What happened

Shares of Zogenix (ZGNX) fell nearly 15% last month, according to data provided by S&P Global Market Intelligence. The pharma company announced it was issuing up to 6.9 million shares of common stock at $52 apiece. While Mr. Market wasn't thrilled with the dilution, the share offering was actually a pretty wise move. That's because it took advantage of a recent surge in the stock price to raise up to $359 million in gross proceeds.

So what

The extra cash will come in handy, as Zogenix is preparing to submit applications for regulatory approval of ZX008 in both the United States and Europe by the end of the year. The drug candidate delivered positive results in a second phase 3 trial in July -- the cause of the stock's recent jump -- demonstrating its potential to treat Dravet syndrome. The drug is also being prepared to begin a phase 3 trial for Lennox-Gastaut syndrome. Both diseases are forms of epilepsy.

An ascending graph drawn on a chalkboard that shows a sudden descent.

Image source: Getty Images.

The most recent results were glowing, which has been the case all along for ZX008. That has helped the drug candidate to earn orphan drug status, breakthrough status, and fast-track status from the U.S. Food and Drug Administration. It also bodes well for the drug's eventual marketing approval for treating Dravet syndrome, which is rare but has inadequate options for patients.

Now what

Zogenix has seen its market valuation climb more than 300% in the last year to around $1.6 billion in early September. That's not too surprising, as it looks increasingly likely that the company will get regulatory nods for ZX008. However, seeing that the drug is the only one in development at the company, investors don't have much clarity over the long-term direction of the pharma. Perhaps it will make an acquisition to stock its pipeline or seek to be acquired itself, but right now, investors might want to consider that there may not be much upside to the stock.