Larimar Therapeutics Inc (LRMR) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Zafgen Second Quarter 2018 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would like to introduce your host for today's conference, Mr. John Woolford, (inaudible) president partners. Mr. Woolford, you may begin.

Welcome, and thank you for joining us for Zafgen's Second Quarter 2018 Operating Highlights and Financial Results Conference Call. Joining us on the call today are Jeffrey Hatfield, Chief Executive Officer; Dr. Dennis Kim, Chief Medical Officer; and Patty Allen, Chief Financial Officer. Brian McVeigh, Chief Business Officer, will also be available for the question-and-answer portion of the call. After management's prepared comments, we will open the call for questions.

Before we begin our prepared remarks, I need to remind you that estimates and other forward-looking statements included in this call represent the company's views as of today, August 7, 2018. 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 could cause actual results to differ materially from those expressed or implied by such statements. Please also note that this call is being simultaneously webcast online.

I'll now turn the call over to Jeff to begin today's call. Jeff?

Thank you, John, and thank you, everyone, for joining us today to discuss our second quarter 2018 operating highlights and financial results. On today's call, I'll provide a brief overview of Zafgen's recent clinical and pipeline developments, then I'll turn the call over to Dr. Dennis Kim to provide additional detail on our leading programs. Dennis will then turn the call over to Patty to review second quarter financial results. I'll then come back and touch on our near-term milestones before opening the call up for questions.

I'd like to start today's call by thanking Dr. Tom Hughes, our President and Chief Scientific Officer, and acknowledge his many contributions to our progress over the past 10 years. As we announced last week, Tom is leaving Zafgen to pursue an opportunity as CEO of a privately-held biotech company. Tom has graciously agreed to assist us to assure a seamless transition, and he will continue to assist us in the future as a member of our Scientific Advisory Board.

At a personal level, Tom's been an enormous resource to me over the past 10 months since I assumed this position, and I'm grateful for the strong partnership we've had. We're really going to miss Tom and wish him great success in his future endeavors.

And now turning to our program updates. Zafgen continued to execute on our 2018 operating plan successfully through the second quarter, with significant progress realized across each aspect of our work. The highlight of the second quarter was our presentation of multiple late-breaker abstracts at the American Diabetes Association, or ADA, Scientific Sessions in late June which detailed safety and efficacy results from the initial part of our Phase II proof of concept clinical trial with ZGN-1061 in patients with type 2 diabetes, as well as 2 supportive non-clinical studies for 1061, each illustrating unique aspects of 1061's potential value in treating these complex patients.

Recently, we also announced that Zafgen and the Foundation for Prader-Willi Research, or FPWR, a nonprofit organization founded to eliminate the challenges of Prader-Willi syndrome, or PWS, through the advancement of research and therapeutic development, launched a co-sponsored 4-year natural history study called PATH for PWS, to advance the current knowledge of the medical history and medical events in people with PWS. The launch of this study is a significant milestone for Zafgen, as it will provide important context for the clinical development of ZGN-1258 and will be tremendously supportive to us, the PWS community, in all sponsors developing new therapies for PWS.

As a quick reminder, 1258 is our novel second generation MetAP2 inhibitor designed to specifically target tissue systems related to the treatment of rare metabolic disorders, beginning with a focus on PWS.

In addition to launching our co-sponsored natural history study, we've continued to make significant progress with our investigational new drug, or IND-enabling studies, for 1258, and continue to anticipate an IND allowance from the FDA and the start of a Phase I clinical trial in the fourth quarter of this year.

Relating to our nonclinical work with 1258, we're pleased to announce today that multiple nonclinical studies with 1258 have been accepted for presentation at the FPWR Annual Conference, which begins October 4, 2018, covering the effects of 1258 in mouse models of hyperphagia and obesity, the impact of 1258 on behavioral manifestations in PWS and nonclinical differentiation of 1258 on safety measures, as well as an overview of the PATH for PWS natural history study design.

Moving back to ZGN-1061, as mentioned earlier, we presented full results from the initial part of our Phase II proof of concept clinical trial for type 2 diabetes at ADA. Since we hosted a call detailing these clinical results in late June, we'll keep our comments on the data relatively brief today, and our results illustrate the full 12-week safety and efficacy data up to the 0.9-milligram dose of 1061. As a reminder, the primary objective of the trial was to establish efficacy and safety of 1061 using mid to low target engagement doses.

