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Why Zogenix Inc. Shares Rocketed Higher

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Zogenix (NASDAQ: ZGNX  ) , a biopharmaceutical company developing therapies to treat central nervous system disorders and pain, jumped as much as 15% after updating the status of its severe pain medication Zohydro ER in Massachusetts.

So what: As a quick refresher, in late March Massachusetts Gov. Deval Patrick announced that he was banning the use of Zohydro ER within the state because of the high potential risk for abuse of the therapy. Patrick noted that he wouldn't allow Zohydro ER to be sold until an abuse-resistant formulation became available.

Last night after the market closed, however, a Zogenix press release noted that the U.S. District Court in Massachusetts entered an order to prevent the implementation of the state's ban on Zohydro ER, effective April 22, 2014. In other words, the Court wanted to ensure that a precedent wasn't being set where states could pick and choose what drugs to allow and not allow. The court was simply reaffirming that this was the job of the Food and Drug Administration. 

Now what: I'm not really sure this severe pain opioid-based therapy could possibly get any more controversial. The FDA's panel voted overwhelmingly against recommending approval, the FDA granted it approval, the state of Massachusetts bans it, and its own District Court overturns that ban! This has more twists than an M. Night Shyamalan movie!

While it's great news for Zogenix and shareholders that Zohydro ER is cleared for sale in Massachusetts, it remains to be seen what sort of peak sales potential is possible for a therapy with so many usage concerns. For that reason, and the murky outlook as to when Zogenix will be profitable, I would suggest possibly adding this stock to your watchlist, but sticking to the sidelines.

Zogenix shares may be soaring today, but they'll probably have a hard time keeping pace with this top stock in 2014
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Read/Post Comments (4) | Recommend This Article (0)

Comments from our Foolish Readers

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  • Report this Comment On April 16, 2014, at 2:02 PM, straticc wrote:

    What usage concerns???!?!?!?!

    It’s a healthier, safer form of medication for chronic pain sufferers... (no acetaminophen).

  • Report this Comment On April 16, 2014, at 2:13 PM, papetebmd wrote:

    We have been prescribing Zohydro ER since its availability. There have been ZERO issues. In fact, my patients love it.

    Follow the advice of this author and you will miss the uptick in price.

    Murky outlook? Usage issues?

  • Report this Comment On April 16, 2014, at 3:44 PM, Dwightfish wrote:

    The Court has done the right thing. There are hundreds of thousands in need of acetaminophen free pain relief. To deny them treatment because a few thousand "might" get access and abuse this drug would be against the benefits it could provide.

    You are also overlooking the potential impact of the schizophrenic treatment that Zogenix has in it's pipeline. I think that a small position should be acquired over time.

  • Report this Comment On April 16, 2014, at 3:58 PM, mpr120 wrote:

    the governor should be removed from office for trying to stick his fat ugly face into something that is none of his business. I plan on suing him for 100 million dollars and then demanding the DOJ prosecute him for abuse of power.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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Related Tickers

8/28/2015 4:00 PM
ZGNX $18.41 Up +1.35 +7.91%
Zogenix, Inc. CAPS Rating: ***