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Zogenix rises on update for pain drug Zohydro

NEW YORK (AP) -- Shares of Zogenix climbed Wednesday after the company's long-delayed pain drug Zohydro appeared to move a few steps closer to approval.

THE SPARK: Zogenix said late Tuesday that the Food and Drug Administration intends to respond to its marketing application for Zohydro after a short delay. The agency's ruling has already been delayed for months. However Zogenix announced some other positive developments: it said the FDA has not found any deficiencies in its marketing application, and it said it has reached an agreement with the agency on the safety label for the drug and a study it will have to conduct if Zogenix is approved.

The company also said the Drug Enforcement Administration has determined that Zohydro will be classified as a Schedule II drug. That means the DEA believes it has a high potential for abuse and addiction. Zogenix said drugs like Zohydro are usually classified as Schedule III drugs, meaning they have a lower potential for dependence.

THE BIG PICTURE: Zohydro is a long-acting version of the painkiller hydrocodone. If approved, Zohydro it be the first pure hydrocodone medication available in the U.S. Older available products combine hydrocodone with lower-grade painkillers like acetaminophen.

In December an FDA panel of advisors 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 is not required to follow the advice of its panels, though it often does so. The FDA was scheduled to make a decision on Zohydro by March 1 of this year but the agency extended its review.

San Diego-based Zogenix Inc. markets an injectable migraine treatment called Sumavel DosePro, which is delivered through a needle-free system.

THE ANALYSIS: William Blair & Co. analyst Tim Lugo said the labeling and post-approval study disclosure and the fact that the FDA hasn't found any deficiencies in Zogenix's applications are all positive developments for the company. He said it looks like the FDA will approve Zohydro despite the negative panel review in 2012.

He rates Zogenix shares "Outperform" with a price target of $3.

SHARE ACTION: Zogenix shares rose 47 cents, or 24.1 percent, to $2.42 in morning trading. The stock closed at $2.36 before the panel review. After the review the shares lost half their value and fell to all-time lows.