To summarize, we met all primary endpoints, demonstrating highly statistically significant efficacy at the 0.9-milligram dose, and exhibiting a well-tolerated safety profile with no serious treatment-related adverse events and no evidence of cardiovascular safety signals, which we believe is a read-through to our full second generation pipeline.

Based on the low to mid-level target engagement of our top 0.9-milligram dose in this trial, as we have announced previously, we extended the clinical trial and have initiated an additional 1.8-milligram dosing cohort to explore the higher end of the therapeutic range into a proximate maximum target engagement of 1061. We expect to report results from the additional 1.8-milligram cohort in early 2019.

We also announced at the ADA positive nonclinical data that further supports 1061's unique profile. Encouraging nonclinical data demonstrating the potential effects of 1061 on liver disease, specifically NASH, were presented, and we've already gotten inbound pharma inquiries about these data. Also, we presented nonclinical data on 1061 in combination with a leading diabetes treatment option, liraglutide, showing profound additive effects on efficacy measures.

In addition to these presentations, our team has produced multiple journal publications during the quarter, providing added scientific and clinical detail to our work on 1061.

Based on these achievements in all of our leading programs, we believe that Zafgen is well positioned to deliver on additional milestones for each program through the remainder of 2018 and beyond.

Finally, before I turn the call over to Dennis, I also wanted to highlight that in early July, we completed a follow-on offering which strengthened our balance sheet and resulted in net proceeds of approximately $65 million. The completion of the offering has provided Zafgen with additional capital, extending runway through the first half of 2020 to fuel advancement of our pipeline through multiple value-creating milestones. Patty will provide additional detail on the offering in her remarks.

So, at this point, I'd like to turn the call over to Dennis to provide insight and further details on our programs. Dennis?

Thanks, Jeff. I'm also excited about the progress we continue to make in our lead programs and look forward to updating you throughout 2018 and beyond as we continue to execute on our (inaudible) objectives.

As Jeff mentioned, during the second quarter, we launched our co-sponsored natural history study with FPWR, which is aimed to improve the understanding of medical history and medical events of people with PWS. The PATH for PWS study is a non-interventional, observational study to evaluate occurrences of serious medical events in PWS which will allow us to collect and analyze important health information to better understand how the condition presents itself and to inform clinical trial design for potential new treatments.

ZGN-1258 is our second-generation program designed to improve hyperphagia, change the way the body metabolizes fat, and reduce fat mass in people with PWS. In nonclinical testing, 1258 has exhibited an expanded ability to act on hunger control centers, and show a favorable efficacy profile that closely aligns with our first MetAP2 inhibitor. Most importantly, however, 1258 demonstrates significantly-improved safety margins similar to that of 1061, which has shown in clinical testing thus far to have encouraging safety and tolerability profile. The nonclinical results for 1258 are a promising development, as our goal is to provide a much-needed treatment for people affected by this devastating condition.

Moving back to the natural history study, the study has been designed to observe people with PWS for 4 years. Every 6 months, caregivers of those enrolled in the study will be asked to provide an update on any medical issues experienced, any related medical procedures or prescriptions, and information about conditions often associated with PWS. Clinic visits are not required, as all information will be provided through an internet base, surveys and questionnaires. The study operates through the Global PWS Patient Registry, which is in turn powered by the National Organization for Rare Disorders Registry Program.

Throughout the duration of the study, we will analyze the data to evaluate the incidents of serious medical events, prescription medication use associated with medical events of interest, patterns of hyperphagia-related behaviors, and any additional areas of importance to the PWS community such as changes in body weight, management strategies for hyperphagia, and characterization of traits and actions common to individuals with PWS.

These analyses will also support Zafgen, FPWR, and others in the PWS research community in identifying potential areas for future research. We are looking forward to working in conjunction with FPWR throughout the PATH for PWS study. We believe that this partnership between FPWR, Zafgen, and other broader community transforms outcomes for patients and their families whose lives are affected by PWS.

In the meantime, the study may allow us to increase the efficiency and speed of our overall clinical development plan for 1258. In many circumstances, we intend to enroll patients in our interventional clinical trials directly from the PATH for PWS study, which will greatly aid in efficiency of patient recruitment.

Also, we may be able to reference patients in the PATH for PWS study as an extended alternate control group for our clinical program. Again, this study is an important part of our overall commitment to transforming the lives of people affected by PWS.

