According to Running USA it takes the average man 4 hours 19 minutes and 27 seconds to run a marathon. (SOURCE)
What does this have to do with Ziopharm? You will see.
Imagine a sports drink company having 10 runners drink their product before running a marathon. Now imagine that all 10 beat the average time it takes to run 26 miles. That might seem impressive. Maybe a press release would be put out citing the results.
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July 16, 2016 ATB Energy Drinkers Excel At Marathon
ATB Industries, (Symbol POS.OTC) the makers of sports drink ATB Energy, is pleased to announce that at the recent Quahog Marathon ten male runners drank our product before running the race. While the average time to run a marathon for a man is over four hours, the ten runners who drank ATB Energy before the race had an average time of just under 3 hours.
ATB CEO Peter Gryphon had this to say about the results: "We are very encouraged by this news, although ten is not a large number it strongly suggests that using our product might provide a net benefit to individuals looking to increase their performance. And if these results are any indication it could be reasonable to expect that athletes in other sports could perform well above average as well".
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Sounds good of course. But maybe those 10 runners were all veterans of the Boston Marathon, where men aged 18-34 must qualify with a time of 3:05 or less. Maybe one of them was even a previous winner of the Boston Marathon where winning times are typically a little over 2 hours. That would certainly improve the overall average.
Aren't numbers fun? Taking the hypothetical PR at face value without asking any questions....investors might just storm in and buy ATB Industry stock, perhaps giving it a lift.
Would this be an example of fraud? Personally I don't think so. Nothing in the PR states that ATB Energy caused these runners to run outstanding times, its merely suggested that there might be a benefit. But what if subsequent to the marathon 3 of the runners died of acute kidney failure after they continued to consume the product? Would the company be guilty of fraud if they failed to disclose this fact to their investors in a timely fashion? What if the company also failed to notify the appropriate regulators?
So what does this fictitious example have to do with Ziopharm?
On May 18th Ziopharm put out a PR with the headline:
The PR cites median survival rates for patients with glioblastoma as being between 6 and 7 months for those who have had multiple recurrences, and just 3 to 4 months for those who have failed salvage chemotherapy with drugs such as temozolomide and bevacizumab.
The company then went on to report that 10 of 11 patients enrolled in the study are still alive, which caused many social media participants to tout Ziopharm's therapy as the reason for their survival, cause and effect.
What the PR failed to mention (as with the ATB Energy drink example) is any of the details on the patients. How long they'd already been living since being diagnosed or had any of them undergone chemo that succeeded in shrinking their tumors. The purpose of the PR seems perfectly clear to me, its right there in the subject line. The company wanted to highlight survival results, even though a Phase I trial isn't even designed to measure survival. The primary objective of a phase I clinical study is to prove safety, or efficacy for those who like the fancier term.
Thanks to the fact that one of the participants in the trial, (a Mr. Charles Peacock) authors a blog we know some details on at least one patient. Mr. Peacock's blog reports that he was diagnosed with glioblastoma back in April of 2012, over 4 years ago. So obviously this courageous individual has already beaten the averages and then some....like the Energy Drink users above, this guy is already a champ.
His blog also relates how he had successful chemo treatments with temozolomide. I wrote a blog piece already on this warrior and his outstanding spirit here:
Now....In my opinion Ziopharm's PR of May 18th, it isn't an example of fraud. I do think touting survival rates in a study not designed to measure that variable is a bit suspect and I consider it possible it was put out to support Ziopharm's falling share price.
After trading up around $9 in mid April 2016, by mid May the PPS had fallen all the way down to about $7. Did the PR help the PPS? Well it didn't hurt, by early June the PPS had recovered to as high as $8 per share.
Now let's fast forward to the present, the news that came out Friday July 15th 2016, that the total number of deaths of patients in the trial has now climbed to three.
The first two deaths were reported as being at 3.7 and 6.9 months after treatment. But the news doesn't give any details on these patients, such as how long ago they were diagnosed or if previous chemo treatments were successful or not. The company asserts that the deaths were unrelated to the study drugs. The third and most recent death they say "has just been reported to us", with this brain cancer patient suffering a cranial hemorrhage. The PR calls this "an isolated" case.
I don't like fuzzy words, and "just" is fuzzy. Was it "just" today, "just" last week or "just" last month? The PR goes on to say that they haven't yet notified the FDA of the most recent death.
Enter the lawyers:
Two PRs came out from law firms saying they are investigating possible violations of security laws, specifically about sections 10 (b) and 20 (a) of the Security Exchange Act of 1934. Section 10 deals with misstatements or omissions made by a company that could constitute fraud while 20 seems to relate to the question of individual and/or corporate liability.
Just as my medical background is restricted to high school and university science courses, my legal bona fides are equally thin. With that being said I believe a lot will depend on timing. How long did Ziopharm have this information before it was released to the investing public?
The legal PRs also state that Ziopharm was engaged with an investment bank in an effort to raise 50 million dollars, however the news says that the deal has now been abandoned. Those who have taken the time to read Ziopharm's SEC filings already know that the company does not have sufficient capital to fund operations to the completion (if successful) of clinical trials and that they'll be in need of financing by the end of 2017 or possibly even sooner.
For investors wanting to make inquiries of their own, here are the relevant PRs from the law firms announcing their investigations:
http://finance.yahoo.com/news/important-investor-alert-goldberg-law-001600961.html
http://finance.yahoo.com/news/federman-sherwood-investigates-ziopharm-oncology-202100911.html
Disclosure: I have no current position in ZIOP however I may in the future, in all likelihood going short.
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