WASHINGTON (AP) -- Shares of Ziopharm Oncology Inc. fell Wednesday after an analyst said the company's experimental cancer drug for sarcoma may not be effective enough to win regulatory approval.
THE SPARK: Jefferies analyst Eun Yang downgraded the company's shares to "Hold" from "Buy" after interviewing cancer experts who suggested the company's drug, palifosfamide, may not win approval from the Food and Drug Administration.
THE BIG PICTURE: The drug is aimed at treating reoccurring soft-tissue sarcoma, which are cancers that form in connective tissue. Palifosfamide is the company's lead drug candidate and it currently has no other products on the market.
Ziopharm is expected to begin reporting late-stage study results for the drug next year.
THE ANALYSIS: Experts say there is a 40 to 50 percent chance that palifosfamide will slow the progression of sarcoma tumors by about three months, according to Yang. Ziopharm has indicated to investors that it believes this performance would be good enough to win FDA approval.
But Yang's experts say the company will likely also have to show that the drug actually extends patients' overall survival, and they estimate there is less than a 50 percent chance of the drug hitting that target.
Yang cut the stock's price target to $4 from $7.
Ziopharm CEO Jon Lewis pushed back against the analyst's conclusions in an interview. He pointed out that GlaxoSmithKline's Votrient won FDA approval in April for second-line use against the same cancer, based on data showing it slowed disease progression. Ziopharm is seeking approval of its drug as a first-line option against the cancer. The FDA has not approved a drug for that indication in nearly thirty years, indicating there is a "significant unmet need," according to Lewis.
"The key opinion leaders who speak to us have been increasingly optimistic," Lewis said.
The FDA does not comment on pending drug applications, under federal regulations.
STOCK MOVEMENT: Shares of New York-based Ziopharm Oncology Inc. fell 28 cents, or 6.3 percent, to $4.16 in afternoon trading.