Alaunos Therapeutics(TCRT) - 2021 Q1 - Quarterly Report

Form 10-Q Filing Information Provides key administrative and identification details for the company's quarterly report filing | Indicator | Value | | :--- | :--- | | Filing Type | Quarterly Report (Form 10-Q) | | Period Ended | March 31, 2021 | | Commission File Number | 001-33038 | | Registrant Name | ZIOPHARM Oncology, Inc. | | State of Incorporation | Delaware | | IRS Employer Identification No. | 84-1475642 | | Principal Executive Offices | One First Avenue, Parris Building 34, Navy Yard Plaza, Boston, Massachusetts 02129 | | Telephone Number | (617) 259-1970 | | Securities Registered | Common Stock (ZIOP) on The Nasdaq Stock Market LLC | | Filed All Required Reports (past 12 months) | Yes | | Subject to Filing Requirements (past 90 days) | Yes | | Submitted Interactive Data File (past 12 months) | Yes | | Filer Status | Large Accelerated Filer | | Emerging Growth Company Election | Not elected extended transition period | | Shell Company | No | - As of April 30, 2021, the number of outstanding shares of common stock was 215,525,411[6] Cautionary Note Regarding Forward-Looking Statements Highlights that the report contains forward-looking statements subject to risks and uncertainties, with no obligation for updates - The report contains forward-looking statements based on current beliefs and expectations, which involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[8] - Key forward-looking statements include those related to capital raising, expenses, cash needs, timing and results of preclinical and clinical studies, regulatory approvals, intellectual property, partnerships, competition, market opportunity, commercialization, and the impact of the COVID-19 pandemic[9][13] - Readers are cautioned not to place undue reliance on these statements, and the company assumes no obligation to update or revise them, except as required by law[9] - Company references 'Ziopharm,' 'the Company,' 'we,' 'us,' and 'our' refer to ZIOPHARM Oncology, Inc. and its subsidiaries[11] - All trademarks, trade names, and service marks are the property of their respective owners[14] Summary of Selected Risks Associated with Our Business Outlines major business risks including health epidemics, funding needs, development challenges, and reliance on third parties - The business faces significant risks, including adverse effects from health epidemics like COVID-19 on operations and clinical development[16] - Substantial additional financial resources are required for product development; inability to obtain these could force delays or discontinuation of operations[16] - Development of non-viral and viral adoptive cellular therapies (engineered cytokines, CAR T-cell, TCR therapies) are new approaches to cancer treatment, subject to significant challenges and limited clinical data[16] - Reliance on third parties for manufacturing and a limited number of vendors for specialized materials poses risks to supply and development[16] - Other risks include inability to obtain regulatory approvals, high costs and time for clinical trials, competition, intellectual property protection issues, stock price volatility, and the potential for future internal control weaknesses[16] Part I - Financial Information Presents the company's unaudited interim financial statements and management's discussion and analysis for the reporting period Item 1. Financial Statements Presents ZIOPHARM Oncology, Inc.'s unaudited interim financial statements and comprehensive notes covering business, financing, accounting policies, and subsequent events Balance Sheets Provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates Balance Sheet Data (in thousands): | Item | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | ASSETS | | | | Cash and cash equivalents | $100,056 | $115,069 | | Total current assets | $112,710 | $130,589 | | Total assets | $128,472 | $146,345 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $18,961 | $18,368 | | Total liabilities | $22,831 | $22,363 | | Total stockholders' equity | $105,641 | $123,982 | | Total liabilities and stockholders' equity | $128,472 | $146,345 | - Cash and cash equivalents decreased by $15,013 thousand from December 31, 2020, to March 31, 2021[21] Statements of Operations Details the company's revenues, expenses, and net loss over specific periods, reflecting operational performance Statements of Operations Data (in thousands, except per share data): | Item | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Research and development | $13,336 | $12,706 | | General and administrative | $8,227 | $5,954 | | Total operating expenses | $21,563 | $18,660 | | Loss from operations | $(21,563) | $(18,660) | | Other income, net | $9 | $367 | | Net loss | $(21,554) | $(18,293) | | Basic and diluted net loss per share | $(0.10) | $(0.09) | | Weighted average common shares outstanding | 213,954,665 | 199,814,768 | - Net loss increased by $3,261 thousand (17.8%) from $18,293 thousand in Q1 2020 to $21,554 thousand in Q1 2021[24] - Research and development expenses increased by $630 thousand (5%) and general and administrative expenses increased by $2,273 thousand (38%) year-over-year[24] Statements of Changes in Stockholders' Equity Illustrates changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit Changes in Stockholders' Equity (in thousands, except share data): | Item | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Common Stock Shares | 215,257,674 | 214,591,906 | | Common Stock Amount | $215 | $215 | | Additional Paid-In Capital | $891,081 | $887,868 | | Accumulated Deficit | $(785,655) | $(764,101) | | Total Stockholders' Equity | $105,641 | $123,982 | - Stock-based compensation contributed $2,197 thousand to additional paid-in capital in Q1 2021[30] - Net loss of $21,554 thousand increased the accumulated deficit in Q1 2021[30] Statements of Cash Flows Summarizes the inflows and outflows of cash from operating, investing, and financing activities over specific periods Cash Flow Data (in thousands): | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,313) | $(9,906) | | Net cash used in investing activities | $(717) | $(513) | | Net cash provided by financing activities | $1,017 | $101,680 | | Net increase (decrease) in cash and cash equivalents | $(15,013) | $91,261 | | Cash and cash equivalents, end of period | $100,056 | $171,002 | - Net cash used in operating activities increased to $15,313 thousand in Q1 2021 from $9,906 thousand in Q1 2020, primarily due to increased net loss and changes in operating assets and liabilities[33] - Financing activities provided significantly less cash in Q1 2021 ($1,017 thousand from stock option exercises) compared to Q1 2020 ($101,680 thousand from public and at-the-market offerings)[33] Notes to Financial Statements Provides detailed explanations and additional information supporting the figures presented in the primary financial statements Note 1. Business ZIOPHARM Oncology, Inc. is a biopharmaceutical company focused on immuno-oncology therapies, operating at a loss with cash expected to fund operations into Q2 2022, and has undergone recent strategic and leadership changes - ZIOPHARM is a biopharmaceutical company developing immuno-oncology therapies, operating at a loss since 2003 with an accumulated deficit of approximately $785.7 million as of March 31, 2021[36][37] - Cash and cash equivalents were approximately $100.1 million as of March 31, 2021, expected to fund operations into Q2 2022[37] - The company has implemented business continuity plans to mitigate COVID-19 impact, including work-from-home policies and restrictions on staff in labs[45] - Subsequent to the quarter, the company committed to winding down its Controlled IL-12 program clinical trials to reallocate resources to its Sleeping Beauty TCR program, resulting in an estimated $0.8 million in severance and termination costs in Q2 2021[46][142] - Heidi Hagen was appointed Interim Chief Executive Officer on February 25, 2021, replacing Dr. Laurence Cooper, who transitioned to a scientific advisory consulting role[47][143] Note 2. Financings In Q1 2020, the company raised significant capital through a public offering and an at-the-market (ATM) facility, totaling approximately $101.7 million. No sales were made under the ATM program during Q1 2021 - In February 2020, a public offering of 27,826,086 shares at $3.25 per share generated approximately $84.8 million in net proceeds[49][50] - An additional 1,284,025 shares were purchased by underwriters in March 2020, yielding approximately $3.9 million in net proceeds[51] - Under the ATM program, 2,814,673 shares were sold in Q1 2020 at an average price of $4.77 per share, generating approximately $13.0 million in net proceeds[53] - No sales were made under the ATM program during the three months ended March 31, 2021[54] Note 3. Summary of Significant Accounting Policies The company's significant accounting policies remain consistent with its Annual Report, with no material changes except for the adoption of ASU 2019-12, Income Taxes (Topic 740), which did not have a material impact on the financial statements - No material changes in significant accounting policies since the Annual Report filing, except as noted[56] - The adoption of ASU 2019-12, 'Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,' effective for fiscal years beginning