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In what many Zogenix (NASDAQ:ZGNX) investors thought would be the most important week in the history of the company based on the expected decision by the FDA by Friday on approval of their new drug Zohydro (the first pure hydrocodone painkiller), has instead turned out to only produce a notice that their wait will last a bit longer. Now investors will have a little bit more time to speculate on what this delay really means. This is due to news that broke last night of the FDA's notice to delay their ruling on Zohydro for a few more weeks.

For those unfamiliar with Zogenix, I recommend my earlier article, which provides a fundamental analysis of this San Diego based biotech company

In what has been a rough road for Zogenix since the disappointing FDA advisory panel meeting on December 7, 2012, which resulted in a 11-2 vote against Zohydro, the stock is back up sharply today on renewed optimism that this new delay in FDA's ruling on Zogenix's PDUFA may in fact point to the likelihood of Zohydro approval after all.

Wells Fargo analyst Michael Tong sure does think this as evidenced by his note issued early this morning which read, "FDA to miss Zohydro ERs' 3/1/2013 PDUFA date, but the delay is likely short (weeks). We continue to believe the odds for eventual approval are high. We speculate FDA is dealing with issues of access and potential misuse. At the current valuation, we view the reward/risk profile of ZGNX shares as skewed toward the reward side. We see 20% downside potential on a negative FDA decision but potentially 100%+ upside on a positive decision." The firm also maintained an Outperform and $3.50-$4.00 price target.

For those following this Zohydro story know that these delays are likely due to the increased scrutiny by the FDA and public health professionals over rising abuse trends in opioid drugs like hydrocodone. In a world where abuse and misuse of opioid analgesics is described as an "epidemic" by Josepeh A. Califano Jr. (Chairman and President of the National Center for Addiction and Substance Abuse at Columbia University), those bearish on Zogenix are confident the FDA will not approve another drug which is likely to be abused by addicts.

Therefore, I would like to provide an investment idea for those who are bearish on Zogenix and for those who still own the company's shares. This idea would also be applicable to those looking for a hedge in case Zohydro approval is denied in the coming weeks. This targeted hedge is what I like to call the "anti-opioid abuse option."

Anti-Opioid Abuse Option: Titan Pharmaceuticals

It is estimated that there are 2.3 million opioid addicts in the United States. Of those, approximately 750,000 people in the U.S. are receiving medicinal treatment for opioid addiction. An an opportunitstic investor always looking for growing markets, you may ask, "Where can money be made on a product that is helping people overcome their opioid addictions in a new and breakthrough way?"

That option can be found in Titan Pharmaceuticals, Inc. (OTCQB:TTNP), a biopharmaceutical Company developing proprietary therapeutics primarily for the treatment of central nervous system ("CNS") disorders. Titan's lead product, Probuphine, is currently under review by the FDA and will receive notice of approval by April 30, 2013.

Probuphine is an investigational subcutaneous implant capable of delivering continuous and persistent, around the clock blood levels of buprenorphine for six months following a single treatment, enhancing patient compliance and retention. Buprenorphine, an approved agent for the treatment of opioid dependence, is currently available in the form of daily dosed sublingual tablets and film formulations, with reported 2011 sales of $1.3 billion in the United States. Titan estimates Probuphine sales could reach $300-500 million per year at peak.

At a current market cap of $149 million, you can understand why approval for Probuphine puts this company at a currently deep level of undervalutation.

Major Partnership Deal: Titan & Apple Tree Partners

Seeing the major market opportunity for the treatment of opioid addicts, investors are already pouring into this sector. On December 17, 2012, Titan signed a very lucrative $305 million partnership agreement with Apple Tree Partners (via Braeburn Pharmaceuticals) for exclusive Probuphine commercialization rights in the U.S. and Canada. Terms of the deal include:

Titan/Apple Tree Deal

Payments

Up-front payment

$15,750,000

FDA Approval of Probuphine

$50,000,000

Sales Milestone Payments

$130,000,000

Regulatory Milestone Payments

$35,000,000

Sales Launch & Commercialization

$75,000,000

Total

$305,750,000

This deal is transformational for Titan and links the company with Apple Tree's impressive track record of dramatically increasing shareholder value to the companies they help build. Apple Tree is a life sciences venture funding company founded in 1999. A few of Apple Tree's investments which turned out to yield massive gains for early investors include:

Apple Tree Partners Funded Successes

Company

Result

Gloucester Pharmaceutical

Acquired by Celgene (NASDAQ:CELG) for $640 million five months after Apple Tree funding

HeartWare (NASDAQ:HTWR)

Traded at $1/share in 2008; now over $80/share

SGX Pharmaceuticals

Acquired by Eli Lilly & Co. (NYSE:LLY) for $64 million

Coelacanth Corp.

Acquired by Lexicon Genetics (NASDAQ:LXRX) for $32 million

Background on Titan's NDA For Probuphine & Upcoming Short Term Catalysts

On October 29, 2012, Titan submitted a New Drug Application (NDA) to the FDA for Probuphine for the maintenance treatment of opioid dependence in adult patients. On January 2, 2013, the FDA accepted the NDA for review and more importantly granted Priority Review designation for Probuphine. Priority designation is only given to therapies that offer potential major advances in treatment, including improved safety, or provide a treatment where no adequate therapy exists. Instead of the customary FDA review period of six months, review of Probuphine has been fast tracked to four months with a target Prescription Drug User Fee Act (PDUFA) date of April 30, 2013.

According to Titan Executive Vice President Katherine Beebe, Ph.D, " this is an important milestone for Probuphine and the Priority Review designation further underscores the critical need for new treatments for opioid dependence. With more than two million people addicted to opioids in the U.S. alone, there is a need for safe and effective treatments that also reduce the risk of abuse or accidental use."

Upcoming catalysts for Titan:

March 21

In news announced today, an FDA advisory committee (Psychopharmacologic Drugs Advisory Committee - PDAC) scheduled a meeting for March 21 to review Titan's NDA for Probuphine. This committee meeting will include a vote on whether to recommend Probuphine's approval by the FDA.

April 30

The target PDUFA date for the FDA to complete its review of the Probuphine NDA. Titan to receive $50 million payment from Apple Tree Partners upon approval.

Conclusion

In the speculative nature of biotech investing, no investor is ever sure that an FDA decision will go their way. For investors who are worried about Zogenix's chances for Zohydro approval, an attractive hedge and "anti-opioid abuse option" is an investment in Titan Pharmaceuticals.

I am more bullish on Titan than Zogenix at this moment because the forces against opioid abuse and for opioid addiction treatments are far greater than those in support of more painkillers on the market. Titan's lead product, Probuphine, is clearly receiving tailwinds from that sentiment leading to huge outside investments by Apple Tree and by individual investors as the April 30 PDUFA date comes more near.

As the FDA advisory committee (PDAC) meeting of March 21 approaches for the review of Probuphine, Titan is poised to run-up on increased speculation that approval is very likely. My target price for TTNP by this March 21 meeting is $2.50. And if the advisory committee recommends approval, this stock could see another nice move up in anticipation of the April 30 PDUFA date.

Source: Titan As A Hedge For Zogenix