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Summary

  • Zogenix is subject to a campaign against its drug Zohydro.
  • Zohydro has received FDA approval.
  • The stock is oversold.

Since the FDA's approval in late October 2013 of the drug Zohydro, manufactured by Zogenix (NASD: ZGNX), there has been a growing resistance to the drug, fueled by politicians, law-enforcement officials and others with vested interests, including rival manufacturers. This presents a buying opportunity in ZGNX, which has been adversely affected by the negative publicity and is selling at more than 35 percent off its 52-week high.

It would be unprecedented for politicians to intervene based on their limited knowledge to overrule a scientific decision made by the FDA after an 18-month, careful evaluation of known and potential risks. The safety of drugs and access to them by patients in need are issues that are far too important to politicize in this way.

Zohydro is a unique, niche product for chronic severe pain sufferers who cannot tolerate the acetaminophen that is used in other extended-release opioid medications such as OxyContin and hydrocodone (Vicodin). For a growing number of people, acetaminophen causes liver damage that can lead to fatalities or the need for liver transplants. Zohydro offers an important option for an estimated limited market of 2.5 million patients whose suffering cannot be alleviated by other drugs.

Many of us have a family member or friend who falls into the category of patients that need Zohydro - those suffering with lower back pain, fibromyalgia, severe arthritis or shingles, for example. We should therefore pay close attention to this situation and look carefully at the facts. Otherwise, these patients may be denied access to a pain treatment that often is their last resort.

The principal objection cited by opponents of the drug is that it is not tamper-resistant and could be crushed and snorted by drug abusers. This argument is akin to saying that any product with the potential for misuse or abuse - like sports cars or alcohol (a universe that is replete with possibilities) - should be forbidden regardless of its benefits. The FDA Commissioner Margaret Hamburg pointed out that other opioid products are not any safer, nor do they offer true tamper resistance. While there are plans in the pipeline to make Zohydro tamper-proof as of 2016, Commission Hamburg didn't want suffering patients to have to wait that long. Patients should not be blamed for those that abuse drugs.

Another false claim about Zohydro is that is far stronger and dangerously more lethal than any alternative medications. These claims are not true. There are other extended release options of higher strength.

Purdue Pharma L.P., which manufactures oxycodone - long a source of great abuse by drug addicts - has begun trials of an acetaminophen-free product, which may accelerate the call to reconsider the FDA's position on Zohydro. In view of the Commissioner's assessment of the poor efficacy of current tamper-resistant approaches, an objective observer must ask why one product would be considered superior to the other.

The political charge against Zohydro is currently led by Senator Joe Manchin (D-WVA), who is the father of Heather Manchin Bresch. Ms. Bresch is the CEO of Mylan (NASDAQ:MYL), which coincidentally manufactures generic hydrocodone - a direct competitor to Zohydro. Is this not a conflict worthy of our attention?

This is not the first time that Senator Manchin has had an apparent professional conflict where his daughter is concerned. Several years ago, Ms. Bresch claimed that she had received an MBA degree from West Virginia University, which was not the case. Her father, then Governor of West Virginia, claimed to have no role in the University awarding her an MBA degree despite her alleged failure to meet the requirements of the school. The Chancellor of West Virginia University later resigned over this case.

Zogenix does an exemplary job of maintaining industry-leading safeguards, and has an External Safety Use Board as well as independent surveillance of use and misuse. The company compensates its sales team not on sales, but rather on its educational efforts and the effective use of educational resources by pharmacists and others. It offers free access to locking pill caps and discounts safe storage units. The drug is subject to the most restrictive of FDA schedules.

Investors in Zogenix should question the political nature of the campaign against Zohydro, which threatens the valuation of the company by trying to overturn a valid and scientific FDA decision. That's a slippery slope for all investors in pharmaceutical companies.

It is becoming increasingly unlikely that political efforts against Zohydro will succeed. While a negative outcome would surely further depress the stock, investors should take advantage of the attractive price to increase their positions. The FDA has no reason - apart from politics - to overturn it's own decision, and certainly will want to guard against political control of scientific judgment.

Source: Zohydro: Should Politicians Be Able To Overturn An FDA Decision?