Zogenix Dives 6% After-Hours On Proposed $200M Notes Offering

Shares in Zogenix (ZGNX) dropped 6% in Tuesday’s after-hours trading, after the global biopharma revealed its intention to offer $200M of convertible senior notes due 2027 in a private offering to institutional buyers.

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Zogenix also expects to grant the initial purchasers of the notes an option to purchase up to an additional $30M principal amount of notes within 13 days from the date notes are first issued.

The notes will be senior, unsecured obligations of Zogenix, will accrue interest payable semi-annually in arrears and will mature on October 1, 2027, unless earlier repurchased, redeemed or converted.

According to the statement, Zogenix will use the proceeds to fund development and commercialization of Fintepla in Dravet syndrome, Lennox-Gastaut syndrome, and other potential indications, to fund the development of MT1621 in TK2 deficiency and other general corporate purposes, such as working capital and admin expenses.

Indeed, its first rare disease therapy, Fintepla (fenfluramine) oral solution, C-IV has been approved by the U.S. FDA and is under review in Europe for the treatment of seizures associated with Dravet syndrome, a rare, severe childhood onset epilepsy.

In addition, the company has two late-stage development programs underway: one for Fintepla or the treatment of seizures associated with Lennox-Gastaut syndrome (LGS), a rare childhood-onset epilepsy and another for MT1621, an investigational novel substrate enhancement therapy for the treatment of TK2 deficiency, a rare genetic disorder.

Shares in ZGNX have plunged over 50% year-to-date, but analysts have a cautiously optimistic Moderate Buy consensus on the stock’s outlook. That’s with an average analyst price target of $46- indicating shares can double from current levels.

“We continue to believe in Fintepla’s long-term potential to be the standard of care for Dravet Syndrome, particularly following promising early launch indicators” comments Mizuho Securities analyst Difei Yang. She has a buy rating on Zogenix and $55 price target.

She sees upside in ZGNX shares driven by Fintepla in Dravet, an area of high unmet medical need and from additional pipeline indications including LGS; adding that the firm’s revenue estimates of $4.2mil/$45.7mil for 2020/2021 are achievable with potential upside. (See Zogenix stock analysis on TipRanks)