Phase 3 trial of palifosfamide in lung cancer, converting it into a Phase 2 study.

Ziopharm said it would throw itself full-tilt into its other program, which uses innovative DNA-based cancer therapies controlled by a molecular switch. That synthetic biology project, while it had created some media buzz, didn’t stop the 64 percent plunge in Ziopharm’s share price March 26. The shares dropped from $5.13 to $1.82, erasing $282 million in market capitalization.

And while the company had stopped money from pouring out for palifosfamide trials, the $73 million in cash left over by the end of 2012 had been estimated to last only into the first half of this year. In an SEC filing Friday, Ziopharm said its cash assets are now even lower—$55.7 million—but estimated it can make the money stretch until the first quarter of 2014 by stripping down its operations.

Ziopharm, which had 83 employees at the end of 2012, now has 39. The company  announced Friday it has let go 40 staffers, including its president of research and development, Hagop Youssoufian, who was also its chief medical officer. Ziopharm also eliminated 25 unfilled positions, and is looking at possible office space retrenchments. The company rents a headquarters office in New York and a four-story space in the Boston Navy Yard complex in Charlestown, MA.

It may take some very good news on Ziopharm’s synthetic biology program, however, to spring loose any new cash from investors.

The public will get its first detailed peek at initial results from Ziopharm’s early-stage clinical trials of its DNA-based cancer therapies as soon as next month.

The experimental treatments were designed to solve a problem in cancer immunotherapy using the protein interleukin-12 (IL-12). The protein can activate the immune system, but it can also cause severe side effects such as hypertension, liver failure, and death, says Ziopharm CEO Jonathan Lewis (pictured at left).

To try to deliver interleukin-12 into the body but reduce its side effects, Ziopharm is making use of synthetic biology—essentially an intensified form of genetic engineering. The company’s experimental product, Ad-RTS IL-12, is a complex that cobbles together three elements: the gene that codes for interleukin-12, a virus to help the gene get inside tumor cells, and a switch that controls the cell’s production of interleukin-12.

The complex is injected into tumors, but the molecular switch is in the off position. It can only be turned on when the patient takes an additional pill, which triggers the cell to read the interleukin-12 gene and make copies of the protein.

The hope is that the interleukin-12 will stir up an immune response against the tumor’s signature molecules, killing the cancerous cells. The worry with introducing gene-based therapies into the body has always been this: once a gene is inserted into the body, doctors can’t take it out.

But synthetic biology holds out the prospect of allowing doctors to keep communicating with the gene. If clinical trial participants injected with Ad-RTS IL-12 start developing severe symptoms associated with interleukin-12, investigators stop giving them the oral activator pill, and the switch turns off, Lewis says.

“It’s a safety valve,” he says.

That biological gizmo, called the RheoSwitch Therapeutic System, was licensed from the synthetic biology company Intrexon, whose human therapeutics division is based in Germantown, MD. Intrexon has developed an inventory of molecular  parts—genes, switches, and other biological mechanisms—that can be mixed and matched to construct various molecular machines to accomplish narrowly focused tasks inside an organism.

Intrexon is a hub of the nascent movement of synthetic biology into drug development. It has licensed its technology to multiple startups, often taking shares in the companies as part of its compensation. One licensee, Ann Arbor, MI-based Adeona, is using Intrexon’s  RheoSwitch to control the intracellular production of an enzyme that may help people with pulmonary arterial hypertension. Among Intrexon’s other partners are Synthetic Biologics (NYSE: SYN) of Rockville, MD, and San Francisco; Halozyme Therapeutics (NASDAQ: HALO), of San Diego and Foster City, CA; and Fibrocell Science (FCSC) of Exton, PA.

Ziopharm said in October that results of a Phase 1 clinical trial of its experimental therapy, Ad-RTS IL-12, in advanced melanoma had encouraged the company to begin a  Phase 2 trial. Lewis says more detailed data will be released in May or June.

In March, the company said it had also launched a Phase 2 study of Ad-RTS IL-12 in advanced breast cancer. Lewis says interim results of this trial could come by the end of the year, with final data in the first half of 2014.

Ziopharm’s business has become increasingly intertwined with Intrexon and its CEO, Randal J. Kirk, a serial entrepreneur who has founded or served on the boards of companies later acquired at notable prices, including New River Pharmaceuticals, bought by Shire in 2007; Fremont, CA-based Scios, which was acquired by Johnson & Johnson (NYSE: JNJ) in 2003; and Newton, MA-based Clinical Data, which was acquired by Forest Laboratories (NYSE: FRX).

Kirk serves on Ziopharm’s board, and Intrexon received about 3.6 million shares of Ziopharm late last year as part of their technology licensing agreement. Entities managed by Kirk, who is CEO of the investment firm Third Security, have also been accumulating Ziopharm shares in the market. Their stake is 14.9 million shares, or about 18 percent of Ziopharm’s outstanding shares, making the entities associated with Kirk Ziopharm’s largest single owner.

As of May 2011, Intrexon had raised more than $259 million to support its synthetic biology platforms and commercial partnerships. Which raises the question: if Ziopharm runs out of cash to demonstrate the potential of Intrexon’s technology, would the larger company step in to shore up its investment?