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Here's Why Zogenix Dropped 29.1% in April

By Maxx Chatsko – May 8, 2019 at 6:58PM

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The pharma company got a rejection letter from the U.S. Food and Drug Administration.

What happened

Shares of Zogenix (ZGNX) lost over 29% last month, according to data provided by S&P Global Market Intelligence. The pharma company collapsed after it received a refusal-to-file letter from the Food and Drug Administration (FDA) for its lead drug candidate. That just means regulators decided not to review the new drug application (NDA) submitted by the company. 

Why not? It's important to note that regulators didn't request additional efficacy or safety studies for Fintepla, a proposed treatment for seizures associated with Dravet syndrome, a rare form of epilepsy that begins in infancy. Instead, the FDA said Zogenix didn't submit all nonclinical studies and provided the incorrect version of a clinical data set. Those are problems that can be addressed, albeit somewhat embarrassing oversights by the clinical-stage pharma.

A paper airplane representing a falling chart.

Image source: Getty Images.

So what

The good news is that Zogenix has requested a Type A meeting (read: one helping a product development program get back on track) with the FDA. It expects to meet in early June to discuss the NDA for Fintepla and should leave knowing exactly what needs to be done to get the application ready for official review. That just means regulators will pore over it, and doesn't guarantee product approval or rejection.

The bad news is that the multi-month delay -- which could have been easily avoided -- might prove costly for the business and shareholders. Fintepla is expected to compete with Epidiolex from GW Pharmaceuticals, but will now lose out on important sales and market-share capture opportunities.

Now what

Zogenix is still plugging away with commercialization activities for Fintepla. It announced that the drug candidate's application was accepted for review by the European Medicines Agency, while also securing a distribution agreement for the drug candidate in Japan. Of course, investors will be closely watching how events unfold with the FDA, which is the gatekeeper to the largest market opportunity of all.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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