Zohydro, a new opioid painkiller developed by San Diego-based Zogenix (NASDAQ: ZGNX), could still be approved by the Food and Drug Administration to treat chronic pain, even though an advisory panel voted against it, according to a Wells Fargo analyst who follows the company.
“We continue to believe an approval is a probable outcome, but cannot rule out a modest (several months) delay,” wrote senior analyst Michael Tong, who rates Zogenix “outperform” with a price target of $3.50 to $4.00.
Shares of Zogenix lost over half their value this week, closing Wednesday at $1.19, after a panel of pain experts voted 11-2 against Zohydro for moderate to severe chronic pain.
Stifel Nicolaus and Oppenheimer both downgraded Zogenix to “hold” and “perform” respectively. Oppenheimer’s Christopher Holterhoff said in a client note he does not expect Zohydro will receive FDA approval. Stifel Nicolaus analyst Annabel Samimy called the drug’s approval a “viable possibility” but said she was “skeptical of Zohydro’s ultimate contribution.”
The FDA is expected to decide by March 1 whether to approve sales of Zohydro ER, which would be the first pure hydrocodone drug on the market. Currently all other forms of hydrocodone are combined with lower-strength painkillers such as acetaminophen (Vicodin) or ibuprofen. About 47 million patients received prescriptions for hydrocodone products last year, according to the FDA.
“If approved and marketed, Zohydro ER will be abused, possibly at a rate greater than that of currently available hydrocodone combination products,” FDA staff reviewers wrote in a report to the Anesthetic and Analgesic Drug Products Advisory Committee, which ultimately voted against approving the drug.
Although rare, it’s not unheard of for the FDA to ignore a recommendation of an advisory committee. In July, the FDA approved a plan to address prescription drug abuse by unveiling a risk evaluation and mitigation strategy (REMS) that calls for the voluntary education of doctors in opioid prescribing. An expert panel had recommended that pain education be mandatory.
A REMS strategy is the main issue holding up Zohydro’s approval. Several members of the advisory panel said more risk measures are needed to prevent the drug from being abused, such as a tamper resistant formula that makes it harder for pills to be crushed into powder and snorted. Zogenix is years away from developing a tamper resistant version of Zohydro.
Wells Fargo’s Tong thinks the FDA will ultimately approve Zohydro, although it could extend the drug’s review period to “buy itself more time.”
“Our reasoning is based on FDA’s acknowledgement that Zohydro ER is effective and safe when used as intended. At the same time we do not believe FDA will require a more stringent REMS program for Zohydro ER, other than incorporating the voluntary measures proposed by ZGNX. Of course, we cannot predict FDA action with certainty,” Tong said in a note to clients.
If approved by the FDA, Zohydro would be classified as a Schedule II drug and be subject to stricter controls on prescribing and dispensing. Hydrocodone combination drugs are classified as Schedule III drugs, which have fewer restrictions.
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November 12, 2012
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