Zafgen hangs 'for sale' sign as chances of imminent recovery fade

For sale sign in front of a business
Shares in Zafgen fell 14% following the news. (Getty/Feverpitched)

Zafgen has begun looking for someone to rescue it from its sticky predicament. The biotech put out the call for a strategic alternatives after preliminary data from an animal study suggested it is unlikely to get ZGN-1061 out from under a FDA clinical in the near term.

The FDA put ZGN-1061 on clinical hold in November amid concerns the MetAP2 inhibitor will suffer from similar cardiovascular safety problems to its predecessor, beloranib. Since then, Zafgen has tried to put together a dataset capable of allaying the FDA’s fears about the safety of ZGN-1061, including by running a study in animals to establish safety margins for the drug.

However, in light of the preliminary animal data and “the alignment and clarity of our recent work with the FDA,” Zafgen thinks the agency is unlikely to lift the hold in the near term. That conclusion has led Zafgen to reappraise its options.

Zafgen now thinks its best option may be a deal of some kind. The regulatory situation of ZGN-1061 will depress the value of the drug to any potential buyers and Zafgen has no other clinical programs. One of Zafgen’s preclinical drugs, ZGN-1258, never made it to an IND filing because of a safety signal seen in rats.

That leaves Zafgen’s Nasdaq listing and the $91.7 million in cash and equivalents it had as of the end of June among the company’s most valuable assets. 

Having reduced its spending on R&D, Zafgen expects the money to see it through the next two years, giving it plenty of time to find a buyer or partner. Zafgen has enlisted MTS Health Partners to help with its hunt for strategic alternatives. 

Shares in Zafgen fell 14% following the news, bringing their value down to around $0.70 a pop. Back in 2015, the stock traded above $45. At that time, Zafgen was moving beloranib through phase 3 but the program came off the rails after patients died. Zafgen battled on, pivoting to ZGN-1061 in a bid to improve its prospects, but has now run into a situation it may not be able to escape without help.