Zogenix, Inc. (NASDAQ:ZGNX) Offloads Its Controversial Drug Zohydro

Pharmaceutical company Zogenix, Inc. (NASDAQ:ZGNX) has offloaded its painkiller known as Zohydro for about $400 million. The company inked a deal to sell the controversial drug to Pernix Therapeutics Holdings Inc (NASDAQ:PTX), a move that will also allow it to gain more focus on its two other drug candidates. The management cited the steps as one that would enable them to regain their destiny.

Why are analyst so optimistic about ZGNX?

Zogenix, Inc. (NASDAQ:ZGNX) is been struggling to market Zohydro, an opioid-based drug that attracted bad press right from the launch. The company has already spent a lot of money on marketing the drug with difficulties. While nobody saw the deal with Pernix over Zohydro coming, it is not totally surprising that the company had to make the move.

At some point, Zogenix’s CEO, Roger Hawley, told analysts that he didn’t want to get to a point where he needed to fundraise for the drug again given the financial challenges that he had already dealt with.

$100 million upfront payment

In the deal with Pernix, Zogenix, Inc. (NASDAQ:ZGNX) is expected to receive upfront payment up to $100 million and more than $285 million will come through future milestone payments. The company intends to use the funds to develop its existing pipeline.

Zogenix, Inc. (NASDAQ:ZGNX) has two drug candidates remaining in its pipeline following the offloading of Zohydro. One of the drug assets is known as brabafen, which is designed for the treatment of a condition known as Dravet syndrome. The other drug candidate in the company’s pipeline is relday, a compound directed at the treatment of schizophrenia.

Cost cutting opportunity

Besides the direct financial boost from the sale of Zohydro, Zogenix, Inc. (NASDAQ:ZGNX) will also be able to significantly cut cost. The company will transfer some employees and sales team to Pernix as part of the deal, a development that will narrow its staff headcount to 60, down from 200.

Controversy

Zohydro, which has registered over 57,000 prescriptions, has been under scathing attacks in the U.S. amid a surge in the abuse of opioids. There is a version of Zohydro that is not prone to abuse.

About the Author

Michael joined US Markets Daily in 2009 and is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments.

Leave A Response