Larimar Therapeutics Inc (LRMR) 2016 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Zafgen fourth-quarter 2016 financial results conference call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host, Ms. Laura Perry. Ma'am, you may begin.

Welcome and thank you for joining us for Zafgen's conference call to discuss fourth-quarter results and provide a corporate and clinical update. Today you'll hear from Dr. Tom Hughes, Zafgen's President and Chief Executive Officer; Dr. Dennis Kim, Chief Medical Officer; and Patty Allen, Chief Financial Officer. After management's prepared comments, we will be available to take your questions. A copy of the slide deck is available for download on the Investors section of the Zafgen website under Events.

Before we begin, the estimates and other forward-looking statements included in this call represent the Company's views as of today, March 9, 2017. Zafgen disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to today's press release, as well as Zafgen's filings with the SEC, for information concerning risk factors that can cause actual results to differ materially from those expressed or implied by such statements.

Please also note that this call is simultaneously webcast online.

The agenda for today's call is shown on slide 3. First, Dr. Hughes will provide an update on our MetAP2 inhibitor pipeline focused on metabolic diseases, including Type 2 diabetes and obesity, and will expand upon ZGN-1061's differentiated profile relative to beloranib. Then Dr. Kim will provide a clinical update on the ongoing Phase 1 clinical trials, as well as the future development path for ZGN-1061. Finally, Patty will provide a financial update. After management's prepared commentary, we will open the call for questions.

I will now turn the call over to Dr. Tom Hughes. Tom?

Thank you, Laura, and thank you, everyone, for joining us. Turning to slide 5.

Last July we made a strategic decision to suspend development of beloranib in favor of second-generation candidates like ZGN-1061 that mirrored the weight loss and glucose lowering efficacy seen for beloranib and other MetAP2 inhibitors but with substantially increased safety margins. We are very fortunate and pleased to have identified ZGN-1061 as our lead second-generation candidate and have -- had evaluated its thrombotic potential in vivo by the time we needed to make a go/no go decision on beloranib development.

We moved quickly to advance ZGN-1061 into development and started our clinical work with the compound last fall initiating a Phase 1 clinical trial. The clinical program is highly informed by our prior work on beloranib, which provides us with a very clear view of what we need to see early on in development in terms of pharmacogenetics, efficacy and safety. The clinical trial is nearing completion, and we look forward to seeing how the compound performs.

Given the findings with beloranib, both positive and negative, a core focus of our Company over the past year or so has been to identify and understand the drivers of thrombotic imbalances seen in our clinical trials that we saw with beloranib as compared to placebo. Our objective is to leverage this knowledge to develop an approach to monitoring for pro-thrombotic effects in the clinic and help de-risk further development of the drug class.

We have continued to explore the reasons why we now believe beloranib potentiates thrombosis and have focused on developing a clear and credible explanation for the differences we see for compounds like beloranib compared with compounds like ZGN-1061. These studies informed by discussions with many of the top lines in the thrombosis field have increased confidence in the potential of our ZGN-1061 program in specific and our MetAP2 inhibitor platform in general. We plan to share some of our insights with you during today's call.

Over the course of 2017, our strategic focus is to develop the path forward for ZGN-1061 and initiate Phase 2 clinical trials in patients with Type 2 diabetes and obesity. In a way, this return to our roots as a company -- this represents a return to our roots as a company, which is founded to leverage the surprising weight loss and metabolic improvements seen with MetAP2 inhibitors in animals in early 2000.

We've seen impressive weight loss and even more impressive improvements in the glycemic control in this patient population and now believe that a compound like ZGN-1061 can be very attractive as a drug candidate in this well-established indication area. The ZAF-1061 101 clinical trial that we are running out is the first step in that process. We look forward to completing dosing by the end of the quarter and then analyzing and reporting top-line data from the SAD and MAD parts of this clinical trial, most likely early in the second quarter.

Assuming favorable results, we remain on track to initiate a Phase 2 clinical trial in Australia in the second half of this year. We will continue to elucidate the differentiation between ZGN-1061 and beloranib as we pursue a path forward for ZGN-1061 in commercially relevant populations.

During today's call, we want to spend some time reviewing some of the data that we believe supports ZGN-1061's differentiation from beloranib relative to thrombosis, yet with a similar impact on metabolic activity.

On slide 6, we provide a high-level side-by-side comparison of ZGN-1061 and beloranib. As you can see, ZGN-1061 has demonstrated similar efficacy, potency, and a range of activity in animal models of obesity compared to beloranib, but displays a highly differentiated safety profile and no impact on testicular function.

