Larimar Therapeutics Inc (LRMR) 2015 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to Zafgen's first-quarter 2015 financial results call. Please note that this call is being recorded.

At this time, I would like to turn the call over to Kimberly Ha of FTI Consulting for introductions and opening remarks.

Welcome and thank you for joining us for Zafgen's first-quarter 2015 financial results conference call. The presentation slides used in conjunction with today's call can be found under the investor section of Zafgen's website, Zafgen.com.

As noted on slide two, today you will hear from Dr. Tom Hughes, Chief Executive Officer, who will give an overview of the Company's first quarter and recent achievements; Dr. Dennis Kim, Chief Medical Officer, who will provide a clinical update; and Patty Allen, Chief Financial Officer, who will discuss Zafgen's first-quarter financial results. After their formal remarks, management, including Patrick Lostau, President, and Alicia Secor, Chief Commercial Officer, will be available to take your questions.

Before we begin, on slide three is a reminder that the estimates and other forward-looking statements included in this call represent the Company's view as of today, May 12, 2015. Zafgen disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to today's earnings release, as well as Zafgen's filings with the SEC, for information concerning 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 will now turn the call over to Dr. Tom Hughes. Tom?

Thanks, Kimberly. Good afternoon and welcome to our first-quarter 2015 earnings conference call.

The start to 2015 has been very busy and productive for us here at Zafgen. With the successful completion of our follow-on offering in late January 2015, we are in a stronger financial position than ever to continue our mission to bring life-changing treatment to patients and families affected by obesity and complex metabolic disorders and to the healthcare providers who care for them.

For this quarter, we have a couple of important updates on the BEST PWS trial, which stands for Beloranib Efficacy Safety and Tolerability in Prader-Willi Syndrome, or PWS, which Dennis will walk you through in a moment. Our work in this patient population has brought us one important step closer to a first commercial indication. As a Company, we are committed to doing our very best to advance beloranib and to understand its utility as an effective treatment option for patients and families living with this challenging condition.

If you turn to slide five, you will see that over the past years we have developed a close relationship with the two leading organizations in the US supporting the PWS community, the Prader-Willi Syndrome Association of the USA and the Foundation for Prader-Willi Research. These organizations bring together an incredible and committed family network that has been galvanized to advance care for their family members affected by PWS.

I recently attended a fund-raising event at which I was deeply moved and invigorated by the hope that these families have for a more complete and autonomous future for their children and for their unanimous encouragement of our efforts to bring beloranib forward. As a Company, we are doing everything in our power to enable a carefully executed trial program, a successful review, and a timely approval process, should the results be supportive. Further, we are proud to be supporters of the fact that May is Prader-Willi Syndrome Awareness Month.

Turning now to slide six, which gives an overview of our pipeline, we now have completed Phase III trials and have achieved positive proof of concept in two rare disease indications, PWS and hypothalamic injury associated with obesity, or HIAO, and we have advanced into Phase III in PWS.

In the coming months, we will be initiating our second pivotal trial in PWS in Europe and we will be solidifying our next steps forward in HIAO. We look forward to updates early in 2016 regarding the outcome of our first PWS pivotal trial and our path forward for beloranib in these two rare diseases.

Our Phase IIb trial of ZAF-203, which is evaluating beloranib in patients in the general population with severe obesity complicated by type II diabetes, is enrolling well. Dennis will give you an update on ZAF-203 in a moment.

Along with leaders of the medical community treating patients with obesity, we are very excited by this trial, ZAF-203, which aims to determine the long-term impact of beloranib on body weight and will allow us to assess the compound's potential to impact medically important comorbid conditions, such as type II diabetes. Patients with type II diabetes generally respond poorly to weight loss agents and glycemic control is more challenging to manage (technical difficulty) setting of obesity.

This difficult combination of obesity and type II diabetes affects an alarming number of people. Better treatments are desperately needed in management of these patients, who are at greatly increased risk of developing complications that are both life limiting and very expensive to treat.

The profile of our MetAP2 inhibitors appears to be uniquely suited to the treatment of this challenging patient segment and we are eager to see what the ZAF-203 trial brings with longer-term beloranib treatment over six- and 12-month periods.

