Why Shares of Zogenix Fell 26% in September

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Why Shares of Zogenix Fell 26% in September

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What happened? Biotech stocks were sold off in September, as the iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) fell 9% during the month.

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What happened? Shares of Zogenix (NASDAQ: ZGNX) were sold off even harder, despite releasing good clinical news.

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So What? Top-line data from a phase 1b trial of Relday, the company’s experimental once a month Schizophrenia medication, was released in September. Results look good enough to start phase 3 testing, but the company is holding off until it finds a partner, which may be the reason that investors dumped the shares. The company estimates trials will begin in Q1 2016. Peak sales are estimated to be around $250 million annually.

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Now what? Beyond Relday, the company’s lead compound, ZX008, is being studied as a treatment for Dravet Syndrome, which is an orphan disease that causes seizures that do not respond to standard treatments. ZX008 has received orphan drug designation in the U.S. & Europe, and peak sales estimates are around $200 million. Phase 3 studies for ZX008 should start in the fourth quarter of 2015. The company raised $98 million in an August common stock offering, so it appears to be well capitalized. Zogenix remains very speculative, so I’m content to stay away until we see good phase 3 data for either ZX008 or Relday.

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