In addition, as we've seen and I will discuss momentarily, 1061 offers a substantial safety margin in nonclinical species with respect to thrombosis. Together, these observations support the potential value of this compound as a more highly optimized, more advanced MetAP2 inhibitor.

Turning to slide 7, over the past year, we've learned a great deal about the factors that may have contributed to the pro-thrombotic properties of beloranib and how 1061 avoids triggering the same cascade. We enlisted the range of leading experts to evaluate the impact of beloranib on every measurable aspect of clouding factor function, platelets, endothelial cells, and neutrophil biology and clot license. With the exception of endothelial cell function, none of these revealed direct or indirect effects of beloranib or components of the beloranib chemical structure. We have observed effects, however, on endothelial function, which we will discuss in greater depth in coming communications and after our discussions with FDA. In short, these findings point to an impact of beloranib when endothelial cell proliferation and on functions of endothelial cells related to their ability to modulate coagulation.

Advancing to slide 8, as we discussed previously and as you can see on the left panel, when we went back and studied the bank samples from our beloranib clinical trials, we found that plasma levels of D-dimer, a well-established marker for thrombosis, had been impacted in humans treated with beloranib. These data points to an ongoing increase of coagulation-related processes in patients treated with beloranib and also show that D-dimer levels can provide a surrogate for evaluation of the pro-coagulant effects of beloranib in animals. Therefore, this is an end point of interest for us as we evaluate ZGN-1061 in both nonclinical species and in humans.

The right panel in this slide provides a comparison of changes in D-dimer levels in dogs treated with beloranib versus ZGN-1061. As you can see, similar to the vehicle, ZGN-1061 has virtually no impact on D-dimer levels. In contrast, even with short exposures to beloranib at relatively lower doses, we see a significant increase in this marker similar to what we saw in our retrospective analysis of the human clinical samples.

Of course, safety and tolerability is only one part of the desired drug profile. We also optimized ZGN-1061 to produce similar efficacy compared to beloranib.

On slide 9, ZGN-1061 shown in blue has demonstrated a similar impact on weight loss in obese animals compared to beloranib shown in green.

The compound also demonstrate a beloranib-like impact on glucose measures, liver function tests, and lipids suggesting that ZGN-1061 like beloranib is engaging the same mechanistic cascades that drive weight loss and improve metabolic control. And, therefore, we believe that it is likely to demonstrate efficacy in the clinic.

This particular graph shows curves for weight loss in mice treated with doses of the two compounds that lead to essentially equivalent compound exposure. As of the current stage of development of ZGN-1061, the totality of these early data, as well as results from other compounds not shown here, point to the potential for a markedly increased safety margin for ZGN-1061 relative to beloranib, and we believe this bodes well for the inhibitor class of the molecule and our path forward.

Of course, we need to evaluate the candidate in the clinical setting to better assess the safety profile, but the nonclinical data to date increases our comfort around ZGN-1061 differentiation relative to beloranib, and we are working to replicate these findings and then publishing and reporting the data at scientific meetings.

In addition, our upcoming Phase 1 results will provide some insights as well.

Finally, we are carefully and thoroughly looking at the potential development paths for ZGN-1061, including the appropriate patient populations for initial target indications. We believe 1061 affords us with a wealth of opportunities for development to patients who have Type 2 diabetes and also are obese represent a particularly good fit for 1061.

At the intersection of Type 2 diabetes and obesity as seen on slide 10, there's just a large and diverse patient population with substantial and disconcerting unmet medical needs. These include but are not limited to patients who have failed drug therapy, patients who have failed bariatric surgery, and more generally patients who have progressed in their disease and require insulin in an attempt to maintain glycemic control.

As we advance our discussions with regulators and KOLs, we will have a better insight into the specific populations we plan to target in later stage clinical trials, and we believe that these high need patients are an ideal target for treatment with the MetAP2 mechanism of action.

Before I turn the call over to Dennis, let me close by saying 1061 represents an unusual and very interesting opportunity for our Company and one that rarely occurs in drug development. We have the chance to develop what is essentially a fast follower in a well-informed manner but for which there is no meaningful competition. It's been a challenging time, and we're still in the early stages of clinical development. But it has been a time of great excitement for our team. We are very fortunate to have a strong cash position as we advance the program.

Dennis will now provide an update on our clinical trial program for ZGN-1061, as well as the near-term clinical development strategy for the compound.

