ZIOPHARM Oncology Inc. (NASDAQ: ZIOP) is on implosion watch. The small-cap biotech is indicated to be way down on a major disappointment on its Phase 3 trial of palifosfamide for the treatment of metastatic soft tissue sarcoma in the first-line setting. The study failed to meet its primary endpoint of progression-free survival.

ZIOPHARM’s independent data monitoring committee of the study recommended that patients be followed for overall survival. Palifosfamide was well tolerated, but that does nothing when the efficacy fails to meet its endpoint.

As far as the new direction, ZIOPHARM is now placing all efforts on its synthetic biology programs in a partnership with Intrexon. The lead therapeutic candidate in this program is Ad-RTS IL-12, a DNA therapeutic to enable controlled delivery of therapeutic interleukin-12, a protein important for an immune response to cancer.

ZIOPHARM is placing IL-12 under the control of Intrexon’s proprietary biological “switch” to turn on or off the therapeutic protein expression. The company said that Ad-RTS IL-12 is currently being tested in two Phase 2 studies. Of those studies, the first is being tested for the treatment of advanced melanoma and the second is in combination with palifosfamide for the treatment of non-resectable recurrent or metastatic breast cancer.

The company is also instituting a restructuring program “to align staffing to current objectives and to marshal its resources toward achieving success with its synthetic biology programs.”

ZIOPHARM shares are down about 54% on first look, at $2.35, against a prior 52-week range of $3.36 to $6.33. The company’s market capitalization rate was $423 million before today’s implosion, and that will now be closer to $200 million if this drop is maintained. The December 31, 2012, balance sheet showed $73.3 million in cash on the books, and both the tangible assets and stockholder equity after liabilities were listed as $48.44 million.

UPDATE at 9:20 AM EST: ZIOPHARM shares are now down 62% at $1.95 on over 5.5 million shares versus average volume of almost 1.3 million shares.

Another biotech implosion.

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