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Zafgen (ZFGN) Plunges as FDA Puts Hold on Diabetes Drug Trial

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Shares of clinical-stage biopharmaceutical company Zafgen, Inc. (ZFGN - Free Report) slumped 40.5% after the company announced that the FDA has placed a clinical hold on the Investigational New Drug Application (IND) for its first U.S. clinical trial of ZGN-1061.

ZGN-1061, the company’s second-generation, investigational MetAP2 inhibitor, is currently being evaluated for the treatment of type 2 diabetes.

The company received a letter from the FDA last week mentioning the clinical hold, citing the possibility of cardiovascular (CV) safety risk as seen in the company’s prior compound.

The agency has outlined multiple potential paths for moving forward, including nonclinical or clinical options, to address these concerns in the ongoing development of the candidate.

As a result, Zafgen plans to assess these options and request a Type A meeting with the FDA to discuss further actions that can be taken regarding the program.

Meanwhile, Zafgen continues to advance its ongoing phase II trial of ZGN-1061 outside the United States, which includes a 1.8 mg dose cohort. Dosing in this trial was recently completed and no CV safety signals have been observed to date. Top-line data from the trial are expected early 2019.

Previously, results from 12 weeks showed that ZGN-1061 met all primary endpoints, demonstrating proof-of-concept efficacy with robust A1C lowering effects, and a favorable safety and tolerability profile generally comparable to placebo.

Zafgen now expects the cash runway to extend through calendar year 2020, given the delay of additional clinical development for the candidate.

Zafgen’s shares have gained 17.1% in the year so far, compared with the industry’s decline of 7.7%.


It has been a bumpy ride for the company of late. Earlier in 2016, the company terminated the development of its lead candidate, beloranib, which was in phase III development for the treatment of hyperphagia and obesity in patients with Prader-Willi syndrome and phase II development for the treatment of obesity in patients with hypothalamic injury-associated obesity.

We note that CV disease is the leading cause of death in patients with diabetes mellitus and quite a few of diabetes drugs are linked to adverse CV events. Hence, there has been a lot of emphasis on drugs with a better CV profile.

In 2017, the FDA expanded Novo Nordisk’s (NVO - Free Report) diabetes drug Victoza’s label to reduce the risk of major adverse CV events, like heart attack, stroke and CV death, in adults with type 2 diabetes and established CV disease. Eli Lilly’s (LLY - Free Report) Jardiance is also indicated to reduce the risk of CV death in adults with type 2 diabetes.

Zacks Rank & Other Stock to Consider

Zafgen carries a Zacks Rank #2 (Buy). Another top-ranked stock from the same space is Gilead Sciences, Inc. (GILD - Free Report) , which carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead’s earnings per share estimates increased from $6.60 to $6.93 for 2018 over the past 60 days. Estimates for 2019 are also up by 30 cents.

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