Later this year, we anticipate advancing ZGN-839 toward the clinic. ZGN-839 is a very exciting, potent MetAP2 inhibitor with exposure targeted at the liver, showing real potential for treatment of nonalcoholic steatohepatitis, or NASH.

Now moving to slide seven, you will see that we believe that Zafgen leads the field in developing MetAP2 inhibitors, having validated the therapeutic impact of the approach in six completed clinical trials, including over 200 patients with conventional obesity, PWS, or HIAO. These trials have shown impressive weight loss even over short durations of treatment, often up to 1 kilogram per week, with a wide range of improvements in cardiometabolic biomarkers.

Slide eight illustrates one view of how we envisage the potential reach of the MetAP2 inhibitor class into indications within the metabolic disease field. Our initial efforts with beloranib provide us with opportunities to create value in the near term by tapping into the potential of this product candidate in rare and particularly severe forms of obesity, including a sub-indication we are calling super severe obesity.

Super severe obesity refers to patients with extremely high BMIs, such as greater than 50 kilograms per square meter, who often are sick or have significant limitations in their lives as a consequence of their obesity. Many medical experts in the field with whom we have spoken view these as being among the hardest-to-treat obese patients. We plan to discuss a potential regulatory path forward for super severe obesity with regulatory authorities over the coming months.

With validation of the metabolic benefits derived from our work with beloranib, we intend to capture long-term value with our second-generation MetAP2 inhibitors through a development plan that will focus on developing the drug as a potential pharmacological alternative to bariatric and metabolic surgery and eventually for the broader obesity market, to bridge the efficacy gap that exists between surgical approaches and currently available therapies.

With ZGN-839, our liver-targeted compound, we also leverage the benefits of MetAP2 inhibition for fatty liver disease.

Together, these approaches represent a long-term strategy for us to move into disease indications with attributes that are well matched to our individual compounds to provide unique efficacy profiles. Each approach enables a potential means to generate important new medicines and to create substantial value.

Moving to slide nine, we've continued to develop awareness of our programs through a number of recent presentations and publications, including a manuscript now published that describes our Phase IIa study of ZAF-201. We presented our HIAO data at the Endocrine Society annual meeting in March, and just last week we presented three abstracts from our Phase IIa studies across the PWS, HIAO, and severe obesity indications at the European Congress of Obesity in Prague, with the HIAO abstract being an oral presentation. Although these data are not entirely new, it was the first time these results had been presented directly to the European obesity research community.

Our data were very well received by leading KOLs in the EU, which will be important as we embark on European clinical trials and develop market readiness. We have had particularly positive feedback from the HIAO trial, which we are being told is teaching the field about new ways to think about the regulation of body weight. Our data continue to impress leaders in the field and we are excited by their interest in working with us to advance our program.

Looking on slide 10, you will see that we are continuing to grow our team with the intention of building a best-in-class company and are tracking experienced and high-caliber candidates. We now have 29 employees and expect to double in size by the end of the year. We have recently made several key appointments, including Dr. Nerissa Kreher, a pediatric endocrinologist and experienced industry veteran, as our head of Medical Affairs. We have also recently hired new employees in clinical, commercial, R&D, and IT to build out our organization.

Now I would like to turn the call over to our Chief Medical Officer, Dr. Dennis Kim, for more details on our clinical development program. Dennis?

Thanks, Tom.

As Tom noted earlier, we have made significant clinical progress with beloranib in the past month. In December, as you can see on slide 12, we initiated ZAF-203, our Phase IIb trial in patients with severe obesity complicated by type II diabetes. Thus far, we have seen significant interest in terms of patient enrollment and are happy to today that we have enrolled approximately two-thirds of the patients into the trial and remain optimistic that we will meet our goal of enrolling 150 patients by the middle of the year.