As Jeff mentioned, we are pleased to announce today that we will have multiple presentations at the FPWR Annual Conference, which begins October 4, 2018, covering the following topics: 1258 facts on food intake and body weight in mouse models of hyperphagia and obesity; 1258 effects on other behavioral manifestations commonly observed in PWS, such as low physical activity, anxiety, and obsessive-compulsive behaviors in mouse models; 1258 differentiations on nonclinical safety measures; and PATH for PWS natural history study design.

We are very excited to advance this promising compound, 1258, into the clinic later this year and demonstrate its promise in the treatment of hyperphagia and obesity in PWS, as well as potentially in other rare metabolic diseases.

Moving on to 1061, as Jeff mentioned, we recently presented full results from the initial part of our Phase II proof of concept clinical trial for difficult-to-control type 2 diabetes at the ADA. To quickly summarize, this was a randomized double-blind placebo control design that evaluated 1061 at 3 doses: 0.05 milligrams, 0.3 milligrams, and 0.9 milligrams, versus placebo for 12 weeks.

The primary objective of the trial was to establish efficacy and safety of 1061 within the low end of the dose-response curve and to identify a minimally-effective dose. In addition, we evaluated 1061 on various glycemic control factors, multiple metabolic biomarkers, and cardiovascular risk factors.

To summarize the results from this Phase II trial, our 12-week data met all primary endpoints, demonstrating highly statistically significant proof of concept efficacy at the 0.9-milligram dose. Importantly, we saw a progressive reduction in A1C, with no evidence of waning of effect, an indication that further A1C lowering may be observed with extended treatment duration.

Additionally, we showed significant improvements in multiple important metabolic and inflammatory biomarkers, including adiponectin, leptin, FGF21, and FGF21, and C-reactive protein. Most importantly, 1061 demonstrated a favorable safety and tolerability profile with no treatment-related serious adverse events and no CV safety signals observed.

We also highlighted our unusually high patient retention rate of approximately 95 percent, potentially further supporting the strong safety and tolerability profile of this compound in the trial.

Based on the low to mid-level target engagement and functional enzyme inhibition at 0.9 milligram, we believe that we have successfully identified 0.9 milligram as a minimally effective treatment dose.

We previously amended the clinical protocol to evaluate a higher dose of 1.8 milligram to compare its efficacy and safety with a current 0.9-milligram dose and a placebo group. We expect the 1.8-milligram dose to approximate maximum target engagement. This trial is currently actively enrolling with a target of 40 patients, who will be randomized on a [2-to-1-to-1] ratio for 1.8 milligrams, 0.9 milligrams, or placebo. We expect to report results of this additional [1-point-milligram] cohort in early 2019.

Moving on to our nonclinical studies, we examined 1061's potential as a treatment for nonalcoholic steatohepatitis, or NASH, a disease characterized by ectopic deposition of fat in the liver, inflammation, and subsequent liver cell damage in a biopsy-confirmed diet-induced obesity, or DIO, NASH mouse model. In the study, 1061 treatment markedly reduced liver weight, NAFLD activity score, and markers of liver damage compared to vehicle-treated mice.

The NASH-related data and clinical liver fat content data from Zafgen's first generation MetAP2 inhibitor suggests potential clinical value in treating liver-specific metabolic conditions. There are currently no improved therapies that can impact this highly prevalent comorbid condition associated with obesity and type 2 diabetes. We intend to explore these liver effects much more in the near term.

Lastly, on the nonclinical front, in a separate study in a DIO rat model, we explored 1061's potential as a combination therapy with liraglutide, a glucose-lowering agent that works through the GLP-1 pathway. Our data shows a profound improvement in glycemic control and weight loss for 1061 treatment in combination with liraglutide, with significant weight loss within the first 5 days of treatment and sustained improvements throughout the duration of the 35-day study.

Weight loss was greatest in rats treated with both 1061 and liraglutide, suggesting that 1061 as a combination therapy with these GLP-1 mediated glucose-lowering agents may yield additive improvements. Also, combination treatments significantly lowered weekly fasting blood glucose compared to placebo and single-treatment groups, implying a complementary mechanism of action for these 2 drugs.

The positive data from both of our clinical and pre-clinical programs further support our MetAP2 inhibitor platform as a potential treatment for a broad range of metabolic diseases.

