Grim Near-Term Prospects For Zogenix: Bioassociate for SeekingAlpha

Bioassociate's latest Seeking Alpha article is on Zogenix Inc. Below is a re-run of the article, and the original can be found here. 

Zogenix (ZGNX) is still awaiting a response from the FDA for the approval of Zohydro ER, after the agency has delayed the scheduled approval decision date of March 1st. Zohydro ER is Zogenix's lead product - hydrocodone bitartrate (opioid painkiller) extended-release capsules for the management of moderate-to-severe chronic pain. Zohydro ER brings two novelties to the current hydrocodone market: (1) twice-daily administration, compared to 4 times a day of current, immediate-release, hydrocodone containing pills; (2) Most importantly, Zohydro ER is a single-entity hydrocodone pill that does not contain acetaminophen. According to Zogenix, the absence of acetaminophen enables patients to avoid the risk of liver injury associated with the use of acetaminophen in high dosages or over long periods of time.

There is no doubt that a need exists for a drug like Zohydro ER in the immense chronic pain market. However, the fact of the matter is that it is quite certain the FDA will not approve Zohydro ER. To make things even worse for Zogenix, even the unlikely event of FDA approval of Zohydro ER will not bring Zogenix's stock price out of the mud, due to the company's feeble financial status and the competitive landscape for Zohydro ER.

Why the FDA will not approve Zohydro ER:

1. The FDA advisory committee voted against recommending the approval of Zohydro ER: Zohydro ER was the first pure hydrocodone (acetaminophen-free) drug candidate to face an FDA advisory committee. In December 2012, the FDA's Anesthetic and Analgesic Drug Advisory Committee of independent experts voted 11 to 2 (with one abstention) against recommending the approval of Zohydro ER. The panel was sharply divided on safety and efficacy, but almost unanimous about the concern over the drug's potential for addiction.

Historical data show a very clear image: when an FDA advisory panel recommends against approval, the FDA rarely reverses the decision. In fact, such reversal happened only on 3 occasions in recent years. This means that according to past statistics there's a very slim chance the FDA will approve Zohydro ER.

2. Zohydro ER is likely to produce the next wave of substance dependence and abuse: opioid drugs, such as hydrocodone and oxycodone (Vicodin, Oxycontin, Percocet), are highly addictive substances that produce abuse-related effects. The Center for Disease Control and Prevention [CDC] reports that around 15,000 Americans die each year from prescription painkillers, such as Oxycontin and Vicodin, with teens comprising a fifth of the victims.

If approved by the FDA and marketed, Zohydro ER could cause dependence and be abused, possibly at a greater rate than that of currently available hydrocodone-acetaminophen combination products, mainly because it contains a much larger dose of hydrocodone (up to 50 mg of pure hydrocodone compared to up to 10 mg in Vicodin).

3. Zohydro ER is not an abuse deterrent product: misuse and abuse of opioid drugs involve physical or chemical manipulations to increase the concentration or bioavailability of the active ingredient, usually for administration via snorting and injections. In recent years, abuse deterrent technologies have been developed and implemented in opioid drugs.

A recent example is the FDA's approval of Purdue Pharma's reformulated abuse-deterrent OxyContin in April 2013. Importantly, along with the approval of the abuse-deterrent Oxycontin, the FDA has determined that the benefits of original OxyContin no longer outweigh its risks and that original OxyContin was withdrawn from sale. Accordingly, the agencyannounced it will not approve any generic versions of original OxyContin.

The absence of abuse-deterrent technology in Zohydro ER further supports the likelihood of this drug's abuse once it reaches the market.

4. The FDA is currently campaigning against abuse and misuse of prescription opioid drugs: The prescription opioid drug abuse epidemic and its consequences are well known to the FDA. Apart from the agency's barring of non-abuse-deterrent OxyContin formulations (see #3 above) from entering the market, the FDA is amidst an overall move towards abuse-resistant narcotics that includes:

• On January 2013, the FDA issued draft guidance on abuse-deterrent opioids.
• In the same month, the Drug Safety and Risk Management Advisory Committee met to discuss the abuse potential of hydrocodone drugs (like Zohydro ER) and voted in favor of rescheduling hydrocodone from Schedule III (moderate-to-low potential for physical and psychological dependence) to Schedule II (high potential for abuse) of the Controlled Substances Act.
• The FDA is under an ongoing political and public pressure against abuse of opioid drugs, coming from pain and drug addiction specialists, the Coalition Against Prescription Drug Abuse, Advocates for the Reform of Prescription Opioids, and families of opioid drugs victims. In addition, a "Stop Tampering of Prescription Pills" Act [STOPP] was introduced to the US Congress, suggesting forcing the FDA to bar new drug applications for orally administered opioids that do not use abuse deterrent formulations.

In its current formulation, Zohydro ER has no protections against abuse and can be easily converted into a large dose of hydrocodone. In the current atmosphere, both within and outside of the FDA, Zohydro ER is an un-approvable drug.

