NEW YORK (TheStreet) -- Shares of Zafgen (ZFGN) - Get Zafgen Inc. Report are plummeting 49.33% to $3.42 on heavy trading volume Wednesday morning after the biotech company said it will suspend the development of its lead obesity drug, beloranid.
Studies of the treatment were placed on hold by the FDA in December following the deaths of two patients, and Zafgen said late yesterday that it will shift its focus to a more promising drug candidate named ZGN-1061.
"Zafgen has determined that the obstacles, costs and development timelines to obtain marketing approval for beloranib are too great to justify additional investment in the program, particularly given the promising emerging profile of ZGN-1061," the company said in a statement.
Zafgen is now screening patients to initiate an early-stage study of ZGN-1061, which is a treatment for severe and complicated obesity.
To align with its new priorities, Zafgen will reduce its workforce by roughly 34% to 31 employees by December as part of a restructuring expected to save about $4.8 million in annualized workforce expenses. Zafgen anticipates a $2.4 million charge in the third quarter related to the restructuring.
About 3.21 million shares of Zafgen have been traded so far today, well above its average trading volume of roughly 368,315 shares per day.