Why Zogenix Inc. Shares Skyrocketed

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Zogenix , a biopharmaceutical company developing therapies to treat central nervous disorders and pain, vaulted higher by as much as 53% on today's announcement that the Food and Drug Administration had approved the drug Zohydro for the treatment of severe chronic pain management.

So what: The FDA said Zohydro ER has been cleared for use in patients who have chronic long-term pain management issues. The FDA's advisory panel actually voted 11-2 in December against recommending Zohydro ER for approval because of concerns about abuse of the medication. This is one of the somewhat rare instances in which the FDA didn't follow the advisory recommendation. Instead, Zogenix will be required to study the effects and potential of abuse for Zohydro ER in a post-approval setting.

Now what: Clearly, this is a gigantic win for Zogenix, which previously had only one FDA-approved product -- Sumavel DosePro for the treatment of migraines. Zogenix has been burning about $40 million-$50 million in cash annually for research and development and general administrative expenses, but Zohydro ER's approval could help cut that burn rate in half as early as next year. While I'm not willing to give Zogenix a clean bill of health just yet, because the launch of a drug is just as important these days as the approval itself, I would certainly say it's in far better shape today than it was last December.

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The article Why Zogenix Inc. Shares Skyrocketed originally appeared on Fool.com.

Fool contributor  Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle  @TMFUltraLong . Try any of our Foolish newsletter services free for 30 days . We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights  makes us better investors. The Motley Fool has a disclosure policy .

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