What: Zafgen (NASDAQ:ZFGN) fell 29% today giving it a two-day loss of a whopping 54%. As best anyone can tell, the decline started yesterday when investors learned the company cancelled some meetings it had with investors.

ZFGN Price data by YCharts

So what: There are a lot of possibilities for why a company would cancel meetings with investors -- maybe the CEO got the flu? -- but given the radio silence from management while its stock is in freefall, it seems likely that the company's lawyers have ordered a quiet period.

Zafgen has a couple of clinical trials under way testing its lead drug, beloranib, in a genetic disease called Prader-Willi Syndrome that causes patient to have a chronic feeling of hunger and another in severe obesity. The quiet period could be because the company has good news or bad news from the clinical trials or potentially other news -- acquisition, management changes, etc.

Investors are clearly betting on bad news. It's possible that bad news was leaked, causing investors in the know to sell. It's also possible that investors are worried that someone else knows something -- even if no one knows anything -- and then the selling just reinforces investors' hunches that someone knows something.

Now what: I don't have any more information than any other investors. But here are some points to consider:

  • Positive efficacy data would require more time to work through than negative safety data.
  • Negative efficacy data can theoretically be presented as quickly as negative safety data, but companies sometimes data mine to try and find something positive to say about a negative clinical trial.
  • The longer this goes on, the less likely the issue is an acquisition or management change, which could be resolved and/or commented on -- even if it's "no comment" -- in a timely manner.

Buying Zafgen at this point will result in a substantial gain if the news turns out to be positive, but without any inside knowledge of the news, it would be more of a wager than an actual investment.

Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.