Zogenix Inc. (NASDAQ: ZGNX) announced an agreement for the sale of its Zohydro ER (hydrocodone bitartrate) business to Pernix for $100 million. This transaction will be composed of $30 million in cash, $20 million in Pernix common stock and a $50 million short-term promissory note. Meeting regulatory and sales milestones could push the total of payments to $283.5 million.
This transaction will enable Zogenix to shift strategic focus to its late-stage CNS clinical pipeline, which includes two anticipated product candidates.
The first candidate is ZX008, which has orphan drug designation in the United States and European Union for the treatment of Dravet syndrome. It is expected to enter Phase 3 development later this year.
The second candidate is Relday, a unique long-acting injectable formulation of risperidone for the maintenance treatment of schizophrenia. It is expected to enter Phase 3 studies in the first half of 2016.
Roger Hawley, CEO of Zogenix said:
The submission and recent approval of the supplemental New Drug Application (sNDA) for Zohydro® ER with BeadTek™ was an important catalyst for increasing strategic interest in the brand. We are very pleased to have selected Pernix for this transaction as we believe they are well positioned to continue raising awareness of the important clinical benefits of Zohydro ER for patients suffering with severe chronic pain who are in need of around-the-clock opioid therapy.
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Hawley also commented on the transition involved with the deal:
As a further benefit to those involved with Zohydro ER, upon closing both companies plan to transition the Zogenix sales team and other select commercial and medical affairs employees to Pernix. This will help ensure uninterrupted customer support, a smooth transition and continued growth of the product. We thank our entire commercial and medical organizations for their achievements during the product’s first year on the market and look forward to continued efforts in the coming months by our sales team in driving adoption of Zohydro ER in the pain community.
Looking as far back as February 2014, shares were closing in on the $5 mark but fell short, way short. At that time shares fell as much as 26%, similar to the fall we are seeing now, after a rival pharmaceutical company said it will seek regulatory approval of a tamper-proof version of Zogenix’s Zohydro.
The betting in 2014 seemed to be if Purdue Pharma’s hydrocodone bitartrate drug, Hysingla, would win U.S. Food and Drug Administration (FDA) approval and kick Zohydro out of the market. Hysingla eventually did receive approval in November.
Shares of Zogenix were down 27.5% at $1.21 in early afternoon trading Wednesday. The stock has a consensus analyst price target of $2.75 and a 52-week trading range of $1.07 to $3.98.
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