Kerrisdale Capital Releases Negative Report on Zafgen

Zafgen's Deadly Obesity Drug Has No Reasonable Chance of FDA Approval

- Zafgen's experimental drug beloranib has already killed two patients in a Phase 3 trial

- Recent excitement about beloranib's efficacy is misplaced given the terrible risk/reward balance: the drug leads to 4-5% weight loss but quadruples the risk of death

- Zafgen has already tried and failed to prevent patient deaths through screening and monitoring, so the company's vague talk of future "risk mitigation" rings hollow

Jan 25, 2016, 09:30 ET from Kerrisdale Capital Management, LLC

NEW YORK, Jan. 25, 2016 /PRNewswire/ -- Kerrisdale Capital, a private investment manager, has published a report explaining its short position in Zafgen, a $240 million US-based biopharmaceutical company whose experimental obesity drug was recently put on hold after two patient deaths. Last week, Zafgen released new data showing that its drug causes modest weight loss in people with Prader-Willi syndrome, a rare genetic disorder whose symptoms include obesity. This announcement led the company's stock price to jump 79% in a day.

But Kerrisdale believes that the stock is worth only $3, 65% lower than where it now trades. Kerrisdale's report demonstrates that Zafgen's drug is highly dangerous – quadrupling the risk of death for individuals with Prader-Willi syndrome – yet only reduces weight by 4-5% and leads to only moderate behavioral improvements. With patients' lives at stake, Kerrisdale believes the FDA will reject Zafgen's pleas for another chance. While no one knows why Zafgen's drug is harming patients, similar drugs (called angiogenesis inhibitors) cause similar side effects, suggesting that there is no easy fix. Meanwhile, other, safer obesity drugs are already on the market. With its only clinical drug candidate gone and little else in its pipeline, Zafgen is worth no more than the present value of the cash it will hold once it resigns itself to its fate.

The full report can be found at

About Kerrisdale Capital

Kerrisdale Capital Management, LLC, is a fundamentally-oriented investment manager that focuses on long-term value investments and event-driven special situations.


Agnes Cao
Kerrisdale Capital 

SOURCE Kerrisdale Capital Management, LLC