Zafgen ditches lead candidate after deaths, aims for clinic in 2017

Zafgen ($ZFGN) fell about 40% in after-hours trading on news that it has suspended development of its lead obesity candidate beloranib, which had been on clinical hold since December, to get its follow-on candidate into clinical testing. The company will also reduce its staff by 31 employees by December.

The Boston-based company expects to end the year with more than $125 million in cash--which it said will fund it through the end of 2018, long enough to complete a Phase IIa trial for follow-on candidate ZGN-1061.

"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 Zafgen President and CEO Thomas Hughes in a statement. “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."

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ZGN-1061 is a fumagillin-class MetAP2 inhibitor, just like the now-shelved beloranib. It was identified after multiple years of research to identify compounds that avoided some of the safety concerns seen with beloranib. The preclinical candidate is said to have similar efficacy, potency and activity in animal models as beloranib--but with a reduced potential to impact thrombosis. Thrombosis was the primary safety concern with the tabled candidate.

The company is screening patients with severe obesity complicated by Type 2 diabetes to start a four-week, Phase I trial that it expects to start during the first quarter. It expects to develop ZGN-1061 in severe and complicated obesity.

"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," added Hughes.

Zafgen shares cratered to below their 52-week low at about $4; it priced a June 2014 IPO at $16 a share to raise $96 million. Foresite Capital and Deerfield Management were major Zafgen shareholders at the end of the first quarter.

- here is the announcement

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