Thanks, Tom. Turning to slide 12, our Phase 1 clinical trial is designed to evaluate the safety, tolerability, PK, and weight loss efficacy with ZGN-1061. The clinical trial consists of two parts, a single ascending dose or SAD study in approximately 48 healthy volunteers which has been completed, as well as a multiple ascending dose or MAD study over four weeks of treatments in approximately 24 healthy overweight and obese volunteers.

The SAD portion consisted of six cohorts of approximately eight subjects each with a 3 to 1 randomization ratio of ZGN-1061 to placebo. The MAD portion consists of three cohorts of approximately eight subjects, each with the same 3 to 1 randomization ratio.

Subjects in the MAD portion were administered twice-weekly subcutaneous dosing of ZGN-1061 or placebo for 28 days for a total of eight injections each. We expect to complete all dosing in this trial by the end of this quarter and will report top-line results as soon as possible thereafter, most likely early in the second quarter.

On slide 13, we reviewed the outcome measures. In addition to safety, tolerability, and other standard Phase 1 measurement parameters, this trial is also designed to characterize and confirm the PK profile of ZGN-1061, as well as to glean preliminary efficacy signals as we had in our earlier Phase 1 four week [warm-up] clinical trials and pre-clinical ZGN-1061 studies. We will also be evaluating coagulation biomarkers and thrombotic endpoints to evaluate the veinous thromboembolism and related safety profile of ZGN-1061.

So we hoped that we will see some early signs of efficacy and safety of this new program, that which we can use to bring the candidate forward.

As depicted on slide 14, if this clinical trial is positive, we plan to move forward into multiple Phase 2a clinical trials that will evaluate dose range, weight loss effects and glycemic controls, safety and tolerability, and thrombosis-related endpoints. The first of these clinical trials will target a relatively large sample size of overweight and obese patients with a subset of patients also having Type 2 diabetes.

We plan to conduct this trial in Australia for a number of reasons. We conducted much of our Phase 2 program in obesity and/or diabetes with beloranib in Australia, so we anticipate having a study population that will afford an apples to apples context in which to compare with historical beloranib data.

We also have a subsidiary in Australia, and we see significant cash tax credits, and we believe we can enroll patients relatively quickly with the clinical trial sites we have collaborated with in the past. We intend to run a second clinical trial in the US, and henceforth we will request a pre-IND meeting with FDA to review the readiness of the ZGN-1061 program in the United States.

Turning to slide 15, in summary, we believe we are well-positioned to advance the development of ZGN-1061. We have compelling and consistent preclinical data that established the groundwork of differentiation of ZGN-1061 from beloranib, and the insights that we have gained from beloranib, together with our discussions with experts and regulators, will help inform the future development path of this promising second-generation compound. We have identified large patient populations with significant and persistent unmet medical need and have developed an efficient clinical strategy targeting patients with Type 2 diabetes and obesity.

Longer-term, we believe there is a great potential for other MetAP2 inhibitors to address additional subpopulations of complex metabolic disorders, and we are ratcheting up our investment into IND to identify additional candidates that leverage this powerful mechanism.

With that, I will turn the call over to Patty Allen for a review of the financials.

Thank you, Dennis, and good afternoon, everyone. I hope everyone has had a chance to review our press release which details our fourth-quarter and full-year 2016 financial results.

Turning to slide 17, we reported a net loss of $10.4 million or $0.38 per share compared to a net loss of $23.2 million or $0.85 per share for the fourth quarter of 2015. For the full year ended December 31, 2016, we reported a net loss of $57.9 million or $2.12 per share compared to a net loss of $74.3 million or $2.78 per share for the year ended December 31, 2015.

The reduction in net loss for both periods was due primarily to a decrease in preclinical, clinical, and manufacturing costs related to beloranib and ZGN-839, partially offset by increased costs related to ZGN-1061 as we shifted focus to ZGN-1061 in July of 2016.

Research and development expenses for the fourth quarter of 2016 were $7.3 million compared to $17.7 million for the fourth quarter of 2015. Research and development expenses for the year ended December 31, 2016 were $39.9 million compared to $54.6 million for the year ended December 31, 2015. The decrease in R&D expenses for both periods versus the prior year period were for the same reasons I just discussed for the net loss.

Our general and administrative expenses for the fourth quarter of 2016 were $3.2 million compared to $5.5 million for the fourth quarter of 2015. General and administrative expenses for the year ended December 31, 2016, were $18.3 million compared to $19.2 million for the year ended December 31, 2015.