after December 15, 2020, did not have a material impact on the company's financial statements[57] Note 4. Fair Value Measurements The company measures financial assets and liabilities at fair value, classifying cash equivalents as Level 1 assets due to their active market quotes. Cash equivalents increased from $75,990 thousand at December 31, 2020, to $79,775 thousand at March 31, 2021 - Fair value is defined as the exchange price in an orderly transaction between market participants[60] - The fair value hierarchy includes Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[61] Fair Value Measurements of Cash Equivalents (in thousands): | Description | Balance as of March 31, 2021 | Level 1 | Balance as of December 31, 2020 | Level 1 | | :--- | :--- | :--- | :--- | :--- | | Cash equivalents | $79,775 | $79,775 | $75,990 | $75,990 | - Cash equivalents are deposits in short-term United States treasury money market mutual funds, classified as Level 1 assets[63] Note 5. Net Loss per Share Basic net loss per share is calculated by dividing net loss by the weighted average common shares outstanding. Potentially dilutive shares were excluded as their inclusion would be anti-dilutive - Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding[64] - Potentially dilutive shares (stock options, inducement stock options, unvested restricted stock, and warrants) were excluded from diluted net loss per share calculation because their effect would be anti-dilutive[64] Potentially Dilutive Shares (as of March 31): | Item | 2021 | 2020 | | :--- | :--- | :--- | | Stock options | 10,738,378 | 6,676,879 | | Inducement stock options | 463,333 | 1,030,000 | | Unvested restricted stock | 1,074,606 | 1,495,536 | | Warrants | 22,272,727 | 22,272,727 | | Total Potentially Dilutive Shares | 34,549,044 | 31,475,142 | Note 6. Related Party Transactions The company has collaboration agreements with PGEN, MD Anderson, Vineti Inc., and the joint venture Eden BioCell, involving licenses, R&D funding, and services - The company holds an exclusive, worldwide license with PGEN Therapeutics and MD Anderson for CAR T-cell therapies, non-viral gene transfer systems, and TCRs[65][66] - Net balance of cash resources at MD Anderson available to offset expenses is $5.1 million, included in prepaid expenses[67] - Expenses of approximately $0.2 million were recorded for services performed by Vineti, Inc. in Q1 2021; Heidi Hagen, Interim CEO, is a co-founder and former officer of Vineti[68] - Eden BioCell, a joint venture with TriArm Therapeutics in Greater China, is developing Sleeping Beauty-generated CAR-T therapies; the company has no commitment to fund its operations, and Eden BioCell incurred a net loss in Q1 2021[69][70] Note 7. Commitments and Contingencies The company has various license agreements and commitments, including exclusive worldwide rights with PGEN, MD Anderson, and NCI for immuno-oncology technologies, involving fees, milestones, and royalties - Exclusive License Agreement with PGEN grants worldwide rights for IL-12 Products, CAR Products (CD19 and a second target), and TCR Products for cancer treatment[74] - Annual license fee to PGEN is $0.1 million, with potential milestone payments up to $52.5 million per program and tiered royalties on net sales[76][77] - License Agreement with MD Anderson provides exclusive worldwide license to technologies for CAR T-cell therapies, non-viral gene transfer, and TCRs; the company funds research and development activities[81][84] - Under the 2019 Agreement with MD Anderson, the company will reimburse up to $20.0 million for development costs starting January 1, 2021, and pay low single-digit royalties on TCR product net sales, plus performance-based payments up to $36.5 million[90] - Patent License with NCI grants exclusive worldwide license for TCRs reactive to mutated KRAS, TP53, and EGFR, requiring minimum annual royalties of $0.3 million (reduced to $0.1 million after $1.5 million aggregate) and potential benchmark payments up to $4.3 million[92][95][99] - CRADA with NCI for ACT-based immunotherapies using Sleeping Beauty system was extended for two years, with a commitment of an additional $5.0 million[103] - License and Collaboration Agreement with Solasia Pharma K.K. grants exclusive worldwide license for darinaparsin, with the company eligible for development- and sales-based milestones and royalties[108][109] Note 8. Leases The company has operating lease agreements for office and laboratory spaces in Boston and Houston, with terms extending through 2028, incurring $0.381 million in operating lease costs for Q1 2021 - Corporate office headquarters lease in Boston renewed through August 31, 2021[112] - Multiple