As a reminder, this trial is a randomized, double-blind, placebo-controlled study of twice-weekly subcutaneous injections of beloranib at doses of 1.2 or 1.8 milligrams in severely obese adults with type II diabetes that aims to demonstrate weight loss efficacy and safety over a six- to 12-month period, along with improvements in glycemic control. Patients randomized to receive the 1.8 milligrams dose will receive four weeks of 1.2 milligrams of beloranib at the start to help mitigate any potential sleep disturbance or other tolerability side effects.

The primary efficacy endpoint in this trial is change in total body weight from baseline to the end of randomized treatment. Key secondary endpoints include changes in glycemic control, lipid parameters, and inflammatory markers. Initial assessments include sense of hunger, prospective food intake, and quality-of-life impact for patients. We are reiterating our guidance today that we expect to report six-month interim data late in 2015 or very early 2016.

Weight reduction is a key therapeutic objective in the clinical management of patients with type II diabetes and is perhaps the most challenging aspect. Most available agents drive less weight loss in obese patients with type II diabetes relative to those without diabetes. Clearly, more effective agents are needed and we are excited to focus the ZAF-203 trial in this population.

The study will help us better understand how effective MetAP2 inhibition can be in this population and will help validate our next steps, whether we choose to advance beloranib or a second molecule in the severe obesity indication. We plan on announcing the completion of enrollment in this trial.

Let's turn our attention to the updates on the Phase III PWS trial or ZAF-311, also known as bestPWS, on slide 13. As a reminder, the trial is a six-month double-blind, placebo-controlled design with placebo, 1.8 milligrams, and 2.4 milligrams of beloranib followed by six months of open-label extension. As we are doing in ZAF-203, patients randomized to receive 2.4 milligrams of beloranib are first being treated with 1.8 milligrams for the first four weeks before dose escalating to 2.4 milligrams, in order to ease them onto drug and reduce the potential for adverse effects.

Based on the Data Safety Monitoring Board's, or DSMB's, recommendation last quarter, we are moving forward with just the 2.4-milligram dose to treat all patients for the open-label extension part of the trial.

We also wanted to give you an update today on the statistical analysis plan for the trial, which you'll see on slide 14. Based on our constructive ongoing dialogue with the FDA, we have finalized our plans regarding the statistical analysis of primary efficacy endpoints for ZAF-311. Both hyperphagia-related behavior and body weight will be co-primary efficacy endpoints and will be evaluated at significant levels of p-value less than 0.05.

This is a shift from the dual primary efficacy endpoint analysis plan we previously communicated, in which either one of the endpoints could have been met to be considered a successful trial, but with each endpoint carrying an alpha of 0.025. This subtle change in the primary efficacy now to the plan has no impact on the conduct of the ongoing bestPWS trial, and with a number of patients targeted for enrollment, the study remains adequately powered to demonstrate an effect of beloranib for the co-primary endpoints.

The trial is being conducted across 15 sites in the US and all sites having recruited patients. We have seen an accelerated rate of patient enrollment in the recent months that has exceeded our projections. This is largely due to the ongoing support of the Prader-Willi Syndrome Association and the Foundation for Prader-Willi Research to raise study awareness and also through all sites fully enrolling since our last update call.

Therefore, we are very happy to announce today that we have reached our enrollment target of 102 patients in the trial. There are still some patients in the screening process, and to be fair to these patients who have volunteered their time and effort, we would like to offer them an opportunity to still enroll, which means closeout of enrollment is expected in the next week or so. Accordingly, we anticipate having a handful more patients in the trial above the initial 102-patient target.

We have a lot of enthusiasm from the patient community and the investigators for this trial, and an upsized patient number will increase the power for both efficacy and safety readouts. This becomes even more important if the results of the study become the basis of an earlier filing.

We're also pleased to continue to have significantly fewer early dropouts in the study than was modeled in our power calculation. This speaks to the commitment that our participating families have to this study, the excellent trial conduct by our contributing clinical study sites, and perhaps to the better-than-expected tolerability of the study drug.

In summary, we believe the trial will be very robust with a greater number of patients, especially when coupled with a high patient retention rate. And we now expect that we will be reporting results from the ZAF-311 trial by early Q1 2015.