With that, I'd now like to turn the call over to Patty to present a financial review of the quarter. Patty?

Thank you, Dennis, and good afternoon, everyone. I'll now provide a brief summary of our financial results for the second quarter of 2018.

Zafgen reported a net loss for the second quarter of 2018 of $15.8 million, or $0.57 per share, compared to a net loss of $13.3 million, or $0.49 per share for the second quarter of 2017.

Research and development expenses for the second quarter of 2018 were $12.2 million, compared to $10.5 million for the second quarter of 2017. The increase in R&D expenses compared to the prior year period was primarily due to increased clinical trial cost related to the 1258 program as IND-enabling studies progressed during the quarter as the program advances toward an IND allowance and initiation of a Phase I clinical trial in the fourth quarter of 2018.

The increase was also as a result of increased clinical trial cost associated with the Phase II trial for the 1061 program. There were also increases in personnel-related costs and non-cash stock-based compensation expense in the second quarter of 2018, as compared to the prior year period. This increase in R&D cost was partially offset by a decrease in nonclinical and manufacturing costs associated with 1061 as it has evolved to a clinical stage program.

General and administrative expenses for the second quarter of 2018 were $3.4 million, compared to $3 million for the second quarter of 2017. The increase in G&A expenses, as compared to the prior year period, was primarily due to an increase in personnel-related cost, as well as an increase in professional fees, primarily multi-country IP filings, partially offset by a decrease in non-cash stock-based compensation expense. As of June 30, 2018, Zafgen had cash, cash equivalents, and marketable securities totaling $75.8 million.

As Jeff mentioned, in early July, we completed an underwritten public offering of 9.2 million shares of our common stock at a price to the public of $7.50 per share, including 1.2 million shares pursuant to the underwriters' exercise in full of their option to purchase additional common shares, which resulted in net proceeds of approximately $64.6 million.

After giving effect to the estimated net proceeds from this public offering of common stock, the unaudited pro forma cash, cash equivalents, and marketable securities balance was $140.4 million as of June 30, 2018.

With the completion of this offering, we are increasing our cash guidance for calendar year 2018, and we now expect that our cash, cash equivalents, and marketable securities balance will be greater than $100 million as of December 31, 2018, and that we now expect our cash runway to last through the first half of calendar year 2020.

And with that, I'll turn the call back over to Jeff for closing remarks. Jeff?

Thanks, Patty. So, to conclude our prepared remarks, I'd like to briefly reiterate our important near-term milestones for Zafgen. For our 1258 program for rare metabolic diseases, we anticipate an IND allowance for 1258 and expect to initiate a Phase I single ascending dose clinical trial by year-end. For 1061, for complex, difficult to control type 2 diabetes, we anticipate our IND allowance for future Phase II clinical trials in the fourth quarter.

We also plan to report full top-line results for the recently initiated 1.8-milligram dosing cohort in early 2019. Lastly, in our early-stage oral pipeline liver program, we expect to select a development candidate and an initial indication for the program by year-end 2018.

With the recent stock offering, we have a stronger balance sheet and longer runway to advance our programs through these milestones, and additional milestones in 2019, which we will provide detail for later in the year. We remain excited about our prospects for our clinical pipeline, and we look forward to updating you on our progress as we continue to execute against our operating plans and strategic objectives.

And with that, I'd like to now open the line to questions. So operator, if you could please open the line.

(Operator Instructions) Our first question comes from the line of Ted Tenthoff with Piper Jaffray.

Great. Thank you very much, guys, for the update, and excited to see you back in the clinic in Prader-Willi syndrome. Very interested to see the natural history study data. I think you mentioned how large that would be, and will that roll right into Phase I studies when you're initiating those, or will it be separate groups of patients?

Yep. So, thanks, Ted, for joining us today, and thank you for that question. So in the natural history study, we expect it to be a 4-year non-interventional study, and this is not necessarily a target, but maybe to give some sense of size, we would expect perhaps about 500 participants in the natural history study through its 4-year duration. Then as it relates to the potential tie-in to 1258 clinical programs, the FDA does support natural history studies as a “best practice” for operating within a rare disease category, and we do expect to be able to have patients -- or, sorry, participants in natural history study move into clinical trials with 1258 if they so choose and if a doctor feels it's appropriate. Dennis, do you have any other comments on this study that you'd want to highlight?

