Company Update (NASDAQ:ZGNX): Zogenix, Inc. Provides Corporate Update and Reports 2Q:15 Financial Results


Zogenix, Inc. (NASDAQ:ZGNX), a pharmaceutical company developing and commercializing products for the treatment of central nervous system (CNS) disorders, provided a corporate update, and announced financial results for the second quarter ended June 30, 2015.

Corporate Update

  • Presented new data at European Paediatric Neurology Society Congress in Vienna, Austria, demonstrating sustained efficacy and tolerability for patients treated with low-dose fenfluramine as an adjunctive therapy for Dravet syndrome. During the 5-year follow-up period from 2010-2014, over 80% of patients experienced a greater than or equal to 75% reduction in seizure frequency every year, and a majority of patients experienced long periods of seizure freedom. The drug was well tolerated and no patient discontinued treatment due to adverse events.
  • Following recent correspondence with the U.S. Food and Drug Administration (FDA), the Company is on track to commence its Phase 3 program for ZX008 in the fourth quarter of 2015. The FDA agreed that Zogenix’s proposal of two double-blind, randomized, controlled Phase 3 studies, plus one long-term, open label extension study, should be sufficient to support registration, pending review of study outcomes.
  • Hosted a Key Opinion Leader meeting focused on Dravet syndrome, including an overview of ZX008, the Company’s investigational proprietary pediatric formulation of low-dose fenfluramine, that featured keynote presentations by Lieven Lagae, M.D., Ph.D., Professor at the University of Leuven, Belgium (KUL), Head of the Paediatric Neurology Department of the KUL University Hospitals and Director of the Childhood Epilepsy Program at the KUL University Hospitals, and current President of the European Pediatric Neurology Society and an elected board Member of the International Child Neurology Association, and Joseph Sullivan, M.D., Associate Professor of Neurology and Pediatrics at the University of California – San Francisco (UCSF), Director of the UCSF Pediatric Epilepsy Center. Dr. Sullivan also serves on the Pediatric Epilepsy Consortium Steering Committee, the Dravet Syndrome Association Medical Advisory Board and the PCDH19 Alliance Scientific Advisory Board. The archived webcast of this event is available on Zogenix’s website.
  • Expanded senior leadership team to further drive strategic focus on CNS disorders and orphan drug development through appointments of Gail M. Farfel, Ph.D., as Executive Vice President and Chief Development Officer, and Thierry Darcis, M.D., M.B.A., as Executive Vice President and General Manager, Europe.
  • Raised net proceeds of approximately $92.0 million through an underwritten public offering of common stock.
  • Executed a reverse stock split of Zogenix’s outstanding common shares at an exchange ratio of 1-for-8 in order to support a per share valuation for the Company that is more in line withZogenix’s peers.

“With further positive data from the Belgian study of low-dose fenfluramine in Dravet syndrome, a clear development path for Phase 3 that now includes significant input from the FDA and the successful execution of a Dravet syndrome-focused KOL event, we have generated significant momentum over the past several months,” said Stephen J. Farr, Ph.D., President and CEO. “From a clinical development standpoint, we are well-positioned to begin our Phase 3 program for ZX008 in the fourth quarter of 2015. In addition, following our recent capital raise, Zogenix is now in the strongest financial position in our company’s history, and our cash should be sufficient to take us through the regulatory submissions, and potential approvals, of ZX008 in the U.S. and Europe.”

Second Quarter 2015 Financial Results Compared to Second Quarter 2014 Financial Results

As a result of the sale of the Zohydro ER business, all Zohydro ER revenue and expenses have been excluded from continuing operations for all periods herein and reported as discontinued operations. All prior period information has been recast to conform to this presentation.

  • Total revenue for the second quarter of 2015 was $7.4 million, and reflected $6.0 million of contract manufacturing revenue and $1.4 million of service and other product revenue (including Migranal®-related co-promotion fees earned under the Company’s co-promotion agreement with Valeant Pharmaceuticals). This compared with total revenue of $6.7 millionin the same quarter last year, which included $2.2 million of contract manufacturing revenue and $4.5 million of net product and other service revenue. The increase in contract manufacturing revenue and decrease in net product revenue in the 2015 second quarter was due to the sale of the Sumavel® DosePro® business to Endo International Plc in May 2014 and subsequent performance under the related supply agreement.
  • Second quarter 2015 research and development expenses totaled $6.2 million, up from $3.2 million in the second quarter a year ago, as the Company continued preparations for its two Phase 3 studies for ZX008, and a multi-dose clinical study for Relday®, which commenced inFebruary 2015.
  • Second quarter 2015 selling, general and administrative expense totaled $7.6 million, compared with $9.1 million in the second quarter a year ago. The Company incurred selling expenses for Sumavel DosePro prior to its sale in May 2014.
  • Income from discontinued operations was $79.2 million, compared to a loss of $14.7 millionin the second quarter a year ago.  Income from discontinued operations includes a gain on the sale of the Zohydro business of $75.6 million net of tax expense and the $5.0 million for the Purdue waiver agreement received on June 29, 2015.
  • Net loss from continuing operations was $6.7 million, compared with net income of $77.5 million in the same quarter a year ago. Net income, including discontinued operations, for the second quarter of 2015 was $72.5 million, or $3.78 per basic share and fully diluted, which includes the pre-tax net gain on the sale of Zohydro ER, which was sold in April 2015, compared with net income of $62.9 million, or $3.59 per basic share and fully diluted, for the second quarter a year ago, which includes the pre-tax gain on the sale of Sumavel DosePro.