The decrease in general and administrative expenses for both periods versus the prior year period was primarily due to a decrease in professional fees. For the fourth quarter of 2016, there was also a decrease in personnel-related costs resulting from the reduction in workforce during the third quarter of 2016.

We ended the year with cash, cash equivalents, and marketable securities of $129.2 million, slightly exceeding our prior guidance, which was to end the year with greater than $125 million.

In terms of guidance, based upon our current outlook, we anticipate ending 2017 with greater than $65 million of cash, cash equivalents, and marketable securities. We continue to expect that our cash resources will get us through the end of 2018, by which time we expect to have data from a Phase 2a clinical trial of ZGN-1061.

So, in summary, we have a healthy balance sheet and an efficient clinical development plan that will take us through key value-creating milestones for ZGN-1061 with our current resources.

And, with that, I will turn the call back to Tom.

Thank you, Patty. As you can see, we expect that 2017 can be a pivotal year for our Company as we work to establish proof of concept for ZGN-1061 and the MetAP2 class in commercially relevant patient populations.

We have outlined on slide 19 a number of R&D objectives for the year that we expect to culminate in the initiation of a Phase 2a clinical trial in patients with Type 2 diabetes in obesity in Australia. We are highly encouraged by the data that we are compiling on ZGN-1061, including nonclinical data that further supports differentiation of this promising second-generation molecule. We are leveraging our extensive discussions with experts and regulators to develop an efficient path forward for ZGN-1061, and we are working to refine manufacturing ahead of the initiation of larger Phase 2 and Phase 3 clinical trials.

We are very excited about the opportunities ahead for Zafgen and our second-generation MetAP2 inhibitors, and we look forward to providing future updates on our progress.

Thank you, again, for taking the time to join us on this call, and with that, we will now take your questions.

(Operator Instructions) Jason Butler, JMP Securities.

Hi. This is Harry on for Jason. Thanks for the additional details. Just a few questions. First on the Phase 1, could you speak to the dosing or the PK levels in the MAD portion relative to those tested in the preclinical models?

Yes, so basically the exposure -- first of all, we will fill in a lot more about this once we have the data from the trial, but the objective of the SAD and the MAD were basically to bracket and extend beyond what we would have expected for exposure, both on the preclinical data but also from our prior experience with beloranib. So we are going above and beyond what we have seen with the prior beloranib experience.

And with respect to the efficacy, of course, we can't speak to the efficacy level in humans, but the efficacy level in animals relates very, very closely between the two compounds in terms of overall exposure. And we see very equivalent target engagement information in the nonclinical species as well. So we will have a good way to calibrate whether the doses we are providing are getting a substantive -- to the concentration range we are engaging the target, and we will have a nice range of markers to track and things to look at to tell us that we are in the working range of the compound.

Okay, great. Thanks. And for the 1061 compound, did you see any effects on the endothelial proliferation or endothelial cell anticoagulation function?

We will give a bigger update on that in the future, but basically what I would say is we wouldn't be where we are right now if we saw that being an issue. There are very clear differences in terms of concentration response and time response, and as I said, we will get into that later on. But there is a rather substantial differentiation at that level. Again, that is part of the rationale that we had for advancing the compound.

Great. Last question. Back to the Phase 1, I guess what you are anticipating or ought to see on the safety biomarkers and if there is a suitable Phase 1 for beloranib for comparison purposes?

Yes, I will turn that one to Dennis.

Yes, we are tracking many different -- all possible, really, biomarkers of coagulation. Not to mention just general adverse events that relate to venous thromboembolism, and we will, of course, share that with you at some level when the data is locked and loaded.

There is a certain amount of safety hurdles that we have to meet before we can continue to go on with the SAD as well as the MAD part of the trial. And so far, the study has been going as planned.

So if that's any indication, things are going relatively well. We don't as a practice discuss details of the trial, not the least of which, the reason is that all these things that I'm saying should be considered preliminary because we have to clean the database and lock the database before we can speak confidently about the details.

Great. Thank you very much for taking the questions.

Phil Nadeau, Cowen and Company.

I guess first a follow-on on the Phase 1 trial. If you were to put beloranib in the same Phase 1 design, which of the measures that you are taking would suggest a signal of thrombosis risk? Are there any that you are measuring, or do you have to do different trials? (multiple speakers)

So, as we pointed out, we have seen with beloranib a very clear group-wide differentiation from vehicle or placebo in terms of the D-dimer elevation. And so that is probably the most clear-cut market that one can use for looking at group-wise compound effects. And so that is one that we are certainly looking at.