Yes. Getting specifically at the question, for the Phase I study, that won't happen since Phase I patients will most likely be healthy normals or healthy obese. For Phase II and beyond, sure, we'll certainly utilize patients enrolled in the PATH for PWS to see if we can get more efficient recruitment.

Excellent, that makes a lot of sense. Great, well, one last question, if I may. How large do you think that Phase I would have to be in healthies?

Ted, I don't think we've got estimates on that yet. We'll finish up our discussions that are on our plate at some point in time with appropriate regulatory agencies and come back on that, but we don't have final design yet.

And our next question comes from the line of [Leeann Losados] with [Dublin Securities].

This is [Shweta] for [Leanna]. Just had one quick question. For (inaudible) ZGN-1258, wanted to get your thoughts on competitor drug candidates like DCCR which are currently in Phase III trial and in line to finish those trials in December of 2018. So I wanted to get your thoughts on that.

Yes, thanks for the question. So, following Zafgen's work in this field, certainly it's shone a light, an important light on a disease condition that has just terrible unmet medical need, and there's really a huge effort, I think, to address that, and no more strong an effort than what we have here at Zafgen.

As we look at the disease, it's characterized by 2 very important and independent pathologies, 1 being this sort of all-consuming feeling of needing to eat called hyperphagia, and that is a really important aspect of the disease. And then also we have, again, independently, the very low basal metabolic rate that can lead to very rapid and extensive weight gains.

As we look through the entire field, we don't believe there are any therapies that will be able to address both components, both essential components of the disease like we believe 1258 can. And that's what we view, and I think the most important thing is for me to reiterate Zafgen's tremendous emotional commitment to finding a solution for this terrible disease.

And our next question comes from the line of Jason Butler with JMP Securities.

Just wondering if you could expand on your plans to study 1061 and NASH. Specifically, any plans to study the -- you know, (inaudible) in the clinic in NASH in the near term? If so, any thoughts on what that kind of trial could look like in terms of sample size, endpoints, or timelines?

Yes. Thanks, Jason. Your question is very reflective of the interest that we've had post-the ADA abstract. We've received a bunch of interest, and I think I made reference to that in prepared comments, that there have been quite a few inbound. As we look at the NASH field, there are no therapies that are approved today. The model that we used in that nonclinical setting, the DIO NASH model, is used broadly across the industry, and we believe the data we see are as good as any therapy currently in development for NASH. That data also ties to other data we have: gene expression data, and as Dennis mentioned, previous positive clinical effects demonstrated with our first compound.

So, yes, we're very interested in it. We are working on what next trial or next trials may be. I think the first step is to gain the IND allowance that we've cited as a near-term milestone that we expect in fourth quarter of this year, and when we get that allowance then it would be appropriate to start detailing where we'll go from there. But I would just -- I guess I'm leaving those 2 points a bit independent right now, but that's work that we're thinking through very carefully and with a lot of interest.

(Operator Instructions) Our next question comes from the line of [Joseph Fome] with Cowen & Company.

Just a first one on the IND allowance for 1258. I guess what are still the steps that remain before that can be submitted? And then second, on 1061, I know that you said that the 1.8-milligram dose is what you believe will have maximum target engagement. Do you see it feasible to increase this dose, or would this happen for any reason or is that likely to be the highest dose that you're going to test going forward?

Good questions. Thanks, I appreciate it. So, the first one, the IND and what steps are remaining, we announced in first quarter of this year that we had initiated the IND-enabling studies and those are progressing on schedule. And so, as mentioned previously, and obviously the root of your question, we are anticipating an IND allowance and being able to start clinical trials with 1258 in fourth quarter.

And I just -- to highlight, because it's new news today, I just wanted to make the point that from nonclinical studies, not particularly the IND-enabling studies, but from the extensive nonclinical work that we've done with 1258, we have a number of presentations we'll be making at the upcoming FPWR conference October 4, so that's important.

Second question was about 1.8 milligram, and I believe the point was, will we go above that. We do expect that all of the pharmacologic actions of 1061 to strengthen at the 1.8-milligram dose level. And the 1.8 milligram would be expected to be our top dose because that represents at or near 100% target engagement.

Thank you, and I'm showing no further questions and I'd like to turn the conference back over to Mr. Jeffrey Hatfield for any further remarks.

Okay. Thank you, operator. And again, I just want to thank everyone for joining the call today and for your interest in Zafgen. Take care.

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