On the next slide, slide 15, with respect to our second pivotal trial, ZAF-312, we are on track to initiate this Phase III clinical trial for PWS in Europe in mid-2015. The trial is designed to enroll approximately 150 patients with PWS. We are still finalizing the statistical analysis plan, but anticipate that this trial will also have co-primary endpoints in reduction in hyperphagia-related behavior and body weight, and it is expected to test just the 2.4-milligram dose, partly based on the DSMB's recommendations, as I mentioned earlier.

The trial is expected to be conducted across 25 to 30 sites in Europe. As Tom mentioned earlier, we have a lot of enthusiasm from the KOL communities and investigators in Europe and they are looking forward to participating in this study. We will also announce the initiation of this trial.

Although our base case for the PWS program is to file with the regulatory agencies in the US and in the EU, based on the results of both ZAF-311 and ZAF-312, the FDA has reiterated the possibility of the Company submitting an NDA based on ZAF-311 alone, should it demonstrate a compelling efficacy and safety profile. And we are continuing to collaborate with the agencies to bring forth a much-needed therapy for this challenging disorder.

We have had a very productive quarter and we have a very busy few quarters ahead of us. We look forward to keeping you apprised of our clinical progress over the coming year.

With that, I will turn the call over to our CFO, Patty Allen, who will take you through our financial results for the quarter.

Thanks, Dennis, and good afternoon, everyone.

As Tom mentioned at the top of the call, this has been an important quarter for us, both in terms of progress with our beloranib clinical program and our recent financing in January. Today, I will focus on first-quarter 2015 results, which are highlighted on slide 17.

For the first quarter of 2015, we reported a net loss of $13.5 million or $0.53 per share, compared to a $4.5 million net loss or $6.18 per share for the three months ended March 31, 2014. Related shares outstanding used to compute net loss per share were 25.6 million shares for the three months ended 2015, compared to 729,000 shares in the first quarter ended 2014, which was prior to our IPO in late June 2014.

Our operating losses were primarily driven by research and development costs associated with our beloranib development program and general and administrative expenses, including costs associated with being a publicly traded Company. We had 26.9 million shares outstanding as of March 31, 2015, which included 3.9 million shares issued at the end of January related to our follow-on offering.

Moving to research and development expenses, for the three months ended March 31, 2015, R&D expenses increased to $10.2 million, compared to $3.3 million for the three months ended March 31, 2014. This significant increase was primarily due to costs of $4.1 million associated with the advancement of the Company's beloranib program, primarily clinical and manufacturing costs. There was also an increase of $1.8 million associated with ZGN-839 and other early-stage development programs, consisting of our second-generation MetAP2 inhibitors and $1 million associated with increased personnel costs.

As we look forward to the rest of 2015 for R&D expenses, we expect to see a significant ramp up in R&D expenses as the year progresses, as we will have three clinical trials running, the ZAF-311 and ZAF-312 bestPWS Phase III trials and the ZAF-203 Phase IIb in severe obesity in the general population. We will also be moving our ZGN-839 program in NASH to an IND in mid-2015 and bringing forth second-generation molecules during 2015.

We will also continue to significantly grow our team in R&D, where we expect to nearly triple the size of the team as we build out our regulatory, quality, clinical, project management, medical affairs, and supply chain groups, amongst others, for Zafgen.

Moving on to general and administrative expenses, for the three months ended March 31, 2015, G&A expenses were $3 million, compared to $1.2 million in the three months ended March 31, 2014, primarily due to increased personnel-related costs of $900,000 for positions added to support our growth as a publicly traded company and as we prepare for early commercialization activities. We also saw increased public company costs, professional fees, travel, and other related costs of approximately $900,000 period over period.

As we look forward to the rest of 2015 for G&A expenses, we expect to see a ramp up as the year progresses as we will be growing our team in G&A and we will be a public company for the full year in 2015. We have started to grow our commercial organization with two recent hires and are conducting market research and market access work in anticipation of success with the bestPWS clinical trial.