lease agreements for office and laboratory space in Houston at MD Anderson, with terms extending through February 2027 and April 2028[113][114] - Future rent expense in Houston will be deducted from prepayments to MD Anderson[113][114] Lease Expense and Terms (in thousands, except years and rate): | Item | Three Months Ended March 31, 2021 | | :--- | :--- | | Operating lease cost | $381 | | Total lease cost | $381 | | Weighted-average remaining lease term | 6.21 years | | Weighted-average discount rate | 8.00% | | Short-term lease expense | $100 | Maturities of Operating Lease Liabilities (in thousands): | Year | Amount | | :--- | :--- | | 2021 (excluding Q1) | $879 | | 2022 | $800 | | 2023 | $820 | | 2024 | $844 | | 2025 | $869 | | Thereafter | $1,519 | | Total lease payments | $5,731 | | Less: Imputed interest and adjustments | $(1,231) | | Present value of lease payments | $4,500 | Note 9. Stock-Based Compensation Stock-based compensation expense for Q1 2021 was $2.197 million, with 4,314,438 stock options granted and unrecognized costs of $16.0 million for options and $2.6 million for restricted stock Stock-Based Compensation Expense (in thousands): | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Research and development | $733 | $530 | | General and administrative | $1,464 | $1,410 | | Total Stock-based compensation expense | $2,197 | $1,940 | - Granted 4,314,438 stock options in Q1 2021 with a weighted-average grant date fair value of $2.43 per share[120] - Extended contractual life of 216,700 fully vested stock options for a former director, resulting in $82 thousand additional compensation expense in Q1 2021[121] Stock Option Activity (in thousands, except share and per share data): | Item | Shares (thousands) | Weighted Average Exercise Price | | :--- | :--- | :--- | | Outstanding, December 31, 2020 | 6,840,719 | $3.81 | | Granted | 4,314,438 | $3.79 | | Exercised | (352,442) | $2.89 | | Cancelled | (84,337) | $3.53 | | Outstanding, March 31, 2021 | 10,718,378 | $3.83 | | Options exercisable, March 31, 2021 | 3,562,744 | $4.23 | | Unrecognized compensation costs (unvested stock options) | $16,000 | (over 1.85 years) | Unvested Restricted Stock Activity: | Item | Number of Shares | Weighted-Average Grant Date Fair Value | | :--- | :--- | :--- | | Unvested, December 31, 2020 | 786,280 | $3.08 | | Granted | 313,326 | $4.31 | | Unvested, March 31, 2021 | 1,099,606 | $3.43 | | Unrecognized compensation costs (unvested restricted stock) | $2,600 | (over 1.57 years) | Note 10. Warrants The company has outstanding warrants from a 2018 private placement and 2019 inducement warrants, including a warrant to MD Anderson with a $14.5 million grant date fair value, vesting upon clinical milestones - Issued 18,939,394 warrants in November 2018 private placement with an exercise price of $3.01 per share and a five-year term[129] - Issued 17,803,031 inducement warrants in 2019 with an exercise price of $7.00 and a five-year term, valued at $60.8 million non-cash charge[131] - Issued a warrant to MD Anderson in October 2019 to purchase 3,333,333 shares of common stock, with an initial exercise price of $0.001 per share and a grant date fair value of $14.5 million, vesting upon clinical milestones[132] - No expense related to the MD Anderson warrant has been recognized as of March 31, 2021, as no work towards specified clinical milestones has begun[132] Note 11. Joint Venture The company formed Eden BioCell, a 50/50 joint venture with TriArm Therapeutics, to develop Sleeping Beauty-generated CAR-T therapies in Greater China, with no funding commitment from the company - Eden BioCell, a joint venture with TriArm Therapeutics, was incorporated in Hong Kong on January 3, 2019, to lead clinical development and commercialization of Sleeping Beauty-generated CAR-T therapies in Greater China, Taiwan, and Korea[133][134][137] - The company and TriArm each hold a 50% equity interest in Eden BioCell[137] - The company accounts for its equity interest in Eden BioCell under the equity method, recognizing no value for its investment due to the de minimis fair value of contributed intellectual property[138][139] - Eden BioCell incurred a net loss for the three months ended March 31, 2021 and 2020, and the company has no commitment to fund its operations[140] Note 12. Subsequent Events Subsequent to March 31, 2021, the company announced a strategic realignment to wind down its Controlled IL-12 program, leading to $0.8 million in severance costs, and terminated Dr. Laurence Cooper's employment - On May 6, 2021, the company announced a plan to realign R&D resources, winding down the Controlled IL-12 program to allocate more capital to the Sleeping