Larimar Therapeutics Inc (LRMR) 2018 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Zafgen's Fourth Quarter and Full Year 2018 Financial Results and Update Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

Now I would like to introduce your host for today's conference, Mr. John Woolford from Westwicke. Mr. Woolford, you may begin.

Welcome, and thank you for joining us for Zafgen's Fourth Quarter and Full Year 2018 Financial Results and Update Conference Call. Joining us on the call today are Jeff Hatfield, Chief Executive Officer; and Patty Allen, Chief Financial Officer. Brian McVeigh, Chief Business Officer, is available for the question-and-answer portion of the call. After management's prepared comments, we will open up 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 view as of today, March 11, 2019. 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 fourth quarter and full year 2018 financial results and the corporate updates we announced in today's press release.

As we have a number of items to discuss today, here's the agenda for the call. I'll start with some comments on recent management changes and then provide an update on ZGN-1061 and ZGN-1258. I'll then turn the call over to Patty to review fourth quarter financial results. Finally, I'll come back on and summarize our key corporate objectives for 2019. So let's get started.

Last week we announced the appointment of Dr. Priya Singhal as Head of Research and Development. We are tremendously excited to have Priya on the team and I'm looking forward to partnering with her. Priya brings more than a decade of experience as a senior drug development executive and several years of experience as a clinician to her new role. She was most recently with Biogen, where she was concurrently the Senior Vice President and the Global Head of Safety and Benefit Risk Management and the interim Global Co-lead and Senior Vice President of Global Development. During her tenure at Biogen, she led the worldwide benefit risk strategy for the Biogen portfolio as well as for the filings and approvals of 6 products, including Tecfidera and Spinraza. She also contributed to Biogen's overall R&D strategy and drug development plans, chaired safety governance for the entire portfolio and led numerous successful portfolio and product interactions with regulators worldwide.

In addition to Biogen, Priya held roles with increasing seniority at Vertex Pharmaceuticals and Millennium Pharmaceuticals. Here at Zafgen, she will lead and oversee the company's research, clinical and manufacturing strategy and implementation and serve as a key member of the executive team supporting overall business strategy. We're thrilled to welcome her to Zafgen to support our efforts in the development of second-generation MetAP2 inhibitors for patients with complex metabolic disorders. We expect to benefit greatly from Priya's expertise and leadership.

Next, as announced in today's release, Dr. Dennis Kim has resigned from his position as Chief Medical Officer to serve as a senior consultant in a CMO capacity for multiple biotechnology companies. Dennis will support a transition process over the next several weeks. I want to thank Dennis for his many contributions to Zafgen, his commitment to the patients and families that are at the center of our work. We wish him all the best in this new chapter of his career.

I'll now move to some program updates, starting with ZGN-1061, Zafgen's second-generation investigational MetAP2 inhibitor currently in development for the treatment of type 2 diabetes. As a quick reminder, in January, we announced positive data for the second cohort of our Phase II clinical trial of 1061 in patients with type 2 diabetes. We were pleased that the clinical trial met all of its primary objectives at the 1.8-milligram dose, which included glycemic control or change in A1C and safety and tolerability, with substantially greater effect on efficacy measures versus prior 0.9-milligram results.

Treatment with ZGN-1061 demonstrated a statistically significant reduction in A1C for 1.8 milligrams versus placebo with a 1.1% reduction. We were encouraged to see that A1C levels continued to decline with no waning of effect through week 12. Also importantly, progressive and notable body weight reduction was observed at the 1.8-milligram dose with no evidence of waning effect. In addition, significant improvements were observed across multiple secondary efficacy endpoints and various relevant metabolic biomarkers. In the trial, 1061 was generally safe and well tolerated with an adverse event profile comparable to placebo. AEs were primarily mild to moderate, and there were no treatment-related serious AEs in the second cohort. The most frequent AEs at the 1.8-milligram dose were upper respiratory tract infection, injection site bruising, contusion and nasopharyngitis.

