by DrKSSMDPhD | April 16, 2016 10:14 am
[Ed. Note: Dr. KSS writes about medicine and biotech stocks for the Irregulars. He has agreed to our trading restrictions, choses his own topics, and his words and opinions are his own. You can see his latest comments and all of his past articles on his Gumshoe page, here.]
Investor ardor has cooled considerably for Zafgen ($ZFGN), a stock we first presented to readers as a long idea in February 2015 (“The Zed Files”). But in October 2015, a tornado hit the sheepdip (“Is Zafgen Kaput?”), with disquieting insider sales surrounding early reports of death in beloranib-treated patients resulting from unanticipated thrombotic events (pulmonary embolism, for example). The saying of sooth led to further revelations of such episodes occurring outside the Prader-Willi syndrome (PWS) patient population. The unavoidable outcome of this was that the Food and Drug Administration placed the drug on clinical hold. Such action by the FDA is by no means universally fatal to a drug’s development, but places considerable onus on a drug company to revisit its data with extreme thoroughness, explain it, derive conclusions about whether future therapy with the agent is safely feasible, and devise a so-called risk evaluation and mitigation strategy to safeguard patients, the company and the FDA. Executed deftly and with discretion, timely and insightful action by the company leads to the FDA placing a quitclaim on its concerns.
Zafgen shares now trade at around one seventh of their 21 September 2015 high ($47.98), roughly on the eve of the bad news, when rumors of death in a trial began swirling. However, as we write, the worst of short sentiment has been flushed out of the stock. Present short interest is about 13.8 percent. 98 percent of the outstanding shares remain spoken for by institutions. Between institutional and insider owners, large block ownership now exceeds 100 percent of the float, probably via overlapping in counting. Atlas Venture, Deerfield Management and Fidelity Management each own at least 10 percent of the outstanding shares (27.3M). In addition to the Deerfield stake, James E. Flynn, lead portfolio manager at Deerfield, directly holds 3.06M shares, a position he amped up considerably in March 2016. As favorable as this barcode snapshot of the situation is, however, Zafgen is hardly here a springloaded stock ready to pop.
Readers have justifiably grown agitated at the situation because nothing has advanced since our last coverage installment in October. The bad news hit then, and soon the clinical hold was inflicted, but the company has yet to say word one about its strategy or about a timetable according to which the issues may be settled. Zafgen nearly appears to have been doing the CellCeutix ($CTIX) two-step, keeping its press release roster flowing with regular notices of only potboiler significance, all of them oblivious to the elephant in the room, which is the clinical hold. Make no mistake about it: these are grave times for Zafgen. The company’s entire future is at stake as the clinical hold transcends indication (thrombotic events, although all of them highly explicable, have also occurred in patients being trialled with beloranib for obesity and diabesity).
What is a clinical hold? What are its ramifications? In what way does it encumber drug development? You can read the FDA’s rendition of such here. But let me distill a few points. First, a clinical hold is not punitive. It incurs no fine. While it could be a result of FDA awareness of serious deficiencies in how a trial is being run, so vast are the FDA’s powers for levying fines and intervening on behalf of patients that when the agency has to fix bad behavior in a corporate clinical trial, it does so by other mechanisms; this may involve sanctioning study sites, sanctioning individual investigators (each site has a principal investigator (PI)), and banning either from participating in further clinical trials. Having been a PI for scores of FDA-approved trials, I can tell you that you operate in such a capacity with zero tolerance for errors by yourself or your staff. I have fired four people over utterly unacceptable errors in their conduct pertaining to clinical trials under my direction; they weren’t evil people, but the mistakes they made were of such gravity that all trust was forsaken. One was an RN with 20 years of trial experience who’d followed me from University of Texas into the private clinical research institute I’d started. She ignored an EKG with a serious abnormality and enrolled a patient; I’d never been asked by her to review the EKG, really a stunning gaffe. Police yourself, or get policed. I’ve never had trouble with the FDA; PI’s who do then have a Sword of Damocles dangling over them for the remainder of their careers.