Beauty TCR program[142] - This realignment will eliminate approximately 15% of the existing workforce, with estimated severance and termination-related costs of $0.8 million to be recorded in Q2 2021[142] - On April 5, 2021, Dr. Laurence Cooper's employment as CEO was terminated, effective April 9, 2021, resulting in a charge of approximately $0.6 million related to his separation in Q1 2021[143] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial condition and operations, covering strategy, developments, performance, liquidity, and capital resources Overview Provides a strategic overview of the company's clinical-stage immuno-oncology platforms, including Sleeping Beauty and Controlled IL-12, and its history of net losses - The company is a clinical-stage biopharmaceutical company focused on immuno-oncology platforms: Sleeping Beauty (non-viral genetic engineering of immune cells) and Controlled IL-12 (engineered adenovirus to conditionally produce IL-12)[151] - Sleeping Beauty platform is developing TCR T cell therapies for neoantigens in solid tumors (Library TCR-T and Personalized TCR-T Approaches) and CAR T cell therapies targeting CD19[152][154] - The company incurred a net loss of $21.6 million for Q1 2021, with an accumulated deficit of approximately $785.7 million since inception[157] - Significant operating expenditures and net losses are expected to continue, requiring substantial increases in expenses for clinical trials, regulatory approvals, infrastructure, and personnel[157][158] Recent Developments Highlights recent events including COVID-19 impacts, FDA clearances, clinical trial progress, strategic program realignments, and key personnel changes - The COVID-19 pandemic has impacted business operations, productivity, and clinical programs, with work-from-home policies implemented for most employees[159] - In February 2021, the FDA cleared the company-sponsored IND application for a Phase 1/2 clinical trial evaluating TCRs from its library for various cancers[160] - In April 2021, the first patient was infused in the CD19-specific RPM CAR-T Phase 1 clinical trial in Taiwan by Eden BioCell[160] - The company is winding down its Controlled IL-12 clinical program for recurrent glioblastoma multiforme and seeking a partner, anticipating a 15% headcount reduction related to this realignment[162] - Heidi Hagen was appointed Interim CEO in February 2021, replacing Dr. Laurence Cooper. James Huang was appointed Executive Chair of the Board. Timothy Cunningham was appointed Interim CFO[163][165] Financial Overview Analyzes the company's research and development, general and administrative expenses, and other income, detailing key drivers of changes year-over-year Research and Development Expenses (in thousands): | Period | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended March 31 | $13,336 | $12,706 | $630 | 5% | Key Drivers of R&D Expense Change: * Increase of $5.0 million in headcount, stock compensation, and facilities costs * Increase of $0.9 million in cell therapy program costs * Offset by $5.3 million decrease in Controlled IL-12 program costs - The company does not track internal R&D costs on a program-by-program basis but tracks third-party vendor costs for clinical candidates[169][170] Third-Party R&D Expenses by Clinical Project (in thousands): | Project | Q1 2021 Expense | Inception-to-Date Expense (through March 31, 2021) | | :--- | :--- | :--- | | Phase 1 Ad-RTS-IL-12 + veledimex (glioblastoma) | $900 | $14,700 | | Phase 1 CD19-specific CAR+ T cells (lymphoid malignancies) | $0 | $6,200 | | Phase 1/2 Ad-RTS-hIL-12 + veledimex (pediatric brain tumors) | $400 | $2,500 | | Phase 2 Ad-RTS-hIL-12 + veledimex + cemiplimab-rwlc (glioblastoma) | $1,300 | $6,700 | General and Administrative Expenses (in thousands): | Period | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended March 31 | $8,227 | $5,954 | $2,273 | 38% | Key Drivers of G&A Expense Change: * Increase of $0.7 million in employee-related expenses * Increase of $0.6 million related to former CEO's separation agreement * Increase of $1.0 million in patent portfolio and advisory fees Other Income, Net (in thousands): | Period | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended March 31 | $9 | $367 | $(358) | (98%) | Key Driver of Other Income Change: * Decrease due to lower cash balance and declining interest rates Liquidity and Capital Resources Assesses the company's ability to meet its financial obligations, detailing historical funding sources, current cash position, future capital needs, and contractual obligations - The company has not generated product sales revenue and has incurred net losses and negative cash flows from