Why Zogenix Inc. Shares Rocketed 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 company developing therapies to treat central nervous system disorders and pain, jumped as much as 15% after updating the status of its severe pain medication Zohydro ER in Massachusetts.

So what: As a quick refresher, in late March Massachusetts Gov. Deval Patrick announced that he was banning the use of Zohydro ER within the state because of the high potential risk for abuse of the therapy. Patrick noted that he wouldn't allow Zohydro ER to be sold until an abuse-resistant formulation became available.

Last night after the market closed, however, a Zogenix press release noted that the U.S. District Court in Massachusetts entered an order to prevent the implementation of the state's ban on Zohydro ER, effective April 22, 2014. In other words, the Court wanted to ensure that a precedent wasn't being set where states could pick and choose what drugs to allow and not allow. The court was simply reaffirming that this was the job of the Food and Drug Administration. 

Now what: I'm not really sure this severe pain opioid-based therapy could possibly get any more controversial. The FDA's panel voted overwhelmingly against recommending approval, the FDA granted it approval, the state of Massachusetts bans it, and its own District Court overturns that ban! This has more twists than an M. Night Shyamalan movie!

While it's great news for Zogenix and shareholders that Zohydro ER is cleared for sale in Massachusetts, it remains to be seen what sort of peak sales potential is possible for a therapy with so many usage concerns. For that reason, and the murky outlook as to when Zogenix will be profitable, I would suggest possibly adding this stock to your watchlist, but sticking to the sidelines.

Zogenix shares may be soaring today, but they'll probably have a hard time keeping pace with this top stock in 2014
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The article Why Zogenix Inc. Shares Rocketed Higher originally appeared on Fool.com.

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 may not 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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