The spirit of a clinical hold recognizes that a clinical trial is a scientific mission, one of gathering data, that it has novelty, that it’s a unique excursion that may reveal newness: some previously unknown quirk of physiology, some facet of how the body handles the drug that imperils the body. Remember, phase 1 drug testing is about confirming lack of toxicity, but you can only lean but so hard on what a phase 1 trial shows. Phase 1’s are small, and with the exception of oncology trials, are done in normal volunteers, people without aberrant physiology. Good phase 1 data mean only that an agent is safe enough to go to phase 2, but not that safety is overarchingly validated (remember Regado?). Since patients in phase 2 and phase 3 studies have diseases, all bets are off as to safety until that is proven, both by sufficient phase 2 (proof-of-concept and dose-finding) trials and generally by two phase 3 large, multicenter randomized controlled double-blind studies. A clinical hold is intended to be a timeout imposed because a study has shown something wholly not expected that has negative ramifications. Although I know of no tabular source of data as to outcomes of holds, as to how many are eventually dropped without drug development being further delayed, my career impression is that about 70 percent of clinical holds are lifted. The hold allows for deeper exploration of the context in which the adverse outcomes happen, and this has a way of disclosing contributory things going on, in most cases, that just weren’t appreciated at the first assessment of the events. The patient whose liver tests bumped on study drug forgot to mention that another provider had prescribed something new for him. The patient who got a DVT forgot to mention that several members of her family have gotten DVTs “out of the blue,” and she’s sorry she failed to mention that. You get the idea.
You’ve gotten fragmentary, piecemeal news about the bad outcomes that led to the beloranib hold, but may not have seen a clear, full presentation of them, including their context. Please carefully study the table below.
In ALL the non-PWS cases, clear, obvious contributing causal reasons are present to explain why study patients clotted anomalously. In one, for example, the patient has factor V Leiden. Normally, factor V is activated to factor Va and then functions as a non-enzymic cofactor accompanying factor Xa, necessary for its activity, to cleave factor II (prothrombin) into thrombin. All body enzymic reactions travel in the company of a retinue of additional molecules that upregulate and downregulate them. As a safeguard against excessive clotting, factor Va is normally clipped and inactivated by the serine proteinase protein C. However, factor V Leiden resists degradation by protein C. All patients with factor V Leiden need chronic anticoagulation unless they’re co-afflicted with a disease that makes anticoagulation unwise. Five percent of North American Caucasians have factor V Leiden. It’s rarer in other races.
Here’s what we know of Zafgen’s concrete plans to face down the FDA and get the clinical hold lifted. My source is a person at the company with whom I had a long phone discussion, asked many questions and got clear answers. I’ll decline to name that person as I don’t want worried shareholders making the same call and exasperating my source. Contact was initiated by reader and investor BTL on behalf of the Gummune; BTL chose later to quarterback a conference call over to me, and I was happy to accept. Please read carefully: I will tell you all that is known and knowable about the status.
Right now, Zafgen is girding its loins for a so-called Type A meeting with the FDA. I encourage you to review this document from the FDA about types of meetings it holds with trial sponsors and drug development applicants. The document spells out framework, protocol, timing, and expectations as to response from the FDA. End of study meetings, meeting to initiate a next-phase clinical trial, new drug applications (NDAs; basically a request for marketing approval), and investigational new drug applications (INDs; permission to trial a new agent clinically in humans) are all Type B meetings.