operations since inception[180] - Operations have been financed primarily through public offerings, private placements, and collaborations, totaling $714.1 million from public offerings and ATM program through March 31, 2021[181] - Existing cash and cash equivalents of $100.1 million as of March 31, 2021, are expected to fund operations into Q2 2022; no committed sources of additional capital currently exist[186][218] - The company's ability to raise additional capital may be hindered by capital market unpredictability, the ongoing COVID-19 pandemic, and nearing the maximum number of authorized common stock shares[186][221][225] Cash Flow Summary (in thousands): | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Operating activities | $(15,313) | $(9,906) | | Investing activities | $(717) | $(513) | | Financing activities | $1,017 | $101,680 | | Net increase (decrease) in cash | $(15,013) | $91,261 | - Working capital as of March 31, 2021, was $93.7 million ($112.7 million current assets, $19.0 million current liabilities), down from $112.2 million at December 31, 2020[192] Contractual Obligations as of March 31, 2021 (in thousands): | Obligation | Total | Less than 1 year | 2-3 years | 4-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating leases | $5,859 | $1,077 | $1,628 | $1,726 | $1,428 | | CRADA | $2,500 | $2,500 | $0 | $0 | $0 | | Royalty and license fees | $3,027 | $350 | $700 | $450 | $1,527 | | Strategic advisory fees | $500 | $500 | $0 | $0 | $0 | | Total | $11,886 | $4,427 | $2,328 | $2,176 | $2,955 | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's market risk exposure is limited to its cash, managed for capital preservation with minimal interest rate risk, and is not materially impacted by currency fluctuations - Market risk exposure is limited to cash, which is held in interest-bearing bank accounts, U.S. treasuries, and government-backed investments[201] - Investment policy goals are capital preservation, liquidity fulfillment, and fiduciary control, with efforts to maximize income while minimizing significant risk[201] - No material impact from currency exchange rates is expected as there are no clinical studies or trials outside the United States[202] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes in internal control over financial reporting - As of March 31, 2021, management concluded that disclosure controls and procedures were effective at the reasonable assurance level[203] - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2021[204] Part II - Other Information Covers legal proceedings, risk factors, equity sales, defaults, mine safety, and a list of exhibits filed with the report Item 1. Legal Proceedings The company may periodically face legal proceedings and claims, but management believes no material matters will adversely affect its financial position as of March 31, 2021 - The company may periodically become subject to legal proceedings and claims in the ordinary course of business[205] - As of March 31, 2021, management believes no material matters are likely to result in a material adverse effect on financial position, results of operations, or cash flows[206] Item 1A. Risk Factors This section details significant factors that could materially affect the company's business and financial results, including risks related to its operations, clinical testing, regulatory approvals, manufacturing, commercialization capabilities, intellectual property, and other company-specific factors. The COVID-19 pandemic is highlighted as an exacerbating factor for many of these risks RISKS RELATED TO OUR BUSINESS Outlines business-specific risks, including COVID-19 impacts, funding needs, development challenges for novel therapies, share limitations, executive turnover, and intense competition - The COVID-19 pandemic could adversely affect business operations, clinical development plans, and timelines due to disruptions in manufacturing, clinical trials, and supply chains[208][210][211][214] - The company requires substantial additional financial resources to fund operations into Q2 2022 and beyond; inability to obtain financing could force delays or discontinuation of programs[217][218][219] - The company's non-viral and viral adoptive cellular therapies are new approaches to cancer treatment, facing significant development challenges and supported by limited clinical data[226][230] - The company has issued or reserved shares nearing its authorized maximum, which could limit future capital raising, strategic relationships, acquisitions, and equity incentives for employees[225] - Significant executive turnover, including the appointment of an Interim CEO and CFO, poses risks to business execution