Why Zogenix Inc. Shares Temporarily Spiked Higher

Why Zogenix Inc. Shares Temporarily Spiked Higher

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 developer of therapies to treat central nervous system disorders and pain, spiked higher by as much as 23% early in the trading session after receiving a price target hike from research firm William Blair. Zogenix has since given up all of its gains and is now hugging the flatline as of this writing.

So what: Before the opening bell, William Blair maintained its rating of outperform on Zogenix shares but doubled its price target from $3 to $6, implying up to 97% upside to shares based on its Friday close. If you recall, Zogenix was the top dog last week among biotech stocks, jumping by as much as 53% at one point on Friday, after the Food and Drug Administration approved Zohydro ER for the treatment of severe chronic pain despite its panel of advisers recommending in December against approving the drug because of abuse concerns by a vote of 11-2.

Now what: Now is that time where I again remind you that analyst ratings, including price target hikes, rarely have any tangible effect on a stock's long-term valuation. Although Zogenix's outlook has clearly improved with the surprise approval of Zohydro ER, it still must successfully launch the drug and find a way to further reduce its cash burn rate. The case for Zogenix did, indeed, get more intriguing last Friday, but it's nowhere near the point where I would feel comfortable owning this stock just yet. I wouldn't, however, steer you away from adding Zogenix to your watchlist.

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The article Why Zogenix Inc. Shares Temporarily Spiked Higher 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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