ZIOPHARM's Underdog Stock

Little-known biopharmaceutical company ZIOPHARM Oncology (ZIOP) has had an interesting year. The company went from being a darling with great potential to outperform to doing just the opposite.

Last year, the combination of pipeline of drugs, a partnership with Intrexon and an increasing number of investors had created some interest in ZIOPHARM. Plus, at last year’s ASCO, ZIOPHARM and Intrexon presented promising study results for patients with melanoma. As a result, back in July 2011, analysts at Griffin Securities were expecting the company to outperform, according to Forbes.

There are three drugs that ZIOPHARM is developing. The first is Palifosfamide, which is in a Phase 3 trial for the treatment of metastatic soft tissue sarcoma. The drug is also in a Phase 1 study for small cell lung cancer. Darinaparsin is in a Phase 1 study for T-cell lymphoma. And Indibulin is being studied in Phase 1 and 2 trials for metastatic breast cancer.

However, since that positive outlook, ZIOPHARM has actually underperformed, with its stock falling from $5.88 a share to $4.88 mid-day on Tuesday.

Interest has not totally abated. There is still expectation that ZIOPHARM is just on the cusp of major gains. According to SeekingAlpha, ZIOPHARM is a seriously undervalued stock considering that the lowest price target from five analysts was $6, which would imply gains of more than 18% given where the stock is now.

In a separate piece, SeekingAlpha tried to explain why ZIOPHARM underperformed since last summer. Apparently, the stock has been heavily shorted, but SeekingAlpha is betting that “the bears have pushed their luck too far here.”

According to Yahoo! Finance, the stock has three strong buy recommendations, one buy and one hold without any underperform or sell recommendations. And while the low target price for the stock is $6, the median is $9.

Considering ASCO is once again coming up, the outlook on ZIOPHARM may be very different after the next two months.

Disclosure:

The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock.

Little-known biopharmaceutical company ZIOPHARM Oncology (ZIOP) has had an interesting year. The company went from being a darling with great potential to outperform to doing just the opposite.