A Type A meeting is a heavy-weather encounter about resolving impasses such as clinical holds. For this, Zafgen must prepare a comprehensive briefing document that will be anything but brief. It will include a comprehensive review of all published material pertinent to the hold, as well as testimonials and opinions from academic leaders in coagulation medicine, obesity, and Prader-Willi syndrome (many PWS experts are pediatric endocrinologists). Having said this, I don’t mean to imply that a Type A meeting is innately confrontational. Remember, the FDA is funded by fees that companies pay for these meetings, and is aware of the side its bread is buttered on. The FDA’s “rate card” for such encounters is a closely guarded secret, but I’ll assert with some foreknowledge that Zafgen will be paying the FDA at least $100,000 for the privilege of meeting with it. The FDA may or may not bring with it a strong sense of conviction about what should happen; commonly it does not. Its reviewers are generally PhD’s or MD’s who often lack specific expertise in the subject matter at hand but are well-versed in trials, adverse events and pharmacology. While most FDA reviewers work bankers’ hours, they generally wield their expertise for below-market salaries. An MD FDA reviewer with maximal salary points added for years of experience still makes under $100,000 per year. A PhD reviewer may make half that. Many are professionally transient, taking the job as a means of keeping skills in gear while a spouse or significant other is post-doc’ing or doing a residency/fellowship in Bethesda or DC. Only rarely are FDA reviewers genuine experts on the question at hand, though the FDA may request third-party expert opinion in tie-breaker situations.
My contact at Zafgen was very open that the company has the full support of the Prader-Willi Syndrome Association of Sarasota, Florida. If you’ll look over its website at the link, I think you’ll gain the sense that its backing is not to be trivialized. Given the rarity of PWS, this association is armed, organized, marshalled, effective. PWSA wants to see beloranib approved, and believes that its strong benefits to PWS patients vastly outstrip what may be its risks. PWSA will be allowed to present its position at the Type A meeting, and is likely to be quite vocal, specifically because data show that beloranib tames the hyperphagia, the relentless eating, of PWS patients; the data allow no room for disputing this. PWS patients never live alone; they require the support of live-in family. Easing their drive to eat, often impetuous and highly theatrical, makes the lives of the families sane again. When such patient-advocacy support presents itself to the FDA, my experience is that the FDA tends to weigh that positively when the message is positive and pro-active. When the message from such associations is negative, it tends to be inflammatory and baiting, and tends to be ignored. When beloranib is on board, PWS families can remove the chains and padlock from the refrigerator (you think I’m joking). PWS patients are Sesame Street Cookie Monsters that are very unfunny: the risks they take to get calories to ingest keep their caregivers on edge round the clock. Cynics will allege that Zafgen has merely purchased PWSA loyalty, but no evidence supports that, and PWSA appears to be an organization that thinks for itself more than most patient advocacy groups do.
Zafgen has retained a panel of experts in coagulation medicine, obesity, and Prader-Willi syndrome, and is paying them to build its case. While the company will not reveal specifics, I feel its fair to say that Zafgen has flown all of them to headquarters and had lengthy all-day conferences with them as a group. It’s likely the group is convening on a monthly basis, each member refining his pitch and contribution. Of this group of experts, let me emphasize one thing. I emphasize this because coagulation medicine is one of my areas of expertise, speaking and publication. The intrinsic bias of all “clotters” is that tendencies to clot are remediable, that they can be easily worked through. Most coagulation experts are of the opinion that human coagulation is tuned, calibrated, to best serve men who are hunter-gatherers on an African savannah and may have confrontations with wild-animal jaws and paws. In other words, the tendency to clot is too amped up for modern life. Humans get into trouble commonly from inappropriate clotting (which is all a heart attack is, after all), and get into trouble far more typically from inappropriate clotting than from bleeding. If you think this way, as a coagulationist does, all of us reside at a thin veneer’s remove from clotting when we shouldn’t. I’ve often said seriously to medical students and physician trainees that if cost were not an issue, I’d probably keep myself lightly anticoagulated with enoxaparin all the time even though I am healthy; it’s because I think life is safer and sounder that way. Thus for a coagulationist, what’s happened to a few unlucky beloranib recipients is no biggie. It can be fixed. Zafgen is considering a proposal that all treated PWS patients be placed on oral factor Xa inhibitors. My personal preference might be enoxaparin therapy, injected subcutaneously just like beloranib. The advantage of enoxaparin over a factor Xa inhibitor is that when challenged by trauma, enoxaparin recipients generally will clot adequately. Enoxaparin exerts specific activating effects on antithrombin-III toward factor Xa, but not lower down (i.e., toward thrombin) in the clotting cascade. Given what I just told you, you may wonder why oral factor Xa inhibitors incur so much more bleeding risk than enoxaparin does. Part of the answer has to do with doses used, and another part of the answer has to do with Ki’s, thermodynamic extents of quantitative inhibition by one agent vs. the other. The bottom line is that since we routinely place highly thrombogenic bare-metal coronary stents into patients and other prosthetic devices (mechanical heart valves, for example) that cheerlead the patient to clot, and manage them through that with our drug arsenal, we should be able to devise a safe route for beloranib treatment. People, it’s merely clotting…..not cardiac arrhythmias, not renal failure, not Stephens-Johnson syndrome, not hip avascular necrosis, not blindness.
