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Zafgen Restructures, Abandons Obesity Drug Following FDA Meeting

Xconomy Boston — 

Zafgen’s prospects have been unclear ever since two patients died in a Phase 3 trial of its lead drug candidate, beloranib, a potential treatment for obesity in patients with a rare disease known as Prader-Willi Syndrome. The question looming over the Boston company: Could Zafgen win approval of the drug despite its apparent safety risks, and bring to market the first Prader-Willi treatment in more than a decade?

Today, the company has an answer to that question, and it isn’t good. Zafgen is abandoning beloranib, its only drug remotely close to approval, and rallying around an experimental treatment that is just now on the verge of its first trial.

Zafgen (NASDAQ: ZFGN) is announcing this afternoon that, following a meeting with the FDA, it has decided that the “obstacles, costs and development timelines” involved in winning FDA approval of beloranib are “too great to justify additional investment” in the drug. As a result, the company is suspending development of the treatment, putting its resources behind a second-generation obesity drug called ZGN-1061, and restructuring.

Zafgen says it is letting go 34 percent of its workforce by the end of the year to save about $4.8 million in annual costs, leaving the company with 31 total employees after the restructuring. Zafgen president Patrick Loustau and chief commercial officer Alicia Secor are also leaving the company. Zafgen had $150.5 million in cash at the end of June and now expects to have $125 million in the bank at the end of 2016, enough to get it through 2018 and a mid-stage trial of ZGN-1061, according to the announcement.

Shares of Zafgen plummeted more than 40 percent, to $3.88 apiece, in after-hours trading on Tuesday.

According to CEO Tom Hughes, Zafgen presented a plan to the FDA to run a new trial testing beloranib in Prader-Willi patients in tandem with an anticoagulant drug, in an attempt to test beloranib’s effectiveness while guarding against the blood clots that killed two volunteers in Zafgen’s Phase 3 study. Hughes says the FDA was receptive to this approach, but that the agency wanted to see a “much longer placebo-controlled type of study than would be feasible for us to run.” In addition, Hughes says it wasn’t clear “what the actual steps would be” to get the FDA’s clinical hold—a order by the agency to stop testing of an experimental drug—lifted.

“It was clear that we would need much more dialogue with them,” he says.

Hughes adds that the company was also encouraged by the preclinical tests it’s done on ZGN-1061, which Zafgen believes to be a much “cleaner” drug than beloranib, meaning less likely to cause safety problems. So Zafgen decided burning “most if not all” of its $150 million in cash on beloranib rather than a drug that has a chance to be superior “no longer [made] good business sense,” particularly given there was no telling when the hold would be lifted.

Still, that’s no consolation to Prader-Willi patients and their families. The only approved drug for Prader-Willi—a rare disease characterize by an insatiable, and potentially deadly hunger—is human growth hormone. While it helps with some of the complex condition’s myriad symptoms, it doesn’t do anything about one of the disease’s core problems, the never-ending drive to eat.

Beloranib was the closest Prader-Willi drug to approval, and now not only is it in limbo, but Hughes says Zafgen isn’t currently planning to develop ZGN-1061 for Prader-Willi either. Because Zafgen believes ZGN-1061 might be much safer than beloranib it’s aiming to develop it as a treatment for much more common forms of obesity, like the form associated with type 2 diabetes. Prader-Willi affects just one in every 12,000 to 15,000 babies born, according to the Prader-Willi Syndrome Association.

“It’s very devastating for all of us to have to turn away from them right now, that’s the hard part,” Hughes says. “I’ll be speaking to the [Prader-Willi] community at their international meeting on Saturday, and hopefully they’ll understand why we’re doing what we’re doing.”

Zafgen has yet to begin clinical testing of ZGN-1061. The company is currently screening patients for a Phase 1 trial of the drug, and expects to report data in the first quarter of next year. Like beloranib, ZGN-1061 is an injectable small molecule drug that is supposed to cause the body to burn more fat by inhibiting the activity of an enzyme called methionine aminopeptidase 2.

Zafgen will have to climb out of a big hole to prove its claims about ZGN-1061’s superiority over beloranib. The company’s shares have lost close to 80 percent of their value over the past year—they traded at over $30 apiece last October—because of beloranib’s safety problems. In addition, Zafgen was sued by shareholders over how the patient deaths in the beloranib trial were disclosed.

Two patients in Zafgen’s Phase 3 Prader-Willi trial died from a pulmonary embolism—a blood clot that gets lodged in an artery in the lungs. Though Zafgen reported positive efficacy data from that study, the patient deaths left beloranib’s fate unclear. As RBC Capital Markets analyst Simos Simeonidis wrote in a note in June, after more detailed data from the Phase 3 trial at a medical meeting:

“We continue to be very impressed with this agent’s efficacy…[but] what is not clear is whether there is a path forward for this drug.”

Zafgen will hold a conference call this afternoon to discuss the news. In the meantime, check out this story for more on Zafgen, beloranib, and Prader-Willi.