Zafgen (NASDAQ:ZFGN) anounced on 7/19/2016 that in order to concentrate effort and resources, it will drop one trial (beloranib) to focus on its most promising MetAP2 inhibitor, ZGN-1061.

The biopharmaceutical Company is based in Boston, Massachusetts. Its novel therapeutic approach for severe obesity stems from a discovery at Childrens Hospital, Boston, one of the leading hospitals in the world. ZFGN has the backing of well heeled institutions. It's IPO in 2014 was at $16 and a subsequent raise in 2015 was at $35.

The company stated it has enough cash to take it to the end of 2018, "at which time it expects to have completed a Phase 2a clinical trial for ZGN-1061".

Zafgen's announcement, timed for market close Tuesday, caused the stock price to tumble to $2.95 by Friday's close- 44% below the company's cash (and cash equivalents).

The stock closed at $46.25 on September 18, 2015. A return to $4.58 seems reasonable. That reflects cash the company expects to have at the end of 2016, considering the present share structure. Or perhaps $5.37 which reflects what this writer estimates to be the cash today. Developmental Stage biopharmaceutical companies can be valued at many times cash.

With solid institutional and insider ownership, a 8.72% short interest to cover and next to no retail float, the share price could head up on the double if the oversold thesis takes hold. The market has had three trading days to absorb the news.

I have taken a modest position in anticipation of a return to higher levels but expect to sell promptly- bios are not my thing, I just see an undervalued stock.

MiamiGent

28,000 posts as MiamiGent across several stock forums