Zogenix trades short-term pain for long-term gain

A sign of the times in pain medicine is that on the same day Collegium Pharmaceutical announced the raising of $50m to support the filing of its abuse deterrent opioid, Zogenix got out of the business altogether.

Zogenix flew a white flag over the pain battlefield with its sale of Zohydro ER to Pernix Therapeutics, and has now resumed its life as purely a drug developer. With the sales trajectory not improving markedly quarter on quarter, the company’s executive team acknowledged that they were not big enough to match up to the likes of Purdue Pharma. “It was tough for us to make it without another product in the bag,” Zogenix's chief executive, Roger Hawley, told analysts yesterday.

Cash, glorious cash 

M&A activity has been a spark for share run-ups in this biotech boom, but unfortunately for Zogenix the loss of its one marketed product meant just the opposite. Shares were trading 27% lower in mid-morning trade today, at a seven-month low of $1.22.

The transaction does bring to Zogenix an immediate $30m cash injection, $20m in Pernix shares and an additional $50m promissory note. Regulatory and sales milestones worth $283.5m are also part of the deal, including a $7.5m payment should a new Zohydro formulation – one that has a better chance of winning an abuse-resistance claim on its label – earn approval.

That lack of an abuse-resistance claim on the FDA label had put Zohydro on the back foot in terms of breaking into the US market. When Purdue’s Hysingla ER won approval with a claim of abuse deterrence, it probably put paid to what Zogenix and its 100-strong sales force could do in the field; the company yesterday reported product revenue of $5m in the fourth quarter, up from $4m in the third.

Hiving off that sales force is, of course, another advantage to the deal, as it reduces operating costs and allows a focus on the R&D products Relday for schizophrenia and brabafen for Dravet’s syndrome. Company executives said the current cash pile of $42m plus the proceeds from the Zogenix deal would get the company through an end-of-phase-II meeting for Relday and US and European filing of brabafen, also called ZX-008.

The disadvantage of the deal was spelled out clearly in investors’ response – today’s share-price reaction wiped away $59m in value.

Zogenix now becomes a more risky company whose promise lies in its ability to repurpose old molecules into clinically useful products. Relday is a once-monthly depot injection of Risperdal, and brabafen is a low-dose fenfluramine, an agent withdrawn from the market because of cardiovascular risk.

Not with a bargepole

This only underscores the general peril of working in CNS disease and the particular risk of seeking to bring new opioid-based pain medications to market. Regulators have been adamant about reducing the dangers of opiate misuse, and in doing so have largely scared off big pharma and biotechs from trying to progress agents in this space. Pfizer's decision to largely exit this space, most recently handly back rights to Remoxy last year, is a case in point.

Clinical-stage abuse-deterrent projects in pain are largely the province of small developers – some, like Collegium and KemPharm, remain privately held despite being well advanced in the clinic.

As for Zohydro, finding a home with a company like Pernix, which has a history of acquiring problematic CNS assets and trying to wring sales growth from them, might have been the most promising outcome. Should some of the new projects win approval, it is possible that they will find a home that looks pretty similar.

To contact the writer of this story email Jonathan Gardner in London at [email protected] or follow @ByJonGardner on Twitter