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Zafgen says patient died in clinical trial of obesity drug

Stock plunges before staging modest rally

Screenshot of a Yahoo Finance message board with a post Tuesday saying that a patient in Zafgen’s clinical trial had died.

Zafgen Inc., a Boston biotech company developing treatments for obesity and metabolic disorders, said Wednesday that it was investigating the death of a patient who was participating in a late-stage clinical trial of its lead drug candidate.

The announcement came after Zafgen’s stock lost more than half of its value on Monday and Tuesday, confounding investors even as the company maintained its silence.

Zafgen shares, which hit a high of $55.36 in March, traded as low as $11 after the company disclosed the patient’s death Wednesday morning. By day’s end, however, they had rallied, to close up nearly 24 percent at $19.50.


Zafgen did not immediately identify the patient or say when or where the death occurred. It said “the cause of the death remains unknown.”

The company said it reported the death to the Food and Drug Administration and is talking with regulators about the implications for the trial of its drug candidate, which treats patients with Prader-Willi Syndrome, a rare, potentially fatal genetic disorder that’s linked to obesity.

A spokeswoman said the clinical trial is ongoing but Zafgen would not comment further. An FDA spokesman said the agency does not discuss unapproved therapies.

“The thoughts of the company are with the family of the patient,” Zafgen said in a statement. “Zafgen remains committed to ensuring the safety of all patients enrolled in its studies.”

Trading in Zafgen’s stock surged this week, with volume of about 1.9 million shares Monday, 2.5 million Tuesday, and 13 million Wednesday. Average volume since the company went public in June 2014 has been about 235,000 shares.

On Tuesday afternoon, amid the usual speculation and complaints on a Yahoo Finance message board about the lack of official information, a post by “hufrd” read in part:

“Patient died, but can be not treatment related.”

A company spokeswoman said Zafgen’s stock dropped after its management canceled some meetings with investors Monday. A spokeswoman for the Securities and Exchange Commission declined to comment. The agency typically reviews cases in which it is notified by a stock exchange or a tip that investors are suspected of trading on inside information.


Zafgen, backed by investors that include the venture capital firms Atlas Venture of Cambridge and Third Rock Ventures of Boston, raised $96 million in last year’s initial public offering.

The company used some of the proceeds from that stock sale to help finance clinical studies of its experimental compound called Beloranib in obese patients with Prader-Willi. The drug works to rebalance the way the body makes and uses fat stored in the tissue of obese patients who have difficulty losing weight.

Zafgen, founded in 2005, is competing with other companies developing obesity therapies, including Boston-based Intarcia Therapeutics Inc. and Vivus Inc. of Mountain View, Calif., which got a drug approved in 2012.

In its ongoing clinical trial, which was expected to lead to a Zafgen application next year for FDA approval of Beloranib, the company enrolled 108 patients, about two-thirds of whom were given twice-a-week injections of the drug, and a third of whom were given a placebo.

Patients weren’t told whether they were taking the drug or the placebo.

Biotech analyst Joseph Schwartz, managing director at the Boston health care investment bank Leerink Partners, issued a note to investors Wednesday, saying Zafgen’s drug candidate remains on track, subject to guidance from the FDA.


He said it is too soon to conclude that the patient’s death was caused by Beloranib, noting that the Prader-Willi population has a high mortality rate and that the company has not said whether the patient was taking its drug or a placebo.

“We have to learn what the cause of death was and if the death was drug-related,” Schwartz said. “It’s encouraging that the trial has not been put on clinical hold. And we see it as positive that [Zafgen] is still taking to the FDA. But even if the trial is put on clinical hold, it was almost complete and they may already have enough data to analyze.”

Schwartz said Zafgen was set to release final data from the study early next year.

Robert Weisman can be reached at robert.weisman@globe.com. Follow him on Twitter @GlobeRobW.