Liquid Biopsy · @Liquid_Biopsy
15th Oct 2015 from TwitLonger
RBC $ZFGN Assessing the damage and the road ahead for
beloranib
Our view: After three volatile days, with some new information, but still
with lots of uncertainty, we're taking a look at what lays ahead. While we
expect near-term uncertainty, and obviously a very negative outcome is
still possible, we see a couple of viable scenarios where none of what has
transpired ends up leading to any real negative impact on ZFGN.
Key points:
What we learned from our second communication with management:
We communicated with mgmt again last night and were told that an
autopsy has been performed, but the cause of death of the patient is
still unknown to them, and also to the investigator, DSMB, and FDA,
because the consent to the local hospital to release this information has
not yet been received. The death certificate should indicate the cause
of death, but this (and the autopsy) could potentially be inconclusive or
nonspecific. In addition, the company remains blinded as to whether the
patient was on placebo or beloranib. As a reminder, the bestPWS trial is
1:1:1 randomized PBO: 1.8mg: 2.4mg beloranib. Thus, not only do they
not know if the death was drug-related, we don't even know if the patient
was on the drug arm. In our discussions with management, they told us
they are in "ongoing dialogue" with FDA, so our assumption is that the
company will know whether the patient was on beloranib or not in the
next couple of days. However, they have not decided whether this will be
disclosed to investors or not. Our own assumption is that if the company
finds out that the patient was on placebo, this will probably be disclosed,
in order to alleviate investor concerns. If however, the patient was on
beloranib, in which case a longer process to determine whether the death
was treatment-related will have to take place, we may not find out until
data are released, unless the company is mandated to do so, as in the case
of a clinical hold.
Let's walk through the theoretical scenarios and timing:
1) The patient death was on the placebo arm (best case scenario: drug's
safety profile is "exonerated"). When do we find out? As we mentioned
above, we believe there's a chance we could find this out very soon, as
early as within the next few days, or as long as it takes to break the blind,
check with DSMB and FDA that it's OK to disclose this (maybe they have
to check with them, maybe not).
Again, as we mentioned above, management told us they are not sure they would be
disclosing this information regardless of what the outcome of the breaking of the blind is, for
a number of reasons, including preserving the integrity of the trial. If that's indeed the case,
we may not find out until topline data are released (1Q16), or when full data are presented
later in 2016.
2) The patient death was on the beloranib arm. When do we find out? Probably not for a
while, possibly not until after topline data are released. If the patient was on beloranib
(which has a 67% probability, given the 2:1 randomization), then the process of adjudicating
whether the death was treatment-related will begin.
This process could be relatively rapid, from a couple of weeks to a couple of months. In the
meantime, recall that the completion of enrollment in bestPWS was announced on 5/28/15,
so dosing in the trial should be completed approximately six weeks from now, around the
end of November. Thus, we estimate that it is likely that dosing in the trial will be completed
before a determination has been made on whether the death (if it even occurred on the
beloranib arm) was treatment-related or not.
2a) if the death is determined to not be treatment-related. When do we find out? From a
couple of weeks at the earliest to 8-12 weeks from now, if the company decides to disclose
it. Otherwise, when topline data are announced (1Q16) or when full data are presented later
in 2016.
2b) if the death is determined to be treatment-related. When do we find out? From a
couple of weeks at the earliest to 8-12 weeks from now, if the company decides or has
to disclose it. Otherwise, when topline data are announced (1Q16), or when full data are
presented later in 2016.
2bi) if the death is determined to be treatment-related, but the FDA does not impose any
restrictions in ongoing/further testing: When do we find out? Same as above. In this case, it
will be a benefit/risk assessment made by the agency, i.e. given the high unmet need of the
PWS patient population, this may be a situation where one death in the ~72 patients treated
with the drug in the trial (n=108), may be an “acceptable” benefit/risk. This decision will
depend heavily on the following: 1) the rest of beloranib’s safety profile in the trial, 2) its
efficacy, and 3) what exactly was the mechanism that contributed to the death, how
common and generalizable it is, etc.
2bii) if the death is determined to be treatment-related, and FDA places beloranib trials on
clinical hold (worst possible outcome): When do we find out? As soon as the adjudication of
whether the death is treatment related, i.e. from as early as a couple of weeks, to perhaps
3 months from now, and the company will of course have to disclose it. In this case the
bestPWS trial may have completed dosing, and dosing in the severe obesity/T2D trial may
also be close to completed. However, this is the worst possible outcome, since the company
will have to deal with a potentially longer delay and with a very negative investor reaction
regardless of the exact nature of the details of the clinical hold. This does not mean that
ZFGN could not recover from this, if it were to materialize; however, as other examples of
companies that faced clinical holds in their programs show, the market can be unforgiving in
such cases.
We are adjusting our price target to $46 from $58 to reflect increased risk. Given today's
news, which we expect will make investors more conservative in the views on the drug's
safety profile, we have adjusted our probability of success assumptions down for PWS (50%
from 65%) and HIAO (50% from 60%). This results in our 12-month price target coming down
to $46 (from previous $58). As a reminder, we had not assigned any value to the severe
obesity opportunity and have not viewed it as a free option/upside