Zafgen tees up an $86M IPO for eye-catching obesity drug

Zafgen has been turning heads with some jaw-dropping results from its mid-stage studies for a promising new obesity drug. And now the biotech hopes to parlay its eye-catching, if risky, technology into an $86 million IPO.

Just about all of Zafgen's eggs rest in a single nest for beloranib, blocking the methionine aminopeptidase 2, or MetAP2, enzyme--which plays a role in the body's production and use of fatty acids. The drug knocks off weight by dialing down the amount of fat produced by the body, a completely different approach from the current crop of drugs, which is designed to suppress appetite.   

Late last year the Cambridge, MA-based biotech posted a stellar Phase II study of beloranib that tracked rapid weight loss among the severely obese, with one group shedding an average of 22 pounds in 12 weeks. The big idea here is that Zafgen's drug could replace a pricey medical procedure to spur weight loss, helping patients avoid a multitude of ailments that can be spurred by obesity. And it could prove to be a whole new standard of care compared to the current crop of obesity drugs on the market--provided it survives a gamut of clinical trials.

Zafgen noted in its S-1 filing with the SEC that the company plans to pursue small subpopulations of patients with rare conditions for its first approvals. As it's setting up targeted approvals, the biotech can position itself for a regulatory OK for obesity--a mass market that will require a huge and costly late-stage program with thousands of patients and a clear record on safety.  

About a year ago Zafgen, a Fierce 15 biotech, was the subject of considerable buzz about a potential buyout. But the deal evidently never made it past the discussion phase. Zafgen banked a $45 million Series E round in December, adding a group of new investors to its fan club that includes RA Capital Management, Brookside Capital, Venrock, Alta Partners, an undisclosed "blue chip" investor and a private investor. 

The company plans to list on Nasdaq under the "ZFGN" symbol. Zafgen has burned through about $69 million since it was founded in 2005, operating as a lean-and-mean virtual biotech with only a handful of staffers working with CEO Tom Hughes. Its board includes Atlas Venture's Bruce Booth, Lou Tartaglia from Third Rock and John LaMattina, the former global chief of Pfizer ($PFE) R&D. Atlas and Third Rock each own a big chunk of the biotech's stock.

Zafgen has one other drug on the radar: ZGN-839, a preclinical therapy for nonalcoholic steatohepatitis, or NASH, nonalcoholic fatty liver disease, abdominal obesity and Type 2 diabetes.

- here's the S-1

Special Report: 2009 Fierce 15 - Zafgen