On Feb. 27, shares of Zogenix (NASDAQ:ZGNX), a California-based pharmaceutical company, slid by about 9%. This drop came on the heels of the company's announcement that the U.S. Food and Drug Administration (FDA) extended the review period for Fintepla, a product for which Zogenix submitted a New Drug Application (NDA) in September 2019. Zogenix initially expected a decision from the FDA in the first quarter, but the company now expects an answer from the health industry regulator in late June.

After its most recent slump, Zogenix's shares are down by 52% over the past three months, while the S&P 500 is down by 12.7% over the same period. Does this represent a buying opportunity for investors?

Pinning its hopes on Fintepla

Zogenix currently has no approved products on the market; hence the importance of receiving regulatory approval for Fintepla as soon as possible. Fintepla is a potential treatment for seizures associated with Dravet syndrome, a rare form of epilepsy. Fintepla is also being investigated as a treatment for seizures associated with Lennox-Gastaut syndrome (LGS), another rare form of epilepsy. Zogenix originally submitted an NDA to the FDA in February 2019, along with a marketing authorization application to the European Medicine Agency (EMA) for Fintepla around the same time.

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However, the FDA determined the NDA was "not sufficiently complete to permit a substantive review," requiring Zogenix to resubmit the application in September 2019.

Despite this setback, Zogenix has high hopes for Fintepla. During the company's fourth-quarter earnings conference call, Zogenix's management outlined the steps the company is taking both in the U.S. and in Europe in preparation for the launch of Fintepla.

According to Chief Commercial Officer Ashish Sagrolikar:

We have built a team with considerable experience in rare diseases and epilepsy in areas such as market access and marketing. We have initiated discussions with healthcare authorities to develop country-specific health economic models....We already have experienced medical and regulatory teams in place all across Europe and we have recently set up country offices and local leadership in United Kingdom, Germany, Italy and Ireland.

In short, Zogenix is ready for the launch of Fintepla once it receives regulatory approval.

Zogenix faces competition

Even if the FDA approves Fintepla, it will face stiff competition. GW Pharmaceuticals (NASDAQ:GWPH), a biotech company that focuses on developing drugs derived from cannabis plants, markets a product called Epidiolex, which is also a treatment for epilepsy associated with Dravet syndrome and seizures associated with LGS. GW Pharma has racked up strong sales since the drug's approval in June 2018. During the fiscal year 2019, GW Pharma recorded a total revenue figure of $311.3 million, including net product sales of $296.4 million generated thanks to Epidiolex during the year.

Furthermore, it looks as though Fintepla would not be a particularly effective treatment for seizures associated with LGS. On Feb. 6, Zogenix announced results from a phase 3 study evaluating Fintepla as a treatment for seizures associated with LGS, and while Fintepla successfully reduced the number of monthly seizures in patients with LGS, it only did so by 26.5%, compared to a 7.8% reduction in the number of monthly seizures for patients taking a placebo. Investors were not impressed with these results, which led to Zogenix's shares plunging by more than 30%. Given all these factors, Fintepla might not be as successful as Zogenix management hopes it will be.

Should you buy?

Zogenix's hopes currently rest on Fintepla, which will encounter stiff competition from Epidiolex in the U.S. and Europe if it is approved for the treatment of epilepsy associated with Dravet syndrome. Furthermore, the market for seizures associated with LGS will likely be even stiffer for Fintepla -- if it ever receives approval for this indication -- given Zogenix's disappointing phase 3 study. For those reasons, Zogenix's stock isn't a buy, despite having shed more than 50% of its value over the past three months.