Penny Stock at Bottom of Nasdaq After Scrapped Drug Plans

Zafgen halted plans for another experimental drug

Patrick Martin
Mar 12, 2019 at 10:30 AM
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The shares of Zafgen Inc (NASDAQ:ZFGN) are down 32.2% to trade at $3.43, one of the worst stocks on the Nasdaq this morning, under pressure from a double-dose of negative headlines. First, the drugmaker pulled plans for its experimental drug for rare diseases due to anomalies in animal trial data. What's more, the company announced its Chief Medical Officer resigned, effectively immediately.

Zafgen stock earlier tapped a fresh two-year low of $3.19. ZFGN was destroyed late in 2018 after another of its experimental drugs was put on clinical hold by the Food and Drug Administration (FDA). After that late-November bear gap, the equity spent most of the time consolidating below the $5.50 mark. Even prior to today's drop, ZFGN had shed 7% in 2019. 

Leerink responded to the news today with a price-target cut to $6 from $9. There could be plenty more bearish analyst attention on the way, too. Exactly three-quarters of the brokerages in coverage rate ZFGN a "strong buy," with zero "sells on the books. Plus, the stock's consensus 12-month price target of $8.40 is a 82.6% premium from last night's closing perch at $4.60. 

There's also ample room aboard the bearish bandwagon. Short interest increased by 5.6% in the most recent reporting period, but the 2.9 million shares sold short is less than half the 2018 highs. Plus, it only represents a slim 2.4% of ZFGN's total available float. Today's drop puts the stock on the short-sale restricted list, however.


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