Six-Months Ended June 30, 2015 Financial Results Compared to Six-Months Ended June 30, 2014 Financial Results

As a result of the sale of the Zohydro ER business, all Zohydro ER revenue and expenses have been excluded from continuing operations for all periods herein and reported as discontinued operations. All prior period information has been recast to conform to this presentation.

  • Total revenue for the six months ended June 30, 2015 was $12.0 million, and reflected $10.2 million of contract manufacturing revenue and $1.8 million of service and other product revenue (including Migranal®-related co-promotion fees earned). This compared with total revenue of $14.1 million in the same period last year, which included $2.2 million of contract manufacturing revenue and $11.9 million of net product and other service revenue. The increase in contract manufacturing revenue and decrease in net product revenue in the 2015 second quarter was due to the sale of the Sumavel® DosePro® business to Endo International Plc in May 2014 and subsequent performance under the related supply agreement.
  • Research and development expenses for the six months ended June 30, 2015 totaled $11.4 million, up from $5.7 million in the year ago period, as the Company continued preparations for its two Phase 3 studies for ZX008, and the multi-dose clinical study for Relday.
  • Selling, general and administrative expense for the six months ended June 30, 2015 totaled$13.9 million, compared with $21.6 million in the year ago period. The Company incurred selling expenses for Sumavel DosePro prior to its sale in May 2014.
  • Income from discontinued operations was $66.5 million, compared to a loss of $30.7 millionin the year ago period.  Income from discontinued operations includes a gain on the sale of the Zohydro business of $75.6 million net of tax expense and the $5.0 million for the Purduewaiver agreement received on June 29, 2015.
  • Net loss from continuing operations was $16.9 million, compared with net income of $72.6 million in the same period a year ago. Net income, including discontinued operations, for the six-months ended June 30, 2015 was $49.6 million, or $2.59 per basic share and fully diluted, which includes the pre-tax net gain on the sale of Zohydro ER, compared with net income of $41.9 million, or $2.40 per basic share and $1.31 fully diluted, for the six months ended June 30, 2014, which includes the pre-tax gain on the sale of Sumavel DosePro.
  • Cash and cash equivalents at June 30, 2015 totaled $77.4 million, which did not reflect the net proceeds of $92.0 million received subsequent to quarter’s end related to the public offering that closed on August 5, 2015.

The Company anticipates that its current financial resources, including the net proceeds from the recently closed public offering, will provide sufficient cash to fund operations through several significant milestones, including the U.S. and European Phase 3 studies for ZX008 and potential regulatory approvals in the U.S. and Europe for ZX008.

2015 Financial Guidance

Below is the Company’s financial guidance for the remainder of 2015.

  • Research and development expenses are expected to be $19 to $22 million for the second half of 2015, reflecting the initiation of ZX008 clinical studies and the recent commencement of the Relday multi-dose clinical study.
  • Selling, general and administrative expenses are expected to be $14 to $16 million for the second half of 2015.
  • Contract manufacturing revenue from the supply of Sumavel DosePro to Endo will continue at a low single-digit markup over cost of contract manufacturing.

Additionally, the Company does not expect gain or loss from discontinued operations to be significant in the second half of 2015. (Original Source)

Shares of Zogenix opened today at $19.08 and are currently trading at $18.82, down $0.166 or 0.88%. ZGNX has a 1-year high of $21.65 and a 1-year low of $8.56. The stock’s 50-day moving average is $16.99 and its 200-day moving average is $13.09.

On the ratings front, Zogenix has been the subject of a number of recent research reports. In a report issued on July 15, Brean Murray Carret analyst Difei Yang reiterated a Buy rating on ZGNX, with a price target of $28, which implies an upside of 46.8% from current levels. Separately, on May 11, Oppenheimer’s Akiva Felt maintained a Buy rating on the stock and has a price target of $20.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Difei Yang and Akiva Felt have a total average return of 16.0% and 34.5% respectively. Yang has a success rate of 49.4% and is ranked #307 out of 3728 analysts, while Felt has a success rate of 61.8% and is ranked #24.

Zogenix Inc is a pharmaceutical company engaged in commercializing & developing therapies that address clinical needs for people living with pain-related and CNS disorders that needs treatment alternatives to help return to normal daily functioning.