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Our Take On This Busted IPO

|About: Zafgen, Inc. (ZFGN)

When truth is replaced by silence,the silence is a lie.” ― Yevgeny Yevtushenko

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Man is not what he thinks he is, he is what he hides.” ― André Malraux

Recently I got a question on a "Busted IPO" called Zafgen (ZFGN) which I have never researched.  Today, we take a look at this small cap name in our instablog of the day.

Company Overview:

Zafgen is a Boston based 'Tier 4' biotech concern that is focused on the development of therapeutics for patients suffering from metabolic diseases comprising type 2 diabetes and obesity.  The company came public in late 2014, sports a market capitalization of approximately $250 million and trades for just under $9.00 a share.

Pipeline:

The company has a limited and early stage pipeline

ZGN-1061

This is the primary drug candidate in Zafgen's pipeline.  This compound is an investigational MetAP2 inhibitor for the treatment of type 2 diabetes.  A phase 2 trial has been enroll and is ongoing.  The study is designed to trial is designed to confirm ZGN-1061's pharmacokinetic profile and evaluate safety, tolerability, and glucose-lowering efficacy.  Interim data should be out in the sometime mid-year.

ZGN-1258

The company is initiating GLP toxicology studies for this clinical compound.  It plans to file an investigational new drug (NYSE:IND) application with the FDA to target Prader-Willi syndrome

Analyst Commentary & Balance Sheet:

This is a sparsely covered small cap equity.  Only one analyst firm has chimed in on Zafgen that I can find over the past nine months.  Last month, Cowen & Co. assigned a Hold rating to the stock.  Several insiders made a total of four small buys in 2017 totaling just over $120,000.  There were no insider sells over that time period.  The company ended the third quarter with just under $95 million in cash and guided it expected to end 2017 with at least $70 million of cash on the balance sheet.

Outlook:

It is hard to get too excited about such an early stage concern with little coverage.  Good interim results from its Phase 2 study could boost the shares when released in a few months.  However, the company appears years and at least one capital raise before it has a chance to reach commercialization stage.  In addition, a previous compound Beloranib targeting the same disease areas had developed suspended in 2016.  Given all this, I am passing on making any investment recommendation on Zafgen at this time.

History is a set of lies agreed upon.” ― Napoléon Bonaparte

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Thank You & Happy Hunting,

Bret Jensen

Founder, The Biotech ForumThe Busted IPO Forum & The Insiders Forum

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.