Zafgen is confident (and I agree) that beloranib is not intrinsically clot-provoking. The most important evidence for this is that thrombosis in study patients has been a late event, not an event occurring after the drug has been on board a few half-lives. Moreover, the agent doesn’t drive up platelet counts, get hepatically cleared, increase blood viscosity, or cause levels of pro- or anti-coagulant plasma proteins to drift. What’s an example of a drug that intrinsically provokes clots? A 30-year-old woman is in a committed intimate relationship. Her partner hates using condoms. She asks her doctor to place her on a birth-control pill, a low-dose combination of an estrogen and progestin. Three weeks later, she wakes up with a tender, swollen calf. Her doctor diagnoses a DVT. The birth-control pill did this because it’s absorbed through the GI tract, which causes its absorbed ingredients to sweep up the portal vein for a passport check in the liver before entering the body. The liver recognizes foreign chemicals and cleanses portal blood of them. The enzymic removal of most of the hormones in a birth control pill tweaks the liver, “pisses it off,” just enough that in response it releases excessive factor VIII, a pro-clotting factor. The small portion of drug not removed by the liver gets into the body and fakes out the woman’s reproductive endocrinology enough that she doesn’t ovulate. But the drug, by its action on liver, has caused a hypercoagulable state.
But you’re wondering: what WILL Zafgen say? Why can’t they make the case to shareholders? If I were to hear their arguments, would I be persuaded? I think it’s highly unlikely that Zafgen will make public its briefing documents before the Type A meeting, if ever. Doing so would allow bloggers with short interest to assail the arguments in a way that could be publicized. Adam Feuerstein would write a column accusing Zafgen of torturing its data to speak only in a favorable way to the committee. Scores of longs would write and call the company wanting their two cents’-worth heeded. Enver Hoxha, the mad socialist dictator who ruled Albania, compelled each household (picture a small round whitewashed concrete bunker) to place in its kitchen a loudspeaker (without an off switch) connected directly to his office so that he could talk at his subjects each morning. I’ve travelled in Albania (wretched place) and seen the speakers. Fellow Gummerati, I think you’ll agree with me: there’s no chance that cloistered Zafgen will ever so regard its shareholders! Contemplating Zafgen reminds me of the time I stood in Red Square in Moscow, acutely aware of all the high thick walls that keep the world from being privy to any of revanchist fist-pounding going on within them.
