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Why This Fund Manager Is Short Ziopharm

Stocks in this article: ZIOP CLVS ELN CLSN

Are there data to support the bear thesis? As proof, my fund manager source points to the slide reprinted below, which depicts PFS from both arms of the phase II study. This slide can be found on page 17 of the protocol for the palifosfamide phase III study.

The blue line tracks PFS for the sarcoma patients in the control arm treated with doxorubicin alone. Focus on the sudden and steep drop in the curve between one and two months. Each red asterisk represents a patient who progressed. Between months one and two, eight patients in this control arm progressed very rapidly. That's unusual. Without those eight early and rapid tumor progressions, the two PFS curves would be much closer together. In fact, they might even overlap, which would mean no significant difference in PFS between the two treatment arms and no positive data for palifosfamide.

What might explain the eight early and rapid tumor progressions between months one and two in the trial? Well, it could be just the way the randomization worked out in the trial. Or, it could be a result of physician bias. The phase II study was open label, which means patients were aware if they were chosen to receive palifosfamide or not. The doctors of those patients knew, too. Obviously, no sarcoma patients entered this trial hoping to be placed in the control arm receiving doxorubicin alone. Doctors likely felt the same way for their patients, so when it came time to analyze scans, they could have been quick to diagnose a tumor progression so patients could switch to new treatments, including palifosfamide.

Unlike the phase II study, the phase III study is blinded to patients and doctors. No one will know who is receiving palifosfamide and who is not. This eliminates the potential for bias. Moreover, independent experts -- not the doctors treating patients -- will be reading and confirmed tumor progression scans.

That explains why the doxorubicin arm of the phase III study will likely perform better than what was observed in the phase II study. The palifosfamide-doxorubicin arm is also expected to perform worse.

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