Dravet syndrome and Lennox-Gestaut syndrome are two rare forms of epilepsy that currently have no approved treatments, but Zogenix (NASDAQ:ZGNX) and GW Pharmaceuticals (NASDAQ:GWPH) are working to change that.

In this Industry Focus: Healthcare segment, Motley Fool analyst Kristine Harjes and contributor Todd Campbell explain how Zogenix's drug ZX008 works, why this is so exciting for patients and investors, some important things that investors should know about ZX008's history, and more.

A full transcript follows the video.

This video was recorded on July 26, 2017.

Kristine Harjes: Let's move on to our final company of the day. This one is called Zogenix, their ticker is ZGNX, and they have a market cap of $320 million.

Todd Campbell: Yeah, this is the smallest stock that we're talking about. It has a $13 price tag and a $322 million market cap. They're working on a drug that has had a mixed past, and we'll talk about that in just a second, that may be able to significantly reduce the number of seizures that patients suffer if they're diagnosed with rare forms of epilepsy.

Harjes: Exactly. They're working on a drug that's called Fenfluramine. They're calling it ZX008, which might be a little bit easier to pronounce and remember. This drug is trying to treat some very rare forms of epilepsy, specifically something called Dravet syndrome and also another one called Lennox-Gastaut. If they are successful, they will be going head to head against a company that we've talked about on the show before called GW Pharmaceuticals. GW has a drug called Epidiolex, which is pending FDA application for approval in Dravet syndrome, which currently has nothing approved to treat it.

Campbell: Yeah. This is a very small patient population. That's something that people should know. They should also know that ZX008 is a low dose of Fenfluramine, and anyone who's been around as long as I have, the grey hair, may remember the drug fen-phen from the 1990s, which was an obesity drug. It was unfortunately found that that drug resulted in some cardiac events, and it was pulled from the market back in 1997. So, this is one of the two drugs that was in that two drug combo of fen-phen, but this is a very low dose of it. So far, there's been no evidence that it is increasing cardiac risk. That's important, obviously, to eventually winning approval. 

What has been seen in trials is pretty darn good efficacy. You mentioned that, if, eventually, this drug makes its way to market, it could be competing against Epidiolex, Epidiolex being marijuana-based drug that GW Pharmaceutical has been working on for years that could also offer new hope in this indication. As you mentioned, there's no approved treatment specifically for it. And typically, patients with this indication do not respond very well to the current existing treatment options that are out there. Lennox-Gastaut syndrome is a much bigger indication. There [are] 15,000 or so patients in the U.S. that theoretically could benefit from the drug, if it's approved, eventually, in that indication. Initially, we're just talking about Dravet syndrome, a relatively small indication. What all eyes are focused on this quarter is data from its Phase III trial, the first of two. You're going to get data in this quarter, and then you'll get data again in early 2018 in Dravet syndrome. And if the data is good, then theoretically, you could get an application filed with the FDA for approval. And if the Lennox-Gastaut, or LGS, data is eventually good some time down the road, then they will file for a supplemental approval of the drug at that point.

Harjes: This is definitely something that investors in GW want to be watching as well, because it could be a pretty big threat. Something to keep an eye on as well when the data comes out is that there aren't any serious side effects, because this drug, as we went through, has a pretty serious side effect history. In fact, it kind of reminds me a little bit of the episode that Gaby and I did on Thalidomide, similar stories there where you have a drug that is not even worth using, and then you find a way that it can actually be effective in a certain population at a certain dose.

Kristine Harjes has no position in any stocks mentioned. Todd Campbell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.