Now D-dimer itself is prone to being a little bit noisy as an endpoint because it can be triggered by any number of different things. But if we see consistent impact on D-dimer, I think that will be telling to us.

In the course of evaluating the sample bank that we had from the beloranib trials and then also from our animal data, we have additional markers that we can speak to, but we really want to make sure that the assays for those particular endpoints perform well in the setting of this trial before we speak to those. So we will be providing a bigger update or a better, more complete update on those once we have the trial results. But really, D-dimer is the one that we would say is probably the most robust.

So, yes, I guess what I'm wondering is for D-dimer, could you, based on the magnitude of difference you've seen for beloranib, would you have been able to pick up a difference in a study with 18 patients on drug and six on placebo over 28 days, or are those patient numbers too small and the time too short?

Yes, so, unfortunately, we had banked the samples in our prior trials only after three months and then at six months roughly of treatment. And so we don't have comparative one-month data in humans. But what we can say is that in animals we can trigger these responses very rapidly and very reproducibly with beloranib at exposures that are not particularly higher than the doses we were studying with beloranib. There is some margin, but there is good overlap of exposure.

And so the way that we understand it now after the work we've done is this is a relatively rapid and reliably triggered event or, let's say, response to treatment. And so what we are really looking for is a consistent signature or lack of a consistent signature of D-dimer elevation in the face of other measures that we are carrying forward.

But to be maybe forward thinking about this, we won't really be able to fully de-risk this approach until we get into larger trials and for longer periods of treatment. And so this first step to understand what the working dose is of the compound and how to carry it forward and to really begin to build a case that the exposures that we are using that are achieving target occupancy and marker impact that we see as efficacy readouts while having no obvious safety issues is that first step to moving into these longer-term studies where we will see all of that and be able to adjudicate it. Not adjudicate, but basically to study it.

So more or less, maybe a shorter way of saying it, our hope is that we can achieve a dose or range of doses where we see good target engagement and perhaps some mechanistic and functional responses that we like, and that when we go back and we look at what concentrations and exposures are required to drive that in animals and in animals with ZGN-1061, it's very hard to drive that effect, but one can go to very high doses and exposures before you even see an inkling of it. But if we have an acceptable margin coming out of this study, we will feel more confident moving into Phase 2 to test it more thoroughly. I hope that makes sense.

But in short, the expectation is that we will never achieve exposures with 1061 that would lead to this effect being exerted.

Okay. Got it. And on the effects on endothelial proliferation, and endothelial cell, anti-coagulation function, anti-coagulant function, are those -- are you developing or do there exist biomarkers to look at those in vivo, or is it possible that there could be biomarkers at some point to look at those in vivo?

Yes, there are, and that's the set of assays that I mentioned, and we just really want to make sure that the assays perform well and that we have good clean reads on those before we talk in depth about them. And that is all coming once we have the data.

Got it. Okay. Thanks for taking my questions.

Joseph Schwartz, Leerink Partners.

Good afternoon, everyone. This is Brett dialing in for Joe. Thanks for taking our questions.

First of all, what were the enrollment criteria for patients in the multiple ascending dose portion of Phase 1? Specifically, were there -- what were the age bracketing and ultimately -- and then the BMI thresholds for inclusion?

You're asking for the MAD dosing part, right?

The MAD dosing part, yes, where you said they were obese volunteers, but I wanted to know how obese is obese.

Yes, so they have to be at least 18 years of age to get into the study, and they could have been as low as BMI of 27. But we capped a number of patients between BMI of 27 to 30, but we don't get too many of those patients. And the vast majority of patients are in the BMI range of 30 to 40.

Okay, great. That's helpful. Because my follow-on for that is that you've talked often about looking into the severe and complicated market, and as we try to pin down this market opportunity, what threshold constitutes severe obesity and among the complicated cases outlined, how big are these addressable patient populations? How far down the numerous treatment options outlined do we need to go? And ultimately the slide you put together, slide 10 was helpful in highlighting the -- how large both the diabetes and obesity markets potentially are. But ultimately where is the greatest opportunity or patients -- and how big are these segments of the market for ZGN-1061 in your minds at this point?

So basically what we need to do is to have conversations obviously with FDA to talk about what an indication focus might be. Our view is that on the basis of what we had observed with beloranib, that there is a very good likelihood that we would have a very substantial impact on glycemic control in the setting of diabetes, and as you're probably aware, most, if not almost all of the patients who are affected by Type 2 diabetes, particularly those who are poorly controlled on other agents, are likely to be obese or at the very least have an elevated BMI.

