Zogenix shares rise on delayed FDA drug decision

Zogenix shares rise on speculation FDA plans to approve company's painkiller

Associated Press

WASHINGTON (AP) -- Shares of drugmaker Zogenix Inc. surged Wednesday, as investors speculated that a delayed decision on the company's lead drug will lead to positive approval in coming weeks.

THE SPARK: Zogenix reported Tuesday that the Food and Drug Administration would take longer than expected to review its drug Zohydro, a long-acting version of the painkiller hydrocodone. The FDA did not provide an explanation for the delay but indicated it "would likely be brief and may last only several weeks." Zogenix said the company has not been asked to submit any additional information.

THE BIG PICTURE: If approved Zohydro would be the first pure hydrocodone medication available in the U.S. Currently available products combine the drug with lower-grade painkillers such as acetaminophen. The company's announcement that FDA is still reviewing the drug may have surprised investors in light of the drug's negative review from federal advisers. In December an FDA panel of specialists voted 11-2 against the drug due to concerns that it could be abused by people addicted to painkillers. Hydrocodone belongs to a family of medicines known as opiates, which includes morphine, oxycodone, codeine and methadone.

The FDA does not have to follow the guidance of its advisers, though it often does.

THE ANALYSIS: Wells Fargo analyst Michael Tong said in a note to investors that the delay may bode well for Zogenix, since the FDA could have rejected the drug outright if it thought it was unapprovable. Tong said the short-term delay suggests the agency is working on measures to make sure the drug is used safely.

"We continue to believe the odds for eventual approval are high. We speculate FDA is dealing with issues of access and potential misuse," Tong said. He rates the company as "outperform" with a price target of $1.21.

SHARE ACTION: Shares of San Diego-based Zogenix Inc. rose 46 cents, or 38 percent, to $1.67 in afternoon trading.

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