Significantly, there were no meaningful elevations in mean D-dimer concentrations across the dosing groups, including the 1.8-milligram cohort as compared to baseline or placebo. This excludes 3 patients across the study who experienced events unrelated to treatment, including a hand fracture, a severe gout attack and a synovial rupture. Consistent with all of our other work with 1061, no cardiovascular or CV safety signals were observed. We look forward to presenting the full data for this clinical trial at upcoming medical meetings.

In addition to delivering this impressive data set, we've also made significant progress toward addressing the current clinical hold on our IND application for ZGN-1061. In its letter, the FDA cited the possibility of CV safety risk based on our prior compound. As we shared at that time, the FDA outlined multiple potential paths for addressing this concern, including nonclinical or clinical options. Since then, we've made important progress in preparing for our intended meeting with FDA. In addition to gaining perspective from a number of independent experts, we plan to present newly developed data and multiple sophisticated new assays, of note, human plasmic coagulation using endothelial cells, endothelial cells surface expression of tissue factor, and the full safety data set from the second cohort of the Phase II clinical trial.

Without exception, we believe these data reinforce a significantly differentiated safety profile between 1061 and the company's prior compound. We'll be requesting a Type A meeting with the agency in the near future to discuss next steps with the program, where we look forward to presenting this information and working with the FDA on a path forward. An update is still anticipated in the second quarter of 2019.

Now moving to ZGN-1258, our investigational MetAP2 inhibitor for rare metabolic disorders, which we are developing for Prader-Willi syndrome as an initial indication. We're extremely disappointed to announce that we have suspended plans to file an IND for 1258 based on an unexpected finding in long-term rat toxicology studies that we proactively initiated last year. Histological data from these 4- and 6-month rat tox studies showed small degenerative changes and other anomalies in muscle tissue. The unusual findings, confirmed last week, were seen in vehicle but were clearly exacerbated by study drug. The effects were not seen in the long-term dog tox studies nor have they ever been observed with any other compound the company has worked on. The entire team at Zafgen is driven by a deep commitment to people with PWS and their families. From here, we'll be leveraging peer review by external experts and considering potential in vitro studies to enhance our understanding of the phenomena we are seeing in rodents, while we also explore other potential options for this devastating disease within our portfolio of MetAP2 inhibitors. We'll continue to evaluate 1258, and we'll provide an update if it is warranted.

Before I turn the call over the Patty, I wanted to give a quick update on PATH for PWS, Zafgen's natural history study conducted in collaboration with the Foundation for Prader-Willi Research, or FPWR. The study is independent of any specific development program and continues enrollment, now with over 400 of the 500 participant goal now enrolled. The data from this study are intended to inform the development and clinical trial design of potential new treatments.

I'd now like to turn the call over to Patty to present a financial overview of the quarter. Patty?

Thank you, Jeff, and good afternoon, everyone. I'll focus my comments today on our financial results for the fourth quarter of 2018. Zafgen reported a net loss for the fourth quarter of 2018 of $14.6 million or $0.39 per share compared to a net loss of $13.1 million or $0.48 per share for the fourth quarter of 2017. We had a weighted average number of common shares outstanding of 37.1 million for the fourth quarter versus 27.4 million shares in the same quarter of 2017.

Research and development expenses for the fourth quarter of 2018 were $11.5 million compared to $10.9 million for the fourth quarter of 2017. The increase in R&D expenses compared to the prior year period was primarily due to increased costs related to the 1258 program as nonclinical studies progressed during the quarter. These increases in research and development costs were partially offset by a decrease in noncash stock-based compensation expense and nonclinical and manufacturing costs associated with our 1061 program in the fourth quarter of 2018 as compared to the fourth quarter of 2017.

General and administrative expenses for the fourth quarter of 2018 were $3.2 million compared to $2.4 million for the fourth 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 costs and noncash stock-based compensation expense. As of December 31, 2018, Zafgen had cash, cash equivalents and marketable securities totaling $118.1 million. We continue to expect that the strong cash position will extend through at least calendar year 2020.

