Zogenix, Inc. (NASDAQ:ZGNX)

CAPS Rating: 2 out of 5

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Player Avatar zzlangerhans (99.80) Submitted: 12/24/2011 4:10:16 AM : Underperform Start Price: $1.74 ZGNX Score: +13.58

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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Member Avatar OklaBoston (66.92) Submitted: 12/31/2011 10:03:14 PM
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Red-thumbing a stock with 68.4% insider ownership and ZERO insider sales in 2 years doesn't sound like a great idea to me. Especially when a director bought on the open market only 3 months ago.

Member Avatar ta2122 (32.03) Submitted: 2/8/2012 9:10:23 PM
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Of course he bought, if he sold it would be worthless.

Member Avatar DAG1996MF (< 20) Submitted: 2/29/2012 3:38:42 PM
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"Their future rests on the regulatory and commercial success of a new prescription opiate." And history has proven that the market for prescription opiates is tiny and shrinking, right? lol

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