Why Zafgen Shares Got Stomped

By Chris Lange Updated Jan 11, 2:31PM EST · Published Nov 26, 10:25AM EST

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Zafgen Inc. (NASDAQ: ZFGN) shares were absolutely crushed on Monday after the company announced an update from the U.S. Food and Drug Administration (FDA).

Essentially, the FDA put a clinical hold on the Investigational New Drug Application (IND) for its first U.S. clinical trial of ZGN-1061, the firm’s second-generation, investigational MetAP2 inhibitor currently in development for the treatment of type 2 diabetes.

The FDA cited the possibility of cardiovascular (CV) safety risk in the ongoing development of ZGN-1061. The company plans to assess these options and request a Type A meeting with the agency to discuss next steps with the program.

In the release the company detailed:

Zafgen continues to advance its ongoing ex-U.S. Phase 2 clinical trial of ZGN-1061, which includes a 1.8 mg dose cohort. Dosing in this clinical trial was recently completed and, while still blinded, no CV safety signals have been observed to date. The Company remains on track to report topline data from this cohort in early 2019. Zafgen previously reported positive full 12-week results for its initial cohort of this Phase 2 proof-of-concept clinical trial, which included a range of doses up to 0.9 mg. In that initial cohort, 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, with no treatment-related serious adverse events and no CV safety signals observed.

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With the delay of additional clinical development for ZGN-1061, Zafgen now expects the cash runway will extend through calendar year 2020, with sufficient capital through multiple milestones. In its most recent quarterly report, the company had $127.8 million in cash, cash equivalents and short-term investments.

Excluding Monday’s move, Zafgen had outperformed the broad markets, with its stock up about 150% in the past 52 weeks. In just 2018 alone, the stock was up 97%.

Shares of Zafgen were last seen down about 46% at $4.91, in a 52-week range of $3.51 to $12.35. The stock has a consensus analyst price target of $13.20.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.