With respect to our cash position, as of March 31, 2015, we had cash, cash equivalents, and marketable securities totaling $234.2 million. We completed our follow-on public offering, including the full exercise of the overallotment, on January 28, 2015, which raised net proceeds of approximately $130 million after deducting expenses, underwriting discounts, and commissions. We expect that this cash position will be sufficient to fund our current operations for at least the next 18 months. We also continue to expect that our cash balance at the end of 2015 will be greater than $145 million.

With that, I will turn the call back to the operator for questions. Liz?

(Operator Instructions). Joseph Schwartz with Leerink Partners.

Congrats on all the progress. I was wondering, first of all, if you could give us some more insight into the process of your interactions with the FDA on the protocol and statistical analysis for the bestPWS trial, just because it seems like it's a little bit late to be making changes. So what is the genesis of these sorts of things?

And then, do you expect to have any more or less power as a result of the latest changes? And maybe you could give us some insight into the assumptions that are underlying your powering calculations in terms of how small of an effect could be statistically significant on the co-primary endpoints. Thanks.

So what I will do is ask Dennis to answer the second part of that question, around the powering, and then I will maybe make some comments about our process. So Dennis?

Sure. With respect to the powering and some of the power assumptions that you asked about, the powering really doesn't change at all. It's a little bit of a mathematical similarity between having two endpoints that need to be met at alpha 0.025 each or independently versus having two endpoints that need to be met together with an alpha of 0.05.

The power remains at essentially 90% for either scenario, so there is no change in power -- of the ability of this study to show an effect on these two endpoints with regards to power.

For power calculation, the assumptions that went in for the two endpoints were that we would see a 1.5% weight delta between the treatment group and the placebo group at the end of six months. So that's one power assumption.

And for the hyperphagia-related behavior, the assumption was that we would see a 4.5-unit delta between placebo and treatment group. And these are all based on the results that we saw on Phase II proof-of-concept trials in ZAF-211, which I think you are probably familiar with and you know the results that we saw after one month of treatment. So I think we have some confidence that after six months, with the weight effect and hyperphagia effect hopefully being progressive, that we will see something far north of this.

So maybe turning to the rest, I think just in general we see this as a relatively minor, very conservative investment in the way that the study's statistics will be safely evaluated.

The interactions that we've had with the agency over the course of the last few years has been in the form of a number of face-to-face meetings; it's been in the form of written communications. And so over the course of that, we worked with them to -- first of all, to help them understand a lot of the, let's say, aspects of Prader-Willi Syndrome. They have also had input from the patient advocacy groups independent of us that has certainly flavored their thinking as well.

And I think what we've seen basically is an evolution over time in their thinking that has consolidated around two things that we also believed to be very important in [valuation] driven, which is both the inappropriate body composition and overweight that these patients have and that they suffer from and eventually will develop to a severe extent as they get older; and then, secondly, this sort of debilitating, let's say, family and life limiting hyperphagia that they experience.

We are quite comfortable with the dual primary endpoint -- or the co-primary endpoint, as we are calling it now, because, as Dennis mentioned, we've seen the drug work against both these things, not just in the Prader-Willi population, but indeed across all of the studies that we've run. And we see this as an extremely conservative shift.

And so when the FDA looked at our statistical analysis plan, which we actually filed early, not late but actually early in the process relative to where one would normally do it, they came back and they felt that they would be more comfortable with the co-primary approach. And we certainly looked at the stats, we looked at the math of it, we looked at our experience with the drug, and we agreed to do this because we simply don't see that as being a major issue and we'd prefer to be in step with the FDA, having now considered our statistical analysis plan in full, and that's where we are.

Great. Thanks so much for all that color. That's extremely helpful.

And do you have any sense after talking to the FDA about what the minimum degree of efficacy that they might view as clinically compelling, regarding the comments that you alluded to earlier in terms of being able to potentially support registration with just one of the two Phase IIIs?

So maybe I will take a little bit of this, then I'll hand it to Dennis. So with regard to -- actually, I'll just turn it to Dennis.

It's a good question. Fortunately, or unfortunately, no one has ever gone into this indication before. This is the first time a study has been run as a Phase III program in PWS patients with these endpoints. So we're in uncharted territory.

