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Zogenix: Zohydro Approval Unlikely Following Negative Panel

 December 10, 2012 10:38 AM

(By Mani) Zogenix, Inc. (NASDAQ: ZGNX) shares plunged about 40 percent after Zohydro failed to receive a positive recommendation from an FDA Advisory Committee, making it unlikely to get  approval for the drug, which is used to manage moderate-to-severe chronic pain.

The Committee cited safety concerns, mainly abuse potential and dependence. It appeared that the panel held Zohydro to a higher standard than other in-class drugs.

As such, it is unlikely that Zogenix will receive approval by the Prescription Drug User Fee Act (PDUFA) date of March 1, 2013. The potential approval may be delayed until abuse risks are mitigated.

[Related -Zogenix (ZGNX): FDA Advisory Committee to Review Chronic Pain Treatment Candidate]

"We believe ZGNX will continue to work with the FDA to improve upon the current REMS program, which the panel viewed as insufficient (owing mainly to its voluntary nature). We note the panel narrowly voted in favor of Zohydro's efficacy, questioning the long-term efficacy of Zohydro," Oppenheimer analyst Christopher Holterhoff wrote in a note to clients.

Of note, the panel felt it was appropriate to juxtapose Zohydro's abuse potential to that of oxycodone vs. oxycodone combination products, with the former having 3x-4x higher abuse.

The panel stressed the ineffectiveness of the current class-wide ER LA Risk Evaluation and Mitigation Strategy (REMS) program potentially resulting in a progression toward additional restrictions.

[Related -Zogenix (ZGNX) Starts Relday Clinical Trial For Schizophrenia]

"ZGNX has a TRF formulation of Zohydro in preclinical development, and while development timing remains uncertain, this formulation may quell panel concerns," Holterhoff said.

Zohydro is an oral, novel extended-release (ER) formulation of hydrocodone without acetaminophen for the management of moderate to severe chronic pain in patients requiring continuous, around-the-clock opioid therapy for an extended period of time.

If approved, Zohydro ER could be the first extended-release, novel formulation hydrocodone therapy without acetaminophen for the management of chronic pain, avoiding the potential for liver injury associated with the use of acetaminophen in high doses or over long periods of time. Acetaminophen may cause liver injury when used in high dosages, over long periods of time or in accidental overdoses due to multiple acetaminophen products being taken at once.

Chronic pain can be managed with both immediate-release and extended-release opioids. Currently marketed hydrocodone products are the only immediate-release and contain an analgesic combination ingredient, primarily acetaminophen. An estimated 100 million people in the United States are burdened with chronic pain, at an estimated national economic cost of $560 billion to $635 billion annually.

San Diego, California-based Zogenix is a specialty pharmaceutical company developing and commercializing products for the treatment of central nervous system disorders and pain. The company's first commercial product, Sumavel DosePro(R) (sumatriptan injection) Needle-free Delivery System was launched in January 2010 for the acute treatment of migraine and cluster headache.

"We note there could be upside to our current ~$1-2/share estimate (~$1/share Sumavel DosePro, remainder for Zohydro) on faster than expected approval of Zohydro approval. Based on current cash balances ($50M as of 3Q12), we believe ZGNX may undertake capital-raising initiatives in 2013," Holterhoff noted.



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