Editor's note: This article is a stock pitch made by a member on CAPS, The Motley Fool's free investing community. The pitch is published UNEDITED and is the opinion of the CAPS member whose pitch it is, in this case: zzlangerhans.

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Company Zogenix (Nasdaq: ZGNX)
Submitted By zzlangerhans
Member Rating 99.18
Submitted On Dec. 23, 2011
Stock Price at Underperform Recommendation $1.74


Zogenix Profile

Star Rating (out of 5) *
Headquarters San Diego
Industry Biotechnology
Market Cap $163 million

Sources: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS.

This week's pitch :

I've been itching to red thumb Zogenix since March, but a year filled with premature red thumbs made me too gun shy and the stock never rose up to meet my threshold. Now I find myself finally placing my red thumb at an entry price two thirds lower than when I started following the stock. I should have gone with my first instincts.

Zogenix suffers from the same problem as Somaxon, which Labopharm and many others suffered from before. They market a drug with limited commercial appeal whose revenues don't come close to the cost of producing and selling it. In the case of Zogenix it's superfluous triptan Sumavel, whose revenues seem to have topped out under 9M per quarter. Partner Astellas finally called it quits on Sumavel this month, which won't do much good for Zogenix's 20M+ quarterly burn rate.

The company has fortified their cash position recently at the expense of heavy dilution and debt, which can only control the hemorrhage temporarily. Their only long-term hope is Zohydro controlled-release hydrocodone for chronic pain, which should be submitted to the FDA in Q2 2012. You read that right. Their future rests on the regulatory and commercial success of a new prescription opiate. I'm sure investors in Pain Therapeutics and Acura are weeping quietly right now.

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