Even so, I’ve been given some inference-allowing clues as to what Zafgen will say to the FDA. Zafgen will have to concede that while morbid obesity is a hypercoagulable state (I’m coming to that), the clotting misadventures in its trials happened only to beloranib recipients and not in placebo arms. The study was enrollment-weighted so that the treated arms had more patients than the placebo arms, and this factor may give a component of undue weight to clotting adverse events. Zafgen plans to place considerable emphasis on data from a recent study by Dr. James Loker commissioned by the PWSA:
Loker more deeply analyzed death data from a series of 310 PWS deaths than I have seen depicted in any other PWS mortality study. Six percent of the deaths were from pulmonary embolism (PE), a sobering cipher that suggests this risk hounds all PWS patients. The mean BMI at which patients died was 55, a number implying extreme porky rotundity. That death was more favored at high BMI implies an active role in obesity severity in facilitating death. Eerily, a PWS patient who died of PE in the trial did so at BMI 55. Remember, PWS incurs an annual death rate of 3 percent: of 100 PWS patients 3 die per year. This is three times the death rate in a randomly-chosen group of people. Survival beyond 30 is uncommon, and PWS patients are bad about accruing BMI rapidly as they age. Data garnered before Loker’s study have suggested, in a vague but unmistakeable way, an inverse relationship between death risk and BMI: PWS’ers who keep their weights down live longer. The literature reports a British woman with PWS who lived to her 70’s, and died with BMI less than 30, a probable cause-effect relationship. Keep in mind, the PWS trial in which the adverse outcomes occurred was this one, calling for 108 patients to be followed for 29 weeks. My arithmetic predicts that this study cohort should have captured 0.03 x 108 x (29/52) deaths, or 1.8 deaths, rounded up to 2. Yet Zafgen played under par with but a single death. Patients with PWS have a real risk of dying from PE, and meanwhile, in a study, one DID die of PE even though fewer enrollees died than one would have predicted. Why is the drug on clinical hold again? Bang: there went several underpinnings propping up the FDA, now smithereens from the detonation of cognitive dynamite. The trial in question, ZAF-311, admittedly only randomized 107 patients, but that barely changes my arithmetic.
A point I’ve made in the threads, which I realize not all readers keep up with completely, is that absent an autopsy, presumed cause of death and actual cause of death match up rather poorly. You can be sure that few PWS patients are subjected to autopsy upon their demise. First, autopsy is becoming a lost art despite the fact that insurance generally pays for it. Second, parents of PWS patients who die often evince the common emotion of family members when the decedent has had a prolonged illness: “(S)he’s suffered so much already.” Because of this we really DON’T know what kills them, and I conjecture it may be PE much of the time. Richard Levenson, MD, FCAP, is a close personal friend and vice chairman of pathology at University of California-Davis. Richard is not only a brilliant polymath, but also a painstaking researcher with whom I’ve worked on many projects. Several years ago, he decided to do a comprehensive study of the true worth of autopsy: he had no pro-autopsy agenda to argue, but meta-analyzed scores of papers. His conclusion? The cause of death presumed by the doctor caring for the patient at the time of death matches the autopsy-proven cause of death (gold standard of proof) no more than 50 percent of the time (a coin toss). Most of the discrepancy owes to clotting events the clinician doesn’t realize the patient has sustained. But if you don’t cut, you don’t know. Loker likely underestimates the true rate of PE in PWS as certainly not all the patients in his series were subjected to autopsy.
The following two panels show screening measures that Zafgen put into effect just prior to the FDA clinical hold and their outcome.
Doppler ultrasonography is a low-cost high-yield way of screening deep veins of the limbs for DVT. D-dimer is a protein fragment indicative of recent thrombosis. Thrombin clips fibrinogen so that it becomes soluble strands of fibrin; fibrin strands are then crosslinked by the transglutaminase activity of factor XIII. D-dimer is a snippet of crosslinked fibrin released by the action of plasmin, the body’s clot-degrading enzyme, set into motion as soon as clotting happens. A spike in D-dimer implies that a patient is right on the heels of a major clotting event such as a DVT or PE. That Zafgen did this and found the algorithm to be efficacious (it prevented outcomes for which beloranib could have been fingered) will hold considerable sway with the FDA. The screening methodology they’ve used really is the best available, even though it’s not perfect.
