Last Friday was a forgettable one for drug maker Zogenix (ZGNX). Shares popped by 15% in early trading, only to end the day down by 9%. So, how can the swing from gain to pain be explained?
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Let’s start with the uptick. The surge followed an announcement that the FDA had approved Fintepla (fenfluramine), the biotech’s oral treatment for seizures caused by Dravet syndrome, a rare form of childhood epilepsy.
The drug is expected to launch by the end of July, when it will become available to certified prescribers in the US.
So, why did shares drop following the good news? This is most likely due to Fintepla’s labeling. The label includes a box warning the drug is associated with valvular heart disease (VHD) and pulmonary arterial hypertension (PAH). As a result of these risks, prior to treatment, during and after treatment ends, patients will be required to undergo cardiac monitoring using echocardiograms.
For Ladenburg analyst Michael Higgins, the black box warning and required EEGs “were not unexpected.” Additionally, the analyst does not think the “labeling will significantly deter physicians from choosing Fintepla.”
However, Higgins expects other issues to prove more problematic.
As Zogenix plans to price Fintepla at $96,000 annually, (or $1,278 per 30mL bottle), the cost is roughly 3x the annual price tag of GW Pharmaceuticals’ Epidiolex, which sells for the annual price of $32,500.
“We anticipate the switch from OLE (open label extensions) and EAP (early access programs) to having to pay a co-pay for Fintepla will be a sticker shock to many patients and is likely to see many patients move to lower cost drugs like Epidiolex prior to trying Fintepla,” Higgins said.
Adding to the analyst’s fear is the fragile current economic climate. “We are less convinced of Fintepla’s market adoption during this COVID pandemic than otherwise,” Higgins summarized.
Higgins, therefore, reiterated a Neutral rating along with a $26 price target. This implies a modest downside of 1% from current levels. (To watch Higgins’ track record, click here)
The rest of the Street has a more bullish outlook. Based on 5 Buys and 2 Holds, Zogenix has a Moderate Buy consensus rating. At $44.60, the average price target could provide investors with upside of a plentiful 63%, should the target be met over the next 12 months.(See Zogenix stock-price forecast on TipRanks)
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