Healthcare Business

Did Ziopharm and Intrexon Run Too Much on an MD Anderson Pact?

When two stocks run up over 50% and 30% on the same news, investors have to wonder if the move in the stock was justified or if the news-pop was due to trading factors and sentiment. Intrexon Corp. (NYSE: XON) and Ziopharm Oncology Inc. (NASDAQ: ZIOP) announced that they had entered into a broad exclusive licensing agreement with the University of Texas MD Anderson Cancer Center. This includes an exclusive sublicensing agreement through MD Anderson for intellectual property developed at the University of Minnesota for the development of non-viral adoptive cellular cancer immunotherapies.

As per the terms of the agreement, MD Anderson will receive consideration of $100 million — $50 million from each Intrexon and Ziopharm, payable in shares of their respective common stock. This is in conjunction with a commitment of $15 million to $20 million annually over three years for researching and developing the technologies.

Ziopharm is a biotech company that employs novel gene expression and control technology to deliver DNA treatment for cancer. Intrexon is a biotech company that focuses on synthetic biology and collaborates with other companies in health, food, energy, environment and consumer sectors to create biologically-based products.

MD Anderson President Ron DePinho, M.D., 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.

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The press release indicated that the synergy between the platforms will be leveraged to accelerate a promising synthetic immunology pipeline. In fact, what was telegraphed was that up to five CARs are now expected to enter the clinic in 2015 and off-the-shelf programs initiating in 2016. Will that be a full five, or is the “up to” being too generous? With stock gains of 50% and 30%, it is a question that has to be asked.

MD Anderson also talked up the system and platform being added to its moon shot cancers program.

Shares of Intrexon closed Wednesday up 31% at $37.30 on over 5.2 million shares, almost a nine-times volume spike. The stock has a consensus analyst price target of $32.67 and a 52-week trading range of $13.13 to $38.60. Intrexon has a market cap of $3.75 billion, which in Wednesday’s trading alone gained $900 million.

Shares of Ziopharm closed Wednesday up 54.5% at $8.87 on over 38 million shares, nearly a 40-times volume spike. The consensus analyst price target is $7.00, and the 52-week trading range is $2.31 to $9.50. Ziopharm gained almost $320 million in its market cap in Wednesday’s trading, giving a total market cap of $908 million.

Did the short interest play a factor in these massive stock pops? It turns out that short interest may have played a serious role here in these massive volume spikes. For the December 31 settlement date, Ziopharm short interest remained relatively flat at 17.6 million with 18.3 days to cover. Intrexon saw its short interest increase to 13.5 million with 20.6 days to cover. These are massively shorted stocks.

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