Having provided you with all the palaver above, what other thrusts and parries can Zafgen make in its presentation to the FDA? A point I’ve made in the threads is that good clinicians perceive obesity as a high-risk state for accidental clotting (by which we mean the formation of DVTs in leg veins where flow is sluggish, or in deep pelvic veins, with clotting then propagating, flying up the inferior vena cava, across the right heart and into the lungs, where fatality often results). A trial means that part of what you do is observe patients for a defined period of time. Observe the obese, and they are likely to have clotting misadventures during the specified time interval regardless of the intervention. Had I been advising Zafgen, I’d have told them, I believe, to consider screening the limbs for clots but also to consider gratuitous anticoagulation. Keep in mind, with modern standards of care, we anticoagulate ALL inpatients whether they are obese or not, whether they are ambulatory or not, because merely being in bed raises DVT risk. I was once briefly hospitalized for a lung infection, and my doctor insisted on placing me on enoxaparin even though I was constantly up walking the halls and chatting with nurses. He was right: the scientific literature suggests that’s the wisest approach. Why should we invoke any milder approach for the morbidly obese? PWS patients are prone to chronic underactivity punctuated by rage and outburst: a fine trigger to roll a clot.
Is there a scientific basis for asserting that the obese are likelier to clot than the slender? Indeed there is. If you have time, consider skimming this really topnotch review article, here in full-text, on the subject, just to give you an idea of the richness of the research on the topic as well as the molecular control points for clotting that get perturbed by being obese. Here are several of the lines of data: (1) plasma levels of factor VII, a potent and universal kick-off enzyme for clotting are higher in obesity. Factor VII, when combined with the badly named “tissue factor” (TF) on a membrane surface, is a highly potent pro-coagulant. Interestingly, (2) TF levels are far higher in obesity, and the TF present is mostly in an altered form that gives it more wallop as regards factor VII. (3) Levels of so-called fragment 1.2, on which I once did a study, are considerably higher as a function of BMI. When prothrombin is activated by factor VIIa/TF to thrombin, fragment 1.2 is released from the prothrombin precursor. This molecule is an immediate, proximal market of clotting. The obese are subliminally clotting, churning the engines of clotting, all the time, (4) The pro-coagulant system is opposed by the counter-regulating fibrinolytic system, which swings into gear immediately to begin breaking down clot as soon as its formed. Your fibrinolytic system is the sole reason that every single injury you have, no matter how minor, does not turn into a DVT. The enzyme plasmin contains the clot, keeps it local, keeps it from propagating. But by multiple mechanisms discussed in the paper, and well known among coagulationists, fibrinolysis is dampened in obesity.
Here’s something you may not know: imagine doing a large-bore needle biopsy of fatty tissue, say from a hip. You fix and mount that tissue, and stain it and study it beneath a microscope. A common feature of adipose tissue is that one encounters islands of adipocytes, in which fat is stored, and that the islands of adipocytes are surrounded by strands of clotted fibrin. What this suggests is that the fatty neighborhood turns on clotting. But it also hints that in a state of rapid weight loss, in which those fat-engorged adipocytes shrink, a sinister set-up for bigger clots emerges: those fibrin strands can coalesce, become “big boys,” spread, and fly off.
When you come down to brass tacks, what does beloranib do in the body? My best answer? It induces a state of sustained lipolysis, of ongoing fat breakdown and release of free fatty acids, one more extreme than the body otherwise encounters, even in starvation. This is a not-exactly-normal state. (Beloranib also tames hunger and hyperphagia, by mechanisms not yet known). I thus did the thought experiment of asking whether sustained lipolysis, releasing fatty acids that are highly pro-inflammatory, could drive aberrant clotting. The literature suggests that it can, although an explanation of how is rather complex. But for one thing, the fatty acids so released form micelles in circulation that provides sites for embedding of pro-coagulant proteins. When you give pro-coagulant proteins a matrix that facilitates their activity, they rev up.
