Zogenix Strategy Unfolds as it Unveils Plans for Next Drug-and-Device Combo

7/19/11Follow @bvbigelow

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this patient population, partly because it’s hard to keep them on a strict schedule for taking their meds.

While it took awhile for the startup’s founders to initially settle on a business plan, the advantages of the company’s strategy should become increasingly evident as Zogenix introduces each new device-and-device combo, Hawley says. After making what Hawley calls “a very significant investment” in developing the Zogenix DosePro needle-free delivery system (The U.K. manufacturing plant accounting for the biggest part), he says it should be relatively easy to double the factory’s capacity from two million to four million devices, and again to eight million units.

Of course, each new cycle of the company’s drug-and-device development will require separate FDA review and clearance. Still, it is a little easier to win FDA approval for reformulations of existing drugs. And because each drug-and-device combo represents a unique product, Zogenix expects to benefit from patent protection on its unique formulation, and to maintain a strong position in the market, even if the drug’s original patent has expired.

Zogenix and Durect plan to change the formulation of risperidone “fairly significantly,” and Hawley says the new version will be highly viscous. As a result, the drug development partners still must amass pharmacokinetic data and complete other clinical studies to validate their approach.

Although Zogenix became a public company eight months ago, its IPO raised a total of $56 million, which was only about two-thirds of its initial $90 million goal. Covering the shortfall required Zogenix to arrange what Hawley called a $30 million “royalty financing” with Cowen Healthcare Royalty Partners II. The financing, which closed yesterday, included 388,601 shares of Zogenix stock, which generated another $1.5 million in gross proceeds for Zogenix, and convertible warrants that can be exercised over the next 10 years for a total of 225,000 Zogenix shares. With the financing, Hawley said Zogenix was able to push out a $3.7 million repayment on its debt that was due in 2011. Still, he says, “We may not be done raising capital.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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