Analysts Weigh In On Zogenix In Light Of Selling Zohydro

Biopharmaceutical company Zogenix Inc (NASDAQ:ZGNX) announced on Tuesday that it will be selling its painkiller drug, Zohydro, to Pernix Therapeutics Holdings Inc (NASDAQ:PTX) for about $400 million.

The deal, scheduled to be closed in April, was made in an effort for Zogenix to cut costs and focus on two other drugs in its pipeline, brabafen, to treat Dravet syndrome, and relday, to fight schizophrenia.

There was a lot of controversy surrounding Zohydro following its launch on the market, as it belongs to the opioid class of drugs. Zogenix received negative attention from the drug as opioid abuse is a growing problem in the United States. As a result, the drug’s sales growth was too slow for the company to afford.

As a part of the deal, Zogenix will give Pernix the Zohydro franchise and transfer its sales team which will slash its employee count from 200 to 60.

Roger Hawley, chief executive officer of Zogenix said, “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... 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."

Zogenix also posted its fourth quarter financial report on March 10th, staying in line with analysts’ expectations. Highlights from the report include a loss of ($.013) a share and $14.9 million in revenue.

According to SmarterAnalyst, Brean Capital analyst Difei Yang reiterated a Buy rating on Zogenix with a price target of $2.50 on March 11th. The analyst’s bullish rating stems from the sale of Zohydro to Pernix. He listed multiple reasons for liking this deal: “1) slow the cash burn; 2) simplify operations; 3) refocus the company to Zogenix' core competency, R&D - we see ZX008 as having significant upside; and 4) the selling price of 5-6x of 2014 Q4 revenue run rate is reasonable, in our opinion, given the profile and history of the product.”



Difei Yang has rated ZGNX 4 times since December, earning a 100% success rate recommending the company and a +28.0% average return per recommendation. Overall, the analyst has a 62% success rate recommending stocks and a +11.1% average return per recommendation.

Separately, William Blair analyst Tim Lugo downgraded his rating on Zogenix from Outperform to Market Perform on March 11th. This was his 5th time rating the stock, earning a 25% success rate recommending the company and a -21.2% average loss per recommendation. Overall, Lugo has a 61% success rate recommending stocks and a +2.4% average return per recommendation.



On average, the top analyst consensus for ZGNX on TipRanks is Strong Buy.