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

Thanks, Patty. To conclude our prepared remarks, I'd like to highlight our key operational objectives for the coming year. Most importantly, we'll continue to work diligently to address the FDA clinical hold for our 1061 program, targeting complex type 2 diabetes. An update is anticipated in the second quarter of 2019. And for ZGN-1345, an orally dosed MetAP2 inhibitor specifically targeting the liver, which has been formally advanced to developing candidate stage, we'll continue to progress towards an IND filing.

Obviously, recent shifts in our program plans have been difficult, but the team here at Zafgen will continue to focus our efforts on unlocking the tremendous value we believe exists with MetAP2 inhibition, and we're fortunate to have a strong new R&D leader joining the team to help us realize that full potential of this pathway. And with that, I'd like to now open the line to questions.

Operator, can you open the line, please?

(Operator Instructions) And our first question is from Ted Tenthoff with Piper Jaffray.

Sorry to see the setback of 1258. One question there, if I may. I know it's still very early days, and there's probably not a lot you can tell us, but is there anything mechanistically that you can point to? Or can you give us a sense of maybe what steps you intend to take to try to figure out what's going on with that compound?

Yes. Thanks, Ted. As you say, we've just gotten this finding confirmed. But we have compounding aspects of the finding in that it is present in vehicle-treated animals, and it's an unusual finding. But clearly, it's exacerbated by drug. So it's really difficult at this time to separate out what we have. There are more questions than answers. We are acting on the need to get information out to the public as quickly as possible, and we'll be doing a lot of follow-up work over the weeks ahead, but we're still very much in an early stage of understanding. I would maybe just add an important point on this. We have not seen this effect ever within our portfolio. It was specific to rats. It's not present in other species. It was not present in earlier studies. And so again, it just -- it's early, and it's compounding, but we're going to deal with it directly.

And do you have other series or other different classes or structures that might be able to advance for Prader-Willi?

Yes. There are backup compounds, and that's important. I'd also just highlight, we do remain committed to PWS and those affected. We're going to evaluate all of our options to try and unlock the potential value we see in MetAP2 inhibition for this terrible disease.

Our next question is from Jason Butler with JMP Securities.

Just one in 1061 and the new assays that you've developed. Can you just speak to the kind of information that they provide versus the prior assays? Is it specificity? Is it sensitivity? Are there new questions that you can ask? And are there any new perspectives that you've learned about the mechanisms of risk with the prior-gen compound versus your safety margin with 1061?

Yes. Thank you, Jason. So I would describe these new assays as more sophisticated, more precise measures of the phenomena and a differentiation that exists amongst our compounds. One is assay in human plasma coagulation, or clotting, in simple terms, using endothelial cells. So clotting was the issue with prior compounds. We see a significant degree of differentiation, as we expected. So these are only confirming what we believed. The second assay, perhaps even more sophisticated, is looking at surface expression of tissue factor on endothelial cells, which you may know, tissue factor is sort of an -- I may be paraphrasing a bit here, but a universal starting point for coagulation. And again, we're seeing very strong marked differentiation amongst these compounds.

There are other new assays and associated data, all of it consistent with what I just said, and so we're hopeful that it adds an additional level of knowledge about the pathway. It reinforces the consistency of our data that 1061 is a highly differentiated molecule, and we look forward very much to sharing those data as well as the full safety data sets -- the clinical data sets from the 1.8-milligram cohort in discussions with FDA in the near future.

Great. And then just on 1258, and again, acknowledging it's really early here, anything you can say about a dose or a temporal relationship to dosing? And was -- were the effects seen in both skeletal and cardiac muscle?

So the only thing I can tell you to date is that it did seem to be dose-responsive in that we saw a little bit -- with each successive dose, we did see an escalation of the amplification of the effect. It all -- and so the collective view remains small as an effect, but there is a dose response to it.

And our next question is from Liana Moussatos with Wedbush Securities.

So with 1258 again, since vehicle impacted these rats, was there something wrong with the rats? Were they sick? Were they treated differently? Is there something about the line that makes muscle degeneration something you might see with water?

