A battered Zafgen seeks strategic options, prophesying ongoing study will unlikely lift FDA hold on diabetes drug
Zafgen, which back in 2015 crossed the $50 mark, is now firmly in penny stock territory. Blighted by safety concerns across a range of its experimental drugs, the Boston drug developer is now seeking strategic options, including a possible sale — predicting data from the ongoing in vivo study for its diabetes drug will not be enough to convince the FDA to lift its clinical hold on the program.
The company’s shares $ZFGN tumbled more than 15% to 69 cents in early Thursday trading.
Zafgen’s woes go back years. In 2016, Zafgen deserted its beloranib program after the experimental obesity drug was linked to patient deaths in a pivotal study. The FDA, worried about exposing more patients to harm, imposed a clinical hold on Zafgen’s second-generation (obesity-related) diabetes drug ZGN-1061 last November, wary that the cardio threat posed by beloranib was still in play. This July, following months of discussion with the regulator, an in vivo animal study design and protocol for ZGN-1061 was agreed upon — data from this study are expected by the end of 2019.
“Based on preliminary results from this study reviewed this week, Zafgen does not presently expect the data to warrant resolution of the clinical hold for ZGN-1061,” Zafgen said on Thursday. The company — which saw a string of managerial departures last year including CEO Tom Hughes, who had led the company for nine years, and board member Bruce Booth, who exited after a dozen years — is seeking alternatives including an acquisition, merger, business combination, in-licensing, or another strategic transaction involving the company or its assets.
Earlier this year, Zafgen was forced to contend with yet another setback. Its experimental drug, ZGN-1258 — under development for rare cases of obesity brought on by rare genetic condition Prader-Willi syndrome, which is characterized by constant hunger — was slapped with a clinical hold by the FDA in March, even before it hit the clinic. The hold emanated from data that indicated muscle deterioration in a rodent model of the disease, which prompted the company to suspend plans for an application to test the drug in humans.
As of June 30, 2019, the company had cash, cash equivalents, and marketable securities totaling $91.7 million, Zafgen disclosed in August. In the second quarter, the company reported a net loss of about $12 million.