And so one can think of complicated obesity as being obesity as complicated by Type 2 diabetes. And so really almost anybody in the diabetes class would fit that criteria.

Where we think that we might have a real opportunity to create particularly significant value, though, are in people who are at the -- at that cusp of failing other agents for the treatment of their diabetes and where we have seen such a very powerful effect of beloranib in that setting. And so looking at that sort of transition moving from non-insulin agents into insulin and perhaps looking at this as a way of displacing insulin in its first use in that population. So we see that as a very intriguing and potentially very valuable segment, and we are doing a deep dive right now into the sort of claims data and electronic medical record data that we have access to understand what that patient journey looks like and what their healthcare costs are and where a good proposition could be made for focusing on that particular subgroup.

Now that is basically another way of saying that this would be a drug for diabetes, and in all likelihood it would be used in settings where other agents have failed. That still is a large segment of the population, and it's hard for us to say exactly what that is at the moment. But in short, most patients will transition through that particular phase at some point in their trajectory.

Now having said that, there are additional sub indications that we are also studying that might be quite interesting to us. And we're not committed to doing this, but if one looks, for example, at the patient population that has undergone bariatric surgery, they have either failed to lose weight on bariatric surgery following bariatric surgery or their diabetes, even if it went into remission, is back. These patients, we believe, may represent a particularly high need, almost a disturbingly high need population, and we are understanding -- we are working to understand what the comorbidities, healthcare costs, and medical needs are in that population. And to the best of our knowledge, that represents multiple hundreds of thousands of patients in the US today, and these are patients for whom other agents are really not doing the job. So these are the sorts of populations we are looking at, and so we are looking at millions of patients at the end of the day in the grade sets.

Okay, great. That's really helpful color. I appreciate that. And lastly, when should we look forward to updates on your portfolio programs? Potentially it is second molecule looking at NASH or other indications. When is that coming down the pike?

So basically these are things that are in process. As I'm sure you are aware from other companies, we usually don't talk about new molecules until you get them. Drug discovery is not always the most predictable thing that we can work on. But we are working to identify new agents, and the -- I guess the path is something that we are quite familiar with and working through.

What I would say is that we really almost tripled down on our approach in this area. We were investing a lot more money into the problem. We are currently studying compounds that we had previously made at bank. We are making new compounds. We are designing new chemical approaches as well. We're exploring different routes of administration, and we are focusing as well on new indications that we can address with this particular modality. And we are encouraged to do so by the fact that we've been able to get a better handle on what exactly was the issue or what was likely to be the issue with beloranib.

And lastly, we are also doing a deeper dive into the underlying mechanism of action for these compounds, and we hope we will be able to identify new modalities to approach as well, meaning new targets and new targeting approaches. So it is a big part of our program, and we will update as it comes along. But this is something we know how to do. We are not concerned about our ability to identify new molecules, but it's just early to say exactly when they will be on our list or what their numbers are, for example.

Okay, great. Thank you very much for the color. Much appreciated.

John Newman, Canaccord.

I just wondered how do you get comfortable around the single ascending and the multiple ascending dose studies in terms of making sure you have a wide enough therapeutic window? I know you have talked previously in the call about the D-dimer test, but I'm just wondering if there are other things that you are going to be looking at to give yourselves comfort that you've got a wide enough window.

And then, excuse me, I'm also wondering which one of the Phase 3 endpoints will be most indicative from an efficacy standpoint to inform what you might want to measure in Phase 2 mix?

Sure. I'll start answering, then I'll hand it to Dennis. But I think to get at the question, the margin question, so one of the things that we were looking for very carefully when we were evaluating the translatability of the D-dimer and thrombosis impact between the clinical samples and the clinical trials we run in the animals was understanding exactly what those margins look like and also how they related to the nature of the exposure that we had with the compound and how to kind of manage that in animals as well. And so once we learned what to look for in the setting of animals treated with beloranib, we were able to work with a set of compounds basically taking compounds that were beloranib-like and compounds that were differentiated from beloranib and perhaps were more like 1061, and we were able to triangulate it on what were the metrics, if you will, of exposure of the animals to compounds and what would and what would not trigger the thrombotic events. And what we have learned was that there was, in fact, an interesting set of -- almost like a rubric, if you will, of what it takes to trigger thrombosis and what it takes to stay away from that. And that is part of our training set that we have developed here.