Of course, we talk with the FDA and experts in the field about what may or may not constitute clinically meaningful changes. And really when we talk to the FDA, they point us to the obesity development guidelines, which points to 5% or a five-kilogram weight loss over a one-year period and being able to show more patients achieving that weight loss compared to placebo.

So I think that's the basis for what we will see and what we will talk about as being clinically meaningful. But again, it's more of a review issue than something that we can put out up front.

With respect to hyperphagia-related behavior, we do have, let's call, the anchoring question that we ask of patients or their caregivers about what they see as being at least minimal, moderate, or significant improvement in patient behavior. So we'll use that anchoring question to come up with what we believe is clinically meaningful change. But again, it becomes more of a review issue since no one has really defined what is clinically meaningful previously.

(multiple speakers) to maybe follow up with that and say that we are collaborating with the field team at FDA and certainly are in step with them with regard to how to go about this anchoring process. And there's a very constructive dialogue going on that will continue to go on, actually, between our team and the field team.

Great. Well, it seems like you've gained some good traction, so keep up the good work.

Phil Nadeau with Cowen and Company.

Hi, this is Jeff on for Phil. Thanks for taking my questions and also congrats on the progress. On the co-primary endpoint, could you remind us why the change from the measure of fat mass to the total body weight loss?

Sure, Jeff. I'll turn that over to Dennis also.

Yes, I would say that it's very similar to what we'd communicated just now on the change from dual primary efficacy endpoints to co-primary efficacy endpoints, and that is really as a result of our discussion with the FDA and our attempts to be in step with the FDA as to what their wishes were.

They had a difficult time with the fat mass as measured by Dexascan. They are not in the habit of allowing disease -- or treatment indications based on radiographic changes; they would rather see total body weight change, which is consistent with, again, the 2006 obesity drug [pullment] guidelines they put out. So this is the main reason why we changed it from fat mass to total body weight change.

Yes. And maybe just to add one point to that, and that is that this is actually several iterations ago that we had body fat content as our second primary endpoint. We've now just simply swapped the ordering of the analysis so that -- whereas the sequence before was by fat content and hyperphagia-related behaviors, followed by body weight. We now have inverted the body weight and body fat content endpoints.

Maybe just a little bit more color also that during the course of the discussions we've had with FDA on this topic, there has been quite a bit of turnover at the FDA in terms of the leadership of the division. This is understandable; there are very good reasons for that. But, not surprisingly, different people being in charge having different, let's say, backgrounds and experience have also had preferences to different endpoints or, as Dennis mentioned, less of a willingness to look at radiographic endpoints rather than gramometric endpoints. And so, that's where we are.

And we are quite content with this. We've seen the drug work very, very well against both body fat content and body weight in all of our trials where we've measured both, and we feel that this is a very, very conservative, very minor, in a way, nuance with regard to the way that the trial will be evaluated.

Thanks very much. I really appreciate the color there. Okay, so one more on the EU trial. I think previously you mentioned that there needed to be some validation on the translation of the hyperphagia question there. Do you have any updates on the progress with that and any other gating factors for starting the EU trial?

Dennis?

Sure. The validation work in terms of translation of the hyperphagia questionnaire into several different languages across Europe is basically ongoing and it's going well. We are on track, as well as negotiating contracts and IRB submissions in the different European countries are also ongoing and on track. And that's why we stated that the trial is, again, on schedule to begin sometime in the middle of 2015.

All right, thank you very much. Good luck going forward.

Simos Simeonidis, RBC Capital Markets.

Just one clarification, Tom or Dennis, you mentioned the delta you have to achieve in each endpoint for the trial to be successful, the 1.5% difference in weight and the 4.5-unit delta in hyperphagia. Was that difference the same in the previous scenario, where you could meet either endpoint? Or is there any change now that you have to meet both endpoints?

Dennis?

No, that's the same exact assumption that went through the previous dual primary efficacy situation as compared to now.

Okay. So the only difference really is that you just have to -- the alpha is the same. The only difference is you have to meet both endpoints.

