Zafgen (ZFGN): Attacking Type 2 Diabetes and Obesity

Edward Kim  |

According to the CDC's National Diabetes Statistics Report, 2017, 30.3 million people in the US have diabetes. Of those afflicted nearly 24% are undiagnosed and therefore untreated for the disease. The International Diabetes Federation estimates that 415 million adults had diabetes as of 2015, and that this number will rise to 642 million people by 2040. Diabetes caused 5 million deaths in 2015 - one death every six seconds - and type 2 diabetes accounts for 90% to 95% of all cases.

Source: Zafgen, Second Quarter 2017 Financial Results Presentation, August 2017

We've been following Zafgen (Nasdaq: ZFGN), which is developing treatments for metabolic diseases including type 2 diabetes and obesity. The company is about 14 months into a restructuring it underwent after the clinical failure of its small molecule candidate, beloranib. Two patients died from pulmonary embolisms during a Phase 3 trial of beloranib for obesity associated with Prader-Willi Syndrome, a rare genetic condition that results in weak muscle tone, feeding difficulties and poor or delayed growth and development. The patient deaths came two months apart, with an FDA-ordered change in protocol in between the unfortunate events. The FDA ordered a clinical hold after the second death, and, after discussions with the agency, Zafgen cancelled the beloranib program in July 2016. The president and the chief commercial officer both resigned, one-third of the work force was cut, leaving 31 remaining employees, and Zafgen put its resources behind its next generation product, ZGN-1061, for severe and complicated obesity.

MetAP2 Inhibition

While ZGN-1061 is a MetAP2 (methionine aminopeptidase type 2 - an enzyme that plays critical roles in the regulation of protein synthesis an modification) inhibitor like beloranib, it has a better safety profile, according to CEO Thomas Hughes, PhD. "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," said Dr. Hughes last year upon the restructuring announcement. The press release stated that ZGN-1061 "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 [blood clots], supporting the value of the compound as a more highly optimized MetAP2 inhibitor."

Inhibiting MetAP2 has been shown to lead to:

  • Reduced hunger and food intake
  • Reduced fat synthesis
  • Increased fat burning
  • Reduced cholesterol synthesis
  • Reduced inflammation

Pipeline

Zafgen expects to begin a Phase 2a trial of AGN-1061 for type 2 diabetes during this Q3 2017. The data from Phase 1 showed encouraging efficacy data, including up to about one pound per week in average weight loss, and positive trends across multiple metabolic measures. The overall safety and tolerability profile was clean, with no prothrombotic effects observed.

Source: Zafgen, Second Quarter 2017 Financial Results Presentation, August 2017

ZFGN stock

Zafgen went public in June 2014, raising $110 million in gross proceeds at a post-IPO valuation of $363 million, primarily on the promise of its lead product candidate at the time, beloranib, which was in clinical trials for multiple obesity indications. The stock, priced initially at $16, breached $55 in March 2015 (market cap of nearly $1.5 billion) before collapsing in the fourth quarter of that year after the patient deaths in the Phase 3 beloranib trial. The shares have never recovered.

The stock currently trades with a a market cap of just $100 million, as investors have been understandably wary of buying into the current clinical program after beloranib's failure. The restructuring the company executed last year enables it to fund operations through 2018, by which time Zafgen expects to have completed the Phase 2a trial for ZGN-1061, and we believe that the risk-reward at this level justifies closer examination. The addressable market sizes for diabetes and obesity are such that any company that shows promise in the fight against metabolic disorders is worthy of our attention.


Source: Nasdaq.com

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