Zafgen is eliminating approximately 34% of its workforce and ending development of its lead drug candidate beloranib as part of a restructuring that will see the company’s president and chief commercial officer leave the company.

The company said yesterday it will retain 31 employees, by December 2016. Not among the 31 are Patrick Loustau, the company’s president until yesterday, and Alicia Secor, who has resigned as chief commercial officer and is leaving the company as of July 31.

Loustau has already been replaced by Thomas E. Hughes, Ph.D., who has been CEO and a board member at Zafgen since 2008.

The company said its restructuring will enable it to pursue development of a differentiated methionine aminopeptidase 2 (MetAP2) inhibitor ZGN-1061 for severe and complicated obesity, after concluding that its long-term development potential is stronger than that of beloranib.

Beloranib has been on full clinical hold since December, after the company disclosed the death of a second patient in a Phase III trial assessing the candidate in people with Prader-Willi syndrome (PWS). The FDA placed a partial clinical hold in October following the first patient death.

Beloranib had been developed as a twice-weekly injection drug for multiple indications, including severe obesity in PWS and obesity caused by hypothalamic injury, including craniopharyngioma-associated obesity, and severe obesity in the general population. Zafgen holds exclusive worldwide rights, except in South Korea, for the development and commercialization of beloranib, which it licensed exclusively from Chong Kun Dang Pharmaceutical Corp. of South Korea.

In a statement, Zafgen said it recently held a Type A meeting with the FDA to discuss clinical and preclinical data for beloranib as well as a proposed risk mitigation strategy for beloranib in PWS.

“Following its discussions with the FDA and review of other considerations, Zafgen has determined that the obstacles, costs, and development timelines to obtain marketing approval for beloranib are too great to justify additional investment in the program, particularly given the promising emerging profile of ZGN-1061,” Zafgen stated.

ZGN-1061, as with beloranib, is a fumagillin-class MetAP2 inhibitor discovered by Zafgen researchers as part of a multiyear campaign to identify novel compounds that avoided limiting preclinical safety concerns observed with beloranib, including teratogenicity and effects on testicular function.

Zafgen said ZGN-1061 has similar efficacy, potency, and range of activity in animal models of obesity as beloranib, but displays a reduced potential to impact thrombosis.

The company is screening patients for a Phase I trial it plans to launch that will evaluate ZGN-1061 for safety, tolerability, and weight loss efficacy over 4 weeks of treatment. Phase I clinical data is expected by the end of the first quarter of 2017.

Zafgen said later-stage development of ZGN-1061 will be focused on severe and complicated obesity, on the basis of the clinical data demonstrating beloranib’s significant effect on body weight and glycemic control in patients with severe obesity complicated by type 2 diabetes.

“While we are disappointed that we could not see beloranib through to approval, we are excited about the potential of ZGN-1061, and look forward to advancing this high-value candidate in the clinic,” Dr. Hughes added.

Zafgen said it believes its current cash balance can fund operations through the end of 2018, when it expects to have completed a Phase IIa clinical trial for ZGN-1061. As of June 30, Zafgen had approximately $150.5 million in cash and cash equivalents—a sum it expects will dip to more than $125 million by year’s end.

Investors responded to news of Zafgen’s restructuring with a stock selloff that shrunk the price of company stock 45% from yesterday’s close of $6.75, to $3.70 in premarket trading as of 9:23 a.m. today.

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