What happened

After updating investors on its clinical-trial progress for low-dose fenfluramine in patients with a rare form of epilepsy called Dravet syndrome, Zogenix (NASDAQ:ZGNX) saw its shares shoot 14.2% higher last month, according to S&P Global Market Intelligence.

So what

Zogenix has been on a tear since reporting first-quarter financials in early May. At the time, the company reported its phase 3 Dravet syndrome trial evaluating low-dose fenfluramine, ZX008, was fully enrolled, and that top-line results from the trial are expected in the third quarter of 2017.

A businessman points to dollar signs floating in the air.


It also reported that another phase 3 study of ZX008 in Dravet syndrome continues to enroll patients, and that the U.S. Food and Drug Administration has cleared Zogenix to begin a phase 3 study of ZX008 in Lennox-Gastaut syndrome.

If its phase 3 trials in Dravet syndrome pan out, ZX008 could someday be pitted head-to-head against GW Pharmaceuticals' (NASDAQ:GWPH) marijuana-derived drug Epidiolex.

Based on small early-stage studies, ZX008 could stand a good chance at controlling seizures better than Epidiolex. In a small early-stage study of ZX008 involving 10 patients, 90% had an average seizure frequency of less than one per month over a five-year observation period, and 30% of patients were seizure-free for the entire five-year period. A follow-on study also adds conviction, showing that there was a 76% reduction in monthly seizures from baseline in nine Dravet syndrome patients.

This data appears to match up pretty strongly to Epidiolex, which in phase 3 trials reduced monthly seizures by about 40% from baseline.

Now what

The phase 3 studies being conducted by Zogenix are much larger, and late-stage studies still have a high failure rate, so the upcoming data in September is critical to this stock's ability to continue climbing.

Assuming the readout from the first phase 3 trial is good, and data from the second study in 2018 is also positive, an FDA application for ZX008 could be filed in 2018, clearing the way for commercialization either late in 2018 or sometime in 2019. That timeline would likely put it behind GW Pharmaceuticals' Epidiolex. GW Pharmaceuticals plans to file for FDA approval for that drug soon, which means it could land an approval early in 2018.

The Dravet syndrome market, however, is tiny, so investors will want to keep an eye on how Zogenix's Lennox-Gastaut study progresses too. There are an estimated 30,000 children and adults in the U.S. with Lennox-Gastaut syndrome, and therefore, a win in that indication would be a bigger needle-mover. Epidiolex has already proven itself in Lennox-Gastaut syndrome, so an eventual green light in both syndromes would position Zogenix best to battle Epidiolex for market share.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.