Zafgen, Inc. and Its CEO Sued for Securities Fraud
Zafgen, Inc. ("Zafgen" or the "Company") (NASDAQ: ZFGN) and its chief executive officer, Thomas E. Hughes, were named as defendants in a lawsuit filed by Block & Leviton LLP alleging that they violated the Federal Securities Laws.
The lawsuit, filed in Federal Court in the District of Massachusetts, docket number 1:15-cv-13618, alleges that Defendants made misleading misrepresentations about thrombotic adverse events in previous clinical trials of its leading drug candidate beloranib. Until October 16, 2015, Zafgen had only ever disclosed two thrombotic adverse events in one prior clinical trial.
On October 12 and October 13, 2015, however, Zafgen shares dropped sharply. Between the opening of trading on October 12, 2015 and the close of trading on October 13, 2015, Zafgen shares dropped from $34.76/share to $15.75/share—a 54.7% drop. The drop was fueled by rumors in the marketplace that a patient had died in an ongoing Phase 3 clinical trial of beloranib.
On October 14, 2015, Zafgen confirmed that a patient in its Phase 3 trial of beloranib had died. Zafgen failed to disclose, however, that the patient was receiving beloranib—i.e., not a placebo—and failed to disclose anything about thrombotic events in prior clinical trials.
Late in the day on October 15, 2015, the Food and Drug Administration ("FDA") informed Zafgen that beloranib has been placed on partial clinical hold. This forced Zafgen to make additional disclosures on October 16, 2015, including that: (i) the patient who died was receiving beloranib; and (ii) there had been four thrombotic adverse events in prior clinical studies of beloranib—two more than previously reported—as well as two additional, previously undisclosed thrombotic events in ongoing studies, for a total of six thrombotic events out of 400 patients receiving beloranib compared to zero thrombotic events in the approximately 150 patients treated with a placebo.
The Company's stock dropped sharply on this news. After closing at $21.02/share on October 15, 2015, Zafgen stock closed at $10.36/share on October 16, 2015—a 50.7% drop.
Certain Zafgen executives sold shares in the weeks prior to these revelations.
If you purchased Zafgen stock between January 12, 2015 and October 16, 2015 you may be a member of the alleged class. You may move the Court to be a lead plaintiff or you need not take any action at this time. If you wish to be a lead plaintiff, you must file a motion by December 21, 2015. If you are interested in becoming a lead plaintiff, have questions about your legal rights, or if you have information relevant to this investigation, please contact attorney Joel Fleming or Jeffrey Block of Block & Leviton LLP at (617) 398-5600 or at Joel@blockesq.com or Jeff@blockesq.com. You may also retain counsel of your own choosing. Confidentiality for any whistleblowers or other persons with information relevant to the investigation is assured.
Block & Leviton represents investors for violations of securities laws as well as whistleblowing employees who provide information about their employers' violations of law throughout the country. The firm's lawyers have collectively been prosecuting securities cases for over 70 years, have recovered billions of dollars for investors and represent some of the nation's largest institutional investors.
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