Market Overview

Zafgen To Explore Strategic Options, With No Near-Term Resolution For Diabetes Drug

Zafgen To Explore Strategic Options, With No Near-Term Resolution For Diabetes Drug

Clinical-stage biopharma companies often face the risk of running out of cash reserves to fund their operations until they can push their investigational assets out of the clinics and into the commercialization stage.

Earlier this week, Abeona Therapeutics Inc (NASDAQ: ABEO) opted to explore strategic options, and another biotech has now made a similar announcement.  

What Happened

Zafgen Inc (NASDAQ: ZFGN), a micro-cap biopharma, announced Thursday that it plans to explore strategic options to maximize shareholder value.

The strategic alternatives being evaluated include an acquisition, merger, business combination, in-licensing or other strategic transaction involving the company and its assets.

Late last year, the FDA placed a clinical hold on the development of Zafgen's ZGN-1061, a MetAP2 inhibitor that is being evaluated for Type 2 diabetes, citing cardiovascular risk.

The stock shed roughly 40% of its value in reaction to the development.

On May 30, when the company made an announcement concerning the minutes of a Type A meeting it had with the FDA to discuss a resolution to the clinical hold, the stock plunged to a record low.

In July, the company reached an agreement with the FDA on an in vivo animal study design and protocol to establish relevant safety margins for ZGN-1061.

Based on the preliminary results from the study, the company now said it does not presently expect the data to warrant resolution of the clinical hold for ZGN-1061.

Cash To Last More Than 2 Years

Zafgen said its projected cash runway is likely to last greater than two years thanks to its previously announced and recently enacted plans to reduce operating expenses and prioritize key resources.

MTS Health Partners has been retained as exclusive advisor to assist the company in exploring alternatives.

Zafgen shares were down 14.12% at 70 cents at the time of publication Thursday. 

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