and institutional knowledge[260] - The company faces intense competition from major pharmaceutical and biotechnology companies with greater resources and experience in cancer treatment development and commercialization[235][236][237][238] RISKS RELATED TO THE CLINICAL TESTING, REGULATORY APPROVAL AND MANUFACTURING OF OUR PRODUCT CANDIDATES Addresses risks associated with clinical trials, regulatory approvals, potential side effects, manufacturing reliance on third parties, and the novel nature of immuno-oncology products - Failure to obtain necessary U.S. or worldwide regulatory approvals (e.g., FDA BLA) for product candidates would severely undermine the business[267][270] - Clinical trials are expensive, time-consuming, and difficult to design and implement, with potential for delays due to unforeseen safety issues, dosing, patient recruitment, or regulatory actions[252][253][272] - Product candidates may cause undesirable side effects, leading to regulatory delays, limited commercial labels, or significant negative consequences post-approval, including product withdrawal or liability claims[274][277] - Reliance on sole or limited source vendors for reagents, specialized equipment, and materials for cell-based and gene therapy products poses risks to manufacturing and supply, potentially delaying clinical trials or commercialization[278][279] - The novel technology of immuno-oncology product candidates makes predicting development time and cost difficult, with few gene and cell therapy products currently approved[284][285] - Dependence on clinical research institutions and contractors for testing and R&D means results are partly beyond the company's control, risking delays if collaborators do not prioritize programs[289] RISKS RELATED TO OUR ABILITY TO COMMERCIALIZE OUR PRODUCT CANDIDATES Covers challenges in commercialization, including establishing sales capabilities, competition, market acceptance, reimbursement, limited patient populations, healthcare reforms, and IT security - Inability to create internal sales, marketing, and distribution capabilities or secure third-party agreements will prevent successful commercialization of product candidates[298][299] - Failure to compete successfully against other biopharmaceutical companies, which often have greater resources and experience, could prevent the company from achieving sufficient product revenues[300][301] - Physician and patient non-acceptance of approved product candidates, influenced by safety, effectiveness, cost-effectiveness, and reimbursement, would materially impair revenue generation[303] - Lack of coverage and adequate reimbursement from third-party payors (government, private insurers) would diminish the ability to commercialize products, as patients rely on these for drug costs[304][305][307] - Market opportunities may be limited to patients ineligible for or who have failed prior treatments, and initial approvals are often for third-line therapy, potentially limiting patient populations[310][311][312] - Healthcare legislative reforms (e.g., ACA, drug pricing initiatives) in the U.S. and foreign jurisdictions could adversely affect the ability to sell products profitably and reduce reimbursement[313][315][317][319][323] - Failure to comply with federal and state healthcare laws (fraud and abuse, privacy, security) could lead to substantial penalties, including fines, exclusion from federal programs, and criminal charges[324][325][327][329] - Future competition from biosimilars, potentially accelerated by legislative changes, could impact market exclusivity and revenue[331] - Reliance on information technology and potential system failures, cyber-attacks, or data loss could compromise sensitive information, disrupt operations, and expose the company to liability[332][333] RISKS RELATED TO OUR INTELLECTUAL PROPERTY Addresses risks concerning intellectual property, including protection, enforcement, reliance on licensed IP, patent prosecution challenges, trade secret protection, and potential infringement claims - Failure to adequately protect or enforce intellectual property rights, or secure rights to others' patents, would diminish the value of IP and impair commercialization ability[334] - The company relies on licensed IP from MD Anderson, NCI, and PGEN; lack of direct control over patent prosecution and potential disputes could harm development and commercialization[336][242][244] - The patent prosecution process is expensive, time-consuming, and uncertain, with potential for patents to be challenged, narrowed, or invalidated[336][342] - Inability to protect confidential information and trade secrets could harm business and competitive position, as enforcement