Zafgen Management Really Believes It Will Have Clinical Hold Removed; Decision Could Come In 4-6 Months

Leerink said Zafgen Inc

management believes it will have clinical hold removed on beloranib and the brokerage expects a FDA decision in the next 4-6 months. In December 2015, the FDA placed a clinical hold on beloranib investigational new drug (IND) application to treat Prader-Willi syndrome (PWS), a genetic disorder that causes learning difficulties, growth abnormalities, and obsessive eating. "We expect the beloranib (Prader-Willi Syndrome [PWS]) risk mitigation proposal submitted by ZFGN to the FDA to present strong reasoning for removal of the full clinical hold; however, we continue to believe the threshold for establishing a positive risk/ benefit argument remains high, a decision is likely several months away, and it is difficult to handicap the FDA's response," analysts including Joseph Schwartz wrote in a note to clients. "Although the timing of ZFGN's complete response submission remains vague, we estimate that an FDA decision on removing or maintaining the clinical hold could be reached in 4-6 months," the analyst continued. Schwartz noted that the next milestone is a Type A meeting with the FDA to discuss a draft of the submission requesting clinical hold removal, followed by formal submission at the timing discretion of ZFGN. "We estimate that the Type A meeting could occur in ~2-3 months followed by ~1-2 months of additional revisions by ZFGN prior to complete response submission and one month of FDA review," Schwartz highlighted. The analyst said the FDA guidance has focused on ensuring that the risk mitigation strategy is simple and actionable by real-world PWS treaters. "ZFGN has been consulting extensively with leading specialists in order to develop a risk mitigation strategy for thrombosis which is now more understood to exist in PWS in general, and appears elevated by beloranib," Schwartz said. In February, SunTrust analyst Edward Nash said he remains concerned on the potential thromboembolic risks, and is unclear of beloranib's benefit-risk profile and more specifically the FDA's view on beloranib's benefit-risk ratio. Read more: http://www.benzinga.com/analyst-ratings/analyst-color/16/02/6428717/thromboembolic-risks-linger-for-zafgens-beloranib-says-s#ixzz45WvXR1FD Schwartz noted: "Despite the well-known risk of deep vein thrombosis/pulmonary embolism (DVT/PE) due to obesity, we believe that very few patients were anticoagulated in the PWS clinical trials." He continued: "We see this as both an opportunity and a challenge, since clot prophylaxis could be part of an attractive solution together with patient screening and monitoring, but anticoagulants are not FDA approved in pediatric patients. Therefore, it remains to be seen how the FDA would view this if it were proposed." Schwartz ‘s note added that beyond resolving the beloranib clinical hold, the management is optimistic that they can advance their 2nd generation injectable obesity drug MetAP2i into clinical trials this year. On the liquidity front, the analyst said Zafgen had $185 million in cash on the balance sheet as of the end of 2015 and expects to end 2016 with over $100 million "so the company is well funded to get back on track." Schwartz maintained his Market Perform rating on Zafgen shares, which is currently trading above the $6 price target of the analyst. The stock is up 0.61 percent to $6.63.