We are confident that Zafgen will make all these points in its disquisition to the FDA. We are confident it will pound the table about the drug’s efficacy, which frankly trumps expectations.
In thinking through the issues, I’ve also asked the question, Could PWS itself lead directly to a tendency to clot? I think the answer has to be “no,” and that PWS patients only clot abnormally when they are obese, as a function of their obesity. PWS is mainly a result of major DNA deletions from chromosome 15. I have scanned a gene map of chromosome 15 and find that no proteins relevant to clotting or fibrinolysis or inflammation are encoded there.
Here’s something I worry about. Early in my career, I got a cold call from a headhunter one afternoon. My name had come up as someone who might be desirable for a position at a major Florida institution. I travelled there, and saw possibilities for an exciting life in a sumptuous locale as a single professional with a good income in an academic setting that I felt I had much to offer. I was speaking with the division chief, the man who would be my boss. He was German to a degree of self-parody; I imagined he had his faculty goosestep to weekly grand rounds. “Ja, we are a fine institution,” he began, “and I yem heppy to report ze conclusions of a recent gastroenterology accreditation committee visiting our department. They said ‘Zero deficiencies.'” He made a zero with his fingers. And that made up my mind right there….NOT to take a job in that setting. Zero deficiencies, OK, but he could not name a single virtue, a single corner of excellence, a single bright shining light about the division that would make me want to join it. Absence of deficiencies is not the same as presence of virtues. You don’t think a high sanitation grade at a restaurant means the food tastes better, do you?
We have had reason to question the charisma, the ability to be dynamic, of Zafgen leadership. In fact, we’ve had reason to question its very accountability because of the moat it seems to see between it and its shareholders. CEO Hughes was nothing but dilatory and casuistic when it came to announcing a death in the PWS trial: his announcement came more than 72 hours after the event had occurred, and he was hopelessly underinformed about it. He also did not at that time disgorge himself of all the bad news about thrombotic events he had for shareholders. My angst pegged not because of the adverse events, but because of Hughes’s frittering style of reporting them: it suggested he very much was not in control of the situation. And that he was too busy reacting to things to lead. Will an FDA briefing document from a Zafgen helmed by him be tepid and tentative?
The company’s entire future, all of it, now depends upon a single briefing, and I frankly worry that while it may have zero deficiencies, it will not exude the led passion and enthusiasm, the emphaticness, with which it needs to be pitched to the FDA. Zafgen’s people need to be crisp and clued-in. They need the ordnance not only of facts but of strong argumentation, the kind that emerges from taking unusual slants and slices through the data Hughes and his designates need to go before the FDA in order to be utterly in control of what happens. The extreme strength of positive beloranib data must be made with such evangelical zeal that humorless, unanimated, toxic-from-overwork FDA reviewers are wooed by it….that beloranib is no mere weight loss drug, but that it’s the answer to civilization’s worst disease. That with it, people lead better and longer lives. I think of remarkable people I’ve heard speak; William F. Buckley, Jr., and C. Everett Koop come to mind. I have heard both get blisteringly, savagely attacked by questioners from left-of-liberal political audiences, and seen both men nearly grin as they coolly dispassionately ripped the questioner to shreds right back, showing the audience that the premise of the question was idiotic. In either situation, neither man’s pulse rose above 65 (as is said of Hannibal Lecter during his most violent acts in the source novels). And I genuinely believe they changed the minds of their assailants, so high-octane were their intellects. Hughes needs to be able to change minds, to win over, indeed to conquer. He needs to come with so highbrow and clean an explanation for what happened, and with so definitive a plan to intervene and safeguard patients that the FDA murmurs to itself, “Hmm, better and more astute than even we were thinking. Who are we to stand in the way of this?” And yet Hughes’s heart may not be sufficiently leonine. I remember my first county fair: I was shocked, giggling, at the dangling mammoth grapefruit-sized testicles on certain small boars. And yet a CEO so endowed is often the best biotech skipper.
