Zafgen (ZFGN) to Suspend Beloranib Development; Will Refocus on MetAP2 Inhibitor ZGN-1061

Zafgen Inc. (Nasdaq: ZFGN) announced that, following a comprehensive review of its assets and clinical programs, as well as feedback from regulatory authorities, the Company is refocusing its resources on development of a differentiated second-generation MetAP2 inhibitor, ZGN-1061, in severe and complicated obesity.

“As the leader of the MetAP2 inhibitor field, we have spent many years validating the tremendous potential of this pathway for the treatment of complicated obesity with beloranib, which in multiple clinical trials demonstrated robust reductions in body weight, improvements in glycemic control, and other benefits related to cardiovascular disease risk,” said Thomas Hughes, Ph.D., President and Chief Executive Officer of Zafgen. “However, given the heightened complexity and future cost of beloranib development, balanced against the emerging product profile of ZGN-1061, we believe that the long-term opportunity for ZGN-1061 is more robust than for beloranib. Given our deep knowledge of this new and exciting drug class, and our strong cash position, we believe we are well-positioned to advance ZGN-1061 as a potential new treatment for prevalent obesity-related indications.”

The beloranib Investigational New Drug (IND) application was placed on full clinical hold in December 2015 by the U.S. Food and Drug Administration (FDA). To address the clinical hold, Zafgen recently held a Type A meeting with the FDA to discuss the clinical and preclinical data for beloranib as well as a proposed risk mitigation strategy for beloranib in Prader-Willi syndrome (PWS). Following its discussions with the FDA and review of other considerations, Zafgen has determined that the obstacles, costs and development timelines to obtain marketing approval for beloranib are too great to justify additional investment in the program, particularly given the promising emerging profile of ZGN-1061. The Company is therefore suspending further development of beloranib in order to focus its resources on ZGN-1061.

ZGN-1061, like beloranib, is a fumagillin-class MetAP2 inhibitor that was discovered by Zafgen’s researchers as part of a multi-year campaign to identify novel compounds that avoided limiting preclinical safety concerns observed with beloranib, including teratogenicity and effects on testicular function. The compound has similar efficacy, potency, and range of activity in animal models of obesity as beloranib, but displays highly differentiated properties and a reduced potential to impact thrombosis, supporting the value of the compound as a more highly optimized MetAP2 inhibitor.

Zafgen is currently screening patients to initiate a Phase 1 clinical trial evaluating ZGN-1061 for safety, tolerability, and weight loss efficacy over four weeks of treatment, and currently expects Phase 1 clinical data by the end of the first quarter of 2017. Based on the clinical data demonstrating beloranib’s significant effect on body weight and glycemic control in patients with severe obesity complicated by type 2 diabetes, Zafgen plans to focus later-stage development of ZGN-1061 in severe and complicated obesity.

As part of the strategic restructuring, the Company plans to reorganize its operations to align with its new priorities focused on ZGN-1061 development. Zafgen’s workforce is being reduced by approximately 34%, to a total of 31 employees, by December 2016. Zafgen expects the restructuring to result in approximately $4.8 million in reduced annualized workforce expenses once the plan is fully implemented. The Company also expects to incur a non-recurring charge of approximately $2.4 million in the third quarter of 2016 related to the restructuring.

In addition, both Patrick Loustau, President, and Alicia Secor, Chief Commercial Officer, will be leaving the Company to pursue other opportunities.

“We would like to thank Patrick, Alicia, and all of our employees for their hard work and dedication over the past several months as we explored every reasonable path to remove the full clinical hold on the beloranib IND and advance beloranib development,” continued Dr. Hughes. “We would also like to express our deepest gratitude to the investigators, patients and families who participated in our beloranib trials. While we are disappointed that we could not see beloranib through to approval, we are excited about the potential of ZGN-1061, and look forward to advancing this high-value candidate in the clinic.”

Zafgen ended June 30, 2016 with approximately $150.5 million in cash and cash equivalents and now expects to end 2016 with greater than $125 million. The Company believes that its current cash balance is sufficient to fund operations through the end of 2018, at which time it expects to have completed a Phase 2a clinical trial for ZGN-1061.

Conference Call and Webcast

Zafgen will host an investor conference call today, July 19, 2016 at 5:00 p.m., Eastern Time, to discuss its strategic focus on ZGN-1061 and corporate restructuring. Investors and other interested parties may participate by dialing 844-824-7428 in the United States or 973-500-2177 outside the United States and referencing conference ID number 52579673. The call will also be webcast live on the Company's website at http://ir.zafgen.com/events.cfm. You can access the replay for seven days following the call by dialing 855-859-2056 in the United States or 404-537-3406 outside the United States and referencing conference ID number 52579673.

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