When we look at beloranib, the margin of safety for beloranib relative to what it takes to trigger thrombosis in humans is extremely narrow versus animals. When we look at 1061, that margin is moved out by a substantial amount. And it gives us a sense of how to develop specs basically for keeping the exposure of the drug under control and in such a manner that we really should not trigger thrombotic events in humans.

So, as we move through that, we have a couple of instruments to work with. One is the D-dimer endpoint, which is, as I mentioned earlier, a rather choppy tool to work with. It is prone to being triggered by any number of things. But we have other markers as well, and we will certainly be working with those as we move along.

It is our expectation that we will need to be into Phase 2 to have enough patients exposed to really be able to say that we have clearly gotten away from that completely. But we believe that we will have enough information coming out of this trial to be able to say whether it is probable that we are triggering or getting into a range of exposures would trigger these events or not.

The other part of that equation, of course, is the efficacy side, and so we -- as I mentioned earlier, we have the ability to look at, with a lot of precision, the engagement of the target in the body. We can measure that by mass spectrometry. We have markers of the enzymatic pathway inhibition as well that we can measure, and then we have good information regarding beloranib and what it took to get beloranib's efficacy to come to be. And so we will have the ability to calibrate where we are, and we hope that we will be able to speak to where we stand in the window once we get there. So that hopefully will come on.

But with regard to the markers of efficacy, I will leave that to Dennis, except to say that we have quite a few endpoints in the body that we can track and that we have seen study to study, patient population to patient population, and over time to be very good signals of the MetAP2 pathway being activated. And so we will look at the totality of that, even though the study is a small one.

So, Dennis, I don't know if you want to add to that.

Yes, it is a pretty simple question because, right now, as we are planning our trials, the operating assumption is that Type 2 diabetes overlap with obesities where the drug is going to be pointed at. And in those circumstances, its body weight and hemoglobin 1C are the two most important endpoints.

We will, of course, measure all kinds of secondary endpoints as well such as body comp and cholesterol profiles, blood pressure, C-reactive protein, and waist circumference to name a few.

Those are endpoints that we've seen repeatedly come through with beloranib, and if we were to assume that 1061 performs like beloranib, we don't really require a lot of patients to be able to see this as a strong signal. So the Phase 2 study will probably -- the size of the Phase 2 study will be driven mostly, as Tom said, based on our need to discharge the thromboembolic risk as much as possible in that stage of development. We are unlikely to completely discharge that risk during Phase 2, but I think we will have -- we will get a pretty good idea as to where the -- what -- how the drug is behaving with respect to thromboembolism.

Okay. And then maybe one last question if I may. What are the measures that you have in place going forward in order to monitor any sort of cardiac toxicity and adverse events if they are different than the typical measures, mainly because the patient population that you may look at unfortunately often carries a higher cardiac risk, not necessarily because of the compound, but just the patient to start with for a higher risk category? Thanks.

Sure. At this stage, in Phase 1, we are doing all the routine cardiac measurements such as blood pressure, pulse rate, EKGs or ECGs and, of course, adverse event reporting. As we advanced into Phase 2a and b and possibly into Phase 3, we will definitely be measuring MACE events, which is the main FDA-required event profile that we have to follow. And patients with Type 2 diabetes in general have about a 3% per year instance rate of a major cardiovascular event. And we hope to have enough of those patients in our Phase 2 and Phase 3 trial such that we can inform the need to do any cardiovascular outcomes trial before or after the drug is marketed.

One thing I will say is that, again, if 1061 performs similarly to beloranib, all the cardio and metabolic risk markers go in the right direction with beloranib and hopefully with 1061.

It's been shown to lower blood pressure, lower LDL, increase HDL, and lower weight circumference, as as well as C-reactive protein. So there is no inherent reason or any evidence to suggest that the drug or the drug class should worsen cardiovascular outcomes, but only data will really show one way or the other.

Okay, great. Thank you.

[Rahul Desouza], FBR.

Number one, and I probably should have known this, but is this the same chemical class -- is 1061 the same chemical as the previous candidate?

It is. We haven't disclosed the structure yet, and we are not in a rush to do that. But it is -- has a shared functionality that comes from a natural product that was the source of optimization for this particular series such [tumidulol] nucleus, and then there's a side chain that is essentially proprietary. And the side chain basically dictates some of the efficacy of the compound or the enzyme binding of the compound. But for the most part, it is what dictates things that impact distribution and clearance of the compound, as well as the tissue distribution of the molecule as well.

It also helps with formulation and manufacturing involved. But they are considerably different at their -- what we call the southern chain, but otherwise, the tumidulol nucleus is packed between the two.