Perhaps the most important thing you came here to find out is a sense of timing, in that FDA clinical holds are nerve-wracking because of their potential indefiniteness. What kind of agenda can we expect? How soon? In what way will Zafgen management reveal news to shareholders? I pressed hard for answers to these questions. In summary:
(1) Zafgen and the FDA have not set a date for the Type A meeting. It will likely come within 30 days of the company requesting it, as per FDA policy, but the company won’t say when it envisions requesting it.
(2) Zafgen’s panel of experts is working actively on a briefing document. When that’s completed and polished, presumably when Hughes and CMO Dennis Kim feel the presentation has sufficient tooth, the company will request the meeting. I suspect Zafgen’s panel is flying in monthly and meeting so that people can hammer out messages and lines of reasoning. But the company has no stated timetable for when the briefing document will be completed.
(3) The briefing document will not be shared with shareholders. The company also will not name any of the experts it’s retained. The latter irks me deeply: why is it a secret? Other companies would go all bombastic trotting out the intellectual firepower on their team.
(4) The company explicitly will not reveal the date of the Type A meeting after it is scheduled. They feel that doing so subjects shareholders to needless gaming of shares.
(5) The Type A meeting is one for which the FDA will generate meeting minutes. As we learned from Esperion’s ($ESPR) recent “accident,” it is foolish for a company to come away from a meeting and state what happened and what the FDA’s disposition was. The true account of what happened comes only from the FDA, and only the FDA can spell out its disposition. It does so in meeting minutes, and by policy has to provide those minutes to the company no later than 30 days following the meeting.
(6) The next news, and the only news, to come from the company about beloranib’s clinical hold will occur after Zafgen has received the FDA minutes, digested them and is prepared to comment. Zafgen management makes no promises as to how soon after the meeting this will be, but recognizes the urgency of reporting to shareholders.
(7) Zafgen has no plans ever to release the FDA meeting minutes.
None of this is what you want to hear, as shareholders will be left dangling for some time. I do believe this one meeting will settle the matter, and I give 85-90 percent odds that it will be settled in Zafgen’s favor. Zafgen will have a risk management strategy of screening and prophylaxis, one that is individualizable, for all patients. The FDA will likely ask for a post-marketing phase IV study to do surveillance of the effectiveness of the company’s risk management strategy. Phase IV’s rarely have a material impact on earnings.
I will be frank: given my experience with the pacing and caution of these kinds of deliberations, and given the built-in delays, and given the company’s clear reticence about transparency, I cannot picture Zafgen making an announcement before August. That’s based on intuition, not anything the company told me. We thus have ulcerogenic months, astral weeks as Van Morrison would say, to stare down another binary outcome. I personally intend to remain long and possibly to add to my position, as I feel comfortable with the science and its upshot. I will continue to assert that the FDA is no Star Chamber: it just seeks a well-reasoned, documented, literature-supported approach to the issues prompting the hold. The company that boldly and responsibly steps up generally finds the FDA taking its side. Do I like what Zafgen’s got us hanging from? I do not.
Disclosures: This column would not have come about without the drive and initiative of BTL (attorney Lawrence M, JD), who raised the questions and led off in contacting Zafgen HQ. BTL went to a top-five US law school, and that fact is ever-apparent in the quality and integrity of his work. His advocacy for this forum is vital and a great gift. This column is not a solicitation or recommendation that you own shares in Zafgen ($ZFGN), a situation now with particular attached risk. Of companies mentioned, I have long positions in $ZFGN and $ESPR. I will not trade in shares of those companies for 72 hours, reckoned in business days, following publication of this column. I have no short positions or options. I have never sought and never gotten anything of pecuniary value from any company or person depicted by me at Stock Gumshoe. Let us know your views on the Zafgen situation. Correspondence from readers is welcome, and also please follow me on Twitter @KSSMDPhD. “Don’t want to be a fat man/People would think that I was just good fun.”
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