No. Actually, we do have to meet both endpoints to declare success on primary efficacy endpoints. But the alpha has been increased to double. So instead of having alpha be 0.025 for each of the endpoints in the dual primary efficacy endpoint scenario, now we have to meet both endpoints, but with an alpha of 0.05.

Right, right. Yes. And then the other question that I have is, what was the genesis of this change? Why the change? Because I remember going back to when you were still private, you had the change from body weight to -- or from body fat to body weight, and then there was another change. And obviously, this isn't a disease where there hasn't been drugs approved. So I assume a big part of it is that the FDA is learning along with you and changing its mind.

But for this specific change, what made them -- was there something that they thought about, something that they saw in the trials? What led to this latest change?

So I think, as I was mentioning before -- this is Tom -- over the course of our interactions with the agency, there has been an evolution in their own thinking, there has been input coming from the advocacy groups. And at the same time, there has been substantial turnover in the leadership within the division.

And so, I think it is fair to say that it has been -- and when you consider the fact that PWS as an indication for the type of endpoints we are going after is really unprecedented, this is a work in progress, I would argue, with the agency. And this is what is really being reflected here.

I'd just like to say again -- I can't emphasize this enough, these changes to us are actually really very trivial with regard to the way that we look at the potential for the trial to read out. In all instances, the nature of what we are measuring has not changed; in other words, the trial conduct has not been impacted at all.

And at the end of the day, as Dennis mentioned, we believe this will become a review issue. In other words, if we hit one of the other endpoints very hard and the other is, let's say, a glancing blow, I think it would be probably still quite likely that we might carry forward and submit the application, simply because it would be hard to imagine pushing away a therapy that would actually bring real benefit to either one of these endpoints.

So I think this is a statistical analysis approach that we're discussing. In truth, the drug needs to teach us what it can do in this population. And as we learn what that is, we will be able to take our next steps. But we have a plan in place. We felt it would be appropriate to share that with all of you, given that you are quite focused on these. And we just wanted to make sure we are being transparent.

So Tom, on this last point that you brought up, you said you view it as a trivial change. Would it be unfair, then, to say or even wrong to say that the bar, so to speak, or the probability of the trial succeeding -- the bar has been raised or the probability, the risk has been increased in that? If one of the two endpoints is not met, the trial is not a success, where -- I understand you have confidence in the drug, and everything we have seen makes it look that this is not a high bar to meet, that the drug should meet either of these endpoints.

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However, yesterday or until 4 o'clock, we thought that if you meet either of those, you can get approved. But now, you have to meet both. So help us understand why this is not a nontrivial change.

Dennis?

Yes, so I would say that it is probably wrong to say that the bar has been raised. I would say the bar is basically the same as before.

And the main reason why I say that is because, yes, we have to meet both endpoints to declare success. But the alpha has now gone up twice, from 0.025 to 0.05. So it's simply a mathematical kind of shift. Instead of having individual independent endpoints, but we have to hit a p-value of less than 0.025 to declare success on either one, now that p-value has gone up to 0.05 as a threshold and we have to meet both. So it's really no different. And the power remains the same as previously.

Yes, and maybe just to follow up on that. So I think the other point to bear in mind here is that if these two endpoints were completely independent one from the other, it might be more of a stochastic process, as you are maybe pointing out. In other words, it would be two tosses of the coin to (multiple speakers).

We know that the drug works in every trial that we've run to lower body weight, or certainly in the previous case to lower body mass. We have a very, very clear signature there, and as well as the underlying body fat content.

But then it also reduces hunger and the drive to consume food. And we've seen this not only in the four trials that we completed in patients with conventional obesity, we've seen it in patients without hypothalamus functioning and we've seen it in the Prader-Willi population as well.

And so, these things are both driven by, we believe, the underlying mechanisms this drug is impacting. So we are looking at two things that are both mediated by the same underlying, basically, drug mechanism.

So we don't really believe that they are intrinsically separate events that we are measuring with their own independent process. Indeed, if you look at the results that we had from the Phase II in PWS, the two endpoints correlated quite nicely in patients who were treated with beloranib. So we have, we think, a very good situation here. And I think that this is partly why we are as comfortable with it as we are.