Right. I do remember from our conversation now. My next question really is sort of a devil's advocate question. In trying to de-risk the Phase 1 right now, let's assume that it is the inflamed endothelium or the compromised vasculature in Type 2 diabetic in obese patients, and that's the problem. What other ex vivo test can you do besides the D-dimer test? That could sort of mitigate or address or mimic better patient situation at this time.

Yes, sir. As you're probably aware, you're right. There's a lot of endothelial dysfunction in the setting of diabetes, and it is probably what drives the microvascular complications of the disease and the rest of that.

We would leave or argue almost that the bulk of the drivers of that dysfunction, which include hyperglycemia, hyperlipidemia, the ongoing inflammation in the body, hypertension, all of these major contributors of endothelial dysfunction in diabetic patients will hopefully be better in the setting of treatment with 1061 and not made worse. So we will hopefully be working in a set of concentrations and exposure profiles with 1061 that will not impact the endothelium, and we can test that both in vivo and in vitro and be very comfortable with that. And at the same time, we will be tapping into the beneficial effects of the compound that are driven by other tissues and by other actions of the compound.

So we think that we can separate that. But at the end of the day, we would hope that it would actually improve endothelial function and, accordingly, reduce cardiovascular and microvascular complication development and severity rather than to make it worse.

But the heart of it will really be in studying those things. I mean I suppose we could at some point monitor endothelial dysfunction in the setting of diabetes by (inaudible) or something like that. But we -- this is -- it's a little bit early to be talking about that sort of thing, but that might be an opportunity for us to really show benefit of the compound.

Great. That's very helpful. And then finally, a quick question on timing. You did mention that dosing is really completed by the end of this quarter, and then data is expected -- top-line data in the second quarter of 2017.

That's correct.

Yes, that's right. It takes --

We need to finish the analyses, get the data cleaned and summarized, and we will report as expeditiously as we can.

Great. Thank you. That's all I had.

Edward Nash, SunTrust.

Thanks for taking the question. This is Mike on for Edward. Just a couple of questions. The first one is on the Phase 1 trial. So is it possible you can quantify the safety margin you are looking for in the Phase 1 trial in order to trigger a go/no go decision for Phase 2?

You are saying therapeutic margin?

Perhaps the margin of the -- maybe the level of the D-dimer or any other biomarkers you are looking for from the Phase 1 trial?

Yes, you know, Dennis, I don't know if you want to answer that. But from my (inaudible) this is a very small trial with a relatively small number of patients and will really be in the evaluation of the totality of the data, not necessarily that we have hard lines in the sand for the treatment group effects or anything like that. But we will have a hard look at it, and I don't know if you want to answer that.

Yes, we will obviously -- collecting D-dimer and any adverse events that has anything to do with coagulation.

But having said that, there is no specific margin that we are looking for, as Tom suggested, because the trial is small and short. We do have PK parameters that we are looking for, and again, we would not have moved on to the MAD part of the trial if we didn't satisfy some of the criteria that we are looking at in terms of drug exposure and performance.

Got it. That's helpful. And also, for the single ascending dose portion of the Phase 1 trial, have you reached an MTD?

Yes, again, those are details of the trial that we just cannot discuss at this point because, again, these are all preliminary results that we are looking at, and we have to clean the database and lock before we can discuss openly.

Yes, I think I answered that a little bit earlier on to a certain extent or maybe just restate it. So our concept for the trial was really to provide patients with a range of doses that would give a broad coverage of the -- and to go above the range that we would have expected to see efficacy with beloranib. In other words, to provide a working dynamic range within which we would then move to our multiple ascending dose. So our expectation was that we would go higher than we had exposure with beloranib and we certainly did that. MTD is a very specific term that we would rather not speak to, but this was not an MTD study as much as it was one to understand what the parameters of exposure are that provide us a good operating range within the window that we felt would be very acceptable for the compound. And we are still working well within that range. So I don't know if that answers your question. But, again, MTD is a term usually that refers to pushing to some sort of a toxicological or tolerability finding that was not the objective of this study, nor did we reach that.

Got it. That's helpful. Thanks a lot.

I am now showing no further questions, and I would like now to turn the call back to Dr. Tom Hughes for any further remarks.

Okay. Well, thank you, operator. In closing, we are encouraged by the differentiated profile of 1061 and its potential to positively impact large patient populations with significant unmet medical need. We look forward to reporting top-line data from our Phase 1 trial early in the second quarter, and thank you again and have a good evening.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program, and you may all disconnect. Everyone, have a great day.