So those are exactly the questions that we're asking now, Liana. Those are really -- I think that -- the critical questions to be asking. It's such early days, we haven't gotten answers to that yet. I can comment that the vehicle was sterile water, so it's nothing special about vehicle that we believe could be contributing to this. But in terms of your other questions, is there's some special strain effects or site effects, both the long-term tox studies were done at a single site with a high-quality CRO. So we have confidence in the conduct of the study. But there are some compounding things here that we just don't know. And those are things that we're going to be thinking about as we move forward.

(Operator Instructions) And our next question is from Yaron Werber with Cowen.

This is [Anthony] on for Yaron. A question on 1258. Did you guys see any biomarkers for this tox? Or were they sex or age-related?

No biomarkers. It's just a small histologic finding. Does not seem to be gender-related, but I can't make that as a definitive statement because it's just too early in the analysis.

Okay. Then moving on to 1061. Does this change your plans? And what needs to be done to lift the clinical hold for that one? Are there more studies that need to be done?

So I can't speculate on getting to the final answer. We've been preparing information, doing new and more sophisticated assays. Again, consulting with outside experts, getting the full safety data sets from the 1.8-milligram dose. These are all the things that have been going on at the company to prepare for a constructive dialogue with FDA in the near future. Our hope is that these data will help in finding options for moving forward, but that's work to be done. We expect to update on this in second quarter.

Our next question is from Joseph Schwartz with SVB Leerink.

Sorry about 1258's setback. I was wondering if you have a date for the Type A meeting that you'd like to have with the FDA yet and how you'll be prioritizing all the groundwork that you've done to characterize the thrombotic risk with the different compounds. And you obviously have a lot of information there for the FDA to wade through, so can you give us an update there on your strategy as well as timing for that?

Yes, Joe. So timing I'll start with, and I think this is generally well known, but the process we're getting a Type A meeting, which is clearly what's indicated in this situation is, again, I'm going to speak generically, once the company requests, there is a general guideline or commitment that the meeting take place within 30 days. And then subsequent to the meeting, that there are minutes published or returned to sponsor within 30 days. So that's what we believe will be the time line here, and I guess, pretty easy math. We've already given the guidance. We expect to be able to update within second quarter, and we certainly want to have the minutes in hand before we update it.

In terms of the content in preparation for the meeting, I completely agree with you. We do have a lot of data, and I think it's an important task that the company has already been working on is to make the discussion as concise and efficient as possible with FDA and to speak directly to their questions, to be able to get constructive dialogue with them during our time. I would cite that Dr. Singhal is involved as a top priority in planning our discussions for the Type A meeting. This is something that she has extensive experience in, in working to address clinical holds, and we remain very comfortable that the guidance is right in terms of being able to update soon.

That's helpful. And then is there any read-through from 1258 to 1061? And do you think that there could be any overhang on any potential partnership interest given the issues that have struck beloranib and now 1258?

Yes. So I would, number one, maybe just start with highly differentiating this finding with 1258 from anything that's happened in prior. This is almost certainly very specific to 1258. Exactly as I've described it and it's very clear, it has no connection whatsoever to what was seen previously with beloranib. As relates to partnering, 1061 -- or the other thing actually, sorry, that I wanted to highlight is that 1061 has already completed all of these long-term studies successfully, and so we know it's not present with 1061. It's not speculation. We know it definitively.

As it relates to partnering discussions, the 1.8-milligram data that we announced a few weeks ago for 1061 definitely catalyzed a fresh round of energy and discussions with potential partners. Obviously, the hold is something that we talk about. But I would just highlight, and I know this is true from my own prior experience in big pharma, this is something that -- regulatory issues are something that generally pharma is well experienced in and is -- I don't want to say comfortable, but it's a relatively routine occurrence. And so pharma partners are not as influenced as the marketplace is by the clinical hold. And so those discussions are continuing productively with a multiple number of parties.

And this concludes our Q&A session for today. I would like to turn the call to our CEO, Jeff Hatfield, for any final comments.

Thank you, operator. And I would just like to conclude by thanking everyone for joining the call today and for your interest in Zafgen. So please, have a good evening, everyone.

And ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may all disconnect. Have a wonderful day.