Like I said before, though, this is a discussion of the statistical analysis of the particular study that we are running. At the end of the day, it's going to be the balance of information that we have from the trial that will dictate our interest in submitting. We may choose to submit even if one of the endpoints meets and the other doesn't. We've had a lot of input from very, very seasoned regulatory advisers that would argue that if you have a drug effect that you should continue to go forward and submit if you believe that the drug is having a benefit in the population.

And so, we don't really believe that we've taken a step backward in terms of probability of success either for the trial itself, for the reasons I mentioned before, or for the overall likelihood of a submission or a reason to submit, once we have the data.

So I think -- we are not trying to whitewash this in any way. I think we are really just trying to say that this is, as Dennis mentioned, a mathematical shift in the way that the trial is to be assessed. And it's deeply rooted in multiple trials in multiple indications showing that both of these endpoints should be sensitive to treatment. And this is where we stand with it right now.

Okay, great. Thank you for walking me through that. Thank you very much.

Jason Butler, JMP Securities.

Thanks for taking the question and apologies; I have another follow-up on the same topic. The way I'm thinking about this is you said you're not making any statistical changes, and mathematically the increase in alpha offsets the need to hit those endpoints. My question is, you have data that supports that the weight loss with this drug, not necessarily in PWS patients, but the weight loss is durable over at least six months -- or, sorry, at least three months. Do you have any data or any rationale that speaks to the durability of the hyperphagia-related behavior data you saw in the PWS patient population?

The only other thing that we can point to is that in that same three-month study that we had in potentially these patients, we saw a very, very highly sustained reduction in hunger and prospective food intake in that study. That's the ZAF-201 study that was recently published, as I mentioned.

To the best of our understanding, the suppression of hyperphagia-related behaviors is a consequence of this reduction of the underlying drive to eat and the hunger itself.

And so, we've seen no evidence of waning of that after 12 weeks or three months in patients with conventional obesity.

When we look at animal models that we've treated for extremely long periods of time with MetAP2 inhibitors, we've seen no attenuation of impact in these endpoints. So I think we are feeling pretty strongly that the drug pathway itself should not show us any tachyphylaxis. And of course, we need to see what the data are that come from the trial. But there's nothing inherent to the drug pathway that would argue that the second 12 weeks should be any different from the first 12 weeks of treatment.

Okay, that's very helpful. Thank you for taking the question.

(Operator Instructions). Christopher James, FBR & Co.

Congrats on the quarter. So just moving, shifting gears to the European study, is there a titration phase built into 312 since you will be using the higher dose? And then, I have a quick follow-up to that.

Dennis?

Yes, you are right. We only use the 2.4-milligram dose in there. And we will likely institute a dose escalation phase where patients will start on a lower dose for the first four weeks and then, for those who are randomized to receive drug, they will go onto the 2.4 milligrams after the first four weeks. In fact, it's probably safe to say that we will institute this study design element in most of the trials going forward.

Okay, great, that's helpful. And then, what reach does the patient -- the Prader-Willi Association, have in Europe? And do you expect any impact on enrollment from the advocacy group?

Alicia, do you want to answer that?

Yes. So the Prader-Willi Syndrome Association has an international connection. And we have been reaching out to our US partners here to help us network across the different advocacy groups in Europe. And we are in active dialogue, realizing the important role they play to help us with recruitment.

Great. Thanks for taking my questions.

I would now like to turn the call back to Dr. Hughes for closing remarks.

Thank you. I'd like to thank everyone again for joining this first-quarter 2015 conference call. It has been a very busy and productive quarter for us and we are really excited about the future coming up.

As you can see on slide 20, we have a data-rich year ahead as we move through the rest of 2015 and into early 2016. And we've got a number of exciting milestones for development programs. We look forward to sharing new data from our beloranib clinical trials, most notably ZAF-311 and ZAF-203, and to announce our transition to the clinic with ZGN-839.

We remain committed to significantly improving the health and well-being of patients affected by obesity and related complex metabolic disorders and look forward to updating you on our further progress on our next call and throughout the year. Enjoy the rest of your day. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone, have a great day.