is difficult and uncertain[344] - Third-party claims of intellectual property infringement are a significant risk in the biotechnology industry, potentially leading to substantial damages, injunctions, or costly litigation[345][348][350][351] - Noncompliance with patent maintenance requirements (fees, submissions) could lead to abandonment or lapse of patent rights, allowing competitors to enter the market[353] - Breach of license agreements could result in termination of licenses, loss of rights, or claims for damages, impacting development and commercialization[355] - Claims of misappropriation of intellectual property from former employers or disputes over ownership of internally developed IP could lead to litigation, loss of rights, or diversion of management attention[357][359][360] OTHER RISKS RELATED TO OUR COMPANY Covers risks related to stock price volatility, anti-takeover provisions, dividend policy, NOL limitations, analyst coverage, activist stockholders, principal stockholder control, and internal control weaknesses - The company's stock price has been and may continue to be volatile due to various factors, including clinical trial results, regulatory approvals, market conditions, and competitive developments[361][362][363] - Anti-takeover provisions in charter documents and Delaware law may make an acquisition more difficult, potentially preventing beneficial changes for stockholders[365] - The company does not expect to pay dividends, meaning investors will only realize income from stock sales at a profit[366] - Ability to use net operating loss carryforwards (NOLs) and research tax credits (R&D credits) may be limited by Section 382 and 383 of the Internal Revenue Code due to potential 'ownership changes'[367][368] - Failure of securities analysts to cover the business, adverse changes in recommendations, or unmet expectations could lead to a decline in stock price and trading volume[369] - Actions by activist stockholders, such as consent solicitations or proxy contests, could be costly, disrupt operations, divert management attention, and negatively impact business opportunities[370][371] - Principal stockholders, executive officers, and directors have substantial control (49.6% ownership as of Dec 31, 2020), potentially preventing other stockholders from influencing significant corporate decisions[372] - A previously identified material weakness in internal control over financial reporting (related to monitoring third-party clinical trial costs) was remediated as of December 31, 2020, but inadequate remediation or future failures could adversely affect financial reporting[375][377][380][381] - The Tax Cuts and Jobs Act of 2017 and the CARES Act could adversely affect the business and financial condition due to significant changes in corporate taxation[383] Item 2. Unregistered Sale of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[384] Item 3. Defaults upon Senior Securities This section indicates that there are no defaults upon senior securities to report - Not applicable; no defaults upon senior securities[385] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures to report - Not applicable; no mine safety disclosures[386] Item 5. Other Information This section indicates that there is no other information to report - No other information to report[387] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, agreements, and certifications, with specific references to their filing status and incorporation by reference Selected Exhibits: | Exhibit Number | Description | | :--- | :--- | | 3.1 | Amended and Restated Certificate of Incorporation | | 3.2 | Amended and Restated Bylaws | | 10.1 | Agreement with WaterMill Asset Management Corp. and Robert W. Postma | | 10.2* | Consulting Agreement with Danforth Advisors LLC | | 10.3* | Employment Agreement with Heidi Hagen | | 31.1+ | Certification of Principal Executive Officer | | 31.2+ | Certification of Principal Financial Officer | | 32.1++ | Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 | | 101.INS+ | Inline XBRL Instance Document | | 104+ | Cover Page Interactive Data File | - Exhibits marked with '*' indicate a management contract or compensatory plan[389] - Exhibits marked with '+' are filed herewith[389] - Exhibit 32.1++ certifications are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934[389] Signatures The report is duly signed on behalf of ZIOPHARM Oncology, Inc. by Heidi Hagen, Interim Chief Executive Officer, and Timothy Cunningham, Interim Chief Financial Officer, on May 6, 2021 - The report was signed by Heidi Hagen, Interim Chief Executive Officer, and Timothy Cunningham, Interim Chief Financial Officer, on May 6, 2021[391][392]