Zohydro ER approval should not affect Zogenix's stock:

1. Upcoming dilution: regardless of the FDA's verdict, Zogenix's financial status calls for an immediate financing round. As of the end of March 2013, the company had cash reserves of ~$25m and an average quarterly burn rate of $15m. This means that by the end of Q2 2013, Zogenix will have only $10m in the bank. A sign for Zogenix's financial stress was the layoff of nearly 40% of its work staff during June, in an effort to conserve cash until the expected announcement from the FDA.

2. Other products will not save the day: Zogenix's first commercial product, Sumavel DosePro - a needle-free sumatriptan injection for the acute treatment of migraine, was launched in early 2010. Sales figures of Sumavel DosePro have been disappointing so far, with stagnation in quarterly revenues (around $8m) in the last 4 quarters, which yield a gross profit of under $4m per quarter. It looks like Sumavel DosePro will not push Zogenix towards profitability.

3. Limited market opportunity for Zohydro ER: an FDA approval of Zohydro ER will come with tight restrictions that will restrain Zogenix from achieving profitability. More importantly, it is very likely that once abuse-deterrent formulations of single-entity hydrocodone pills will be approved (see in #4 below), Zohydro ER will be pulled from the market, as was the case with Oxycontin.

4. Superior competition is around the corner: three pharmaceutical companies are currently in final stages of developing their own versions of extended-release single-entity hydrocodone, with abuse deterrent technologies. Pharma giants Teva Pharmaceuticals and Purdue Pharma will be completing phase III studies with long-acting hydrocodone pills by the end of 2013, and are expected to launch their products by the end of 2014. The Danish company Egalet is also developing a tamper-resistant hydrocodone product that could reach the market by 2015. The launch of superior alternatives to Zohydro ER by industry leaders will leave Zogenix with a very short time to generate revenues from Zohydro ER before this market segment will be taken over.

The bottom line is that the chances for an FDA approval of Zohydro ER are very slim. Nevertheless, even with FDA approval for Zohydro ER, Zogenix might not reach profitability due to limited revenue generation. Combined with the company's current shaky financial status, Zogenix's stock is not expected to rise in the near future.

Neurotechnology: The Growing Brain Market and Latest Neurotech Breakthroughs

“If we want to make the best products, we also have to invest in the best ideas... Every dollar we invested to map the human genome returned $140 to our economy... Today, our scientists are mapping the human brain to unlock the answers to Alzheimer's... Now is not the time to cut these job-creating investments in science and innovation. Now is the time to reach a level of research and development not seen since the height of the Space Race”

                                                    -President Barack Obama, 2013 State of the Union address

“It’s all in the mind” seems to be one of humanity’s age-old mottos whose meaning has only grown more persuasive against the test of time. Ailments previously deemed peripheral based purely on their symptoms are being exposed for having deep roots in the brain as quickly as our knowledge of grey matter is expanding, so much so that many of over 600 known neurological disorders now top the leading disease list in the developed world (Table 1). In Europe, 38% of the population is said to be affected by brain disorders annually[i], whose burden in 2010 was estimated to be €798 billion, taking into account treatment costs as well as lost productivity. And the general consensus among physicians is—incidences of neuro-disorders, such as migraine, autism, Parkinson’s disease and multiple sclerosis is visibly on the rise. Over the coming years the European Brain Council has forecasted a further 20% increase in neurologic illness in the EU[ii].

To exacerbate the problem, ageing populations have never before borne so much impact on the global total. As cardiovascular, infectious and oncology treatments ameliorated, so has survivability and thus the incidence of diseases of the “old age”, such as dementia and Alzheimer’s disease, strokes, Parkinson’s disease and progressive hearing loss. Alzheimer’s disease and stroke have been identified as the fastest-growing threats to US health, ahead of autoimmune disorders and diabetes[iii].

And perhaps the worst news is—Big Pharma has so far yielded sub-optimal treatments for neurological disorders, as success rates of neuropharmaceuticals in costly clinical trials have been excruciatingly poor in recent years. For instance, Alzheimer's disease (AD) researchers and patients had to face a long string of disappointments, as one promising AD therapy after another have failed to stop, or even slow down the disease. 2012 witnessed a fascinating race to the finish line between two anti-β amyloid monoclonal antibodies - Pfizer/Johnson&Johnson's Bapineuzumab ("Bapi") vs. Eli Lilly's Solanezumab ("Sola"). Both contenders tried to make history by altering the Alzheimer's disease treatment paradigm, but ended up failing in two of the biggest phase III studies of the year, having likely spent at least $400 million each on the drugs’ development. 

TABLE 1. LEADING NEUROLOGICAL DISORDERS IN THE US, 2010/11

Disease	Prevalence/ Incidence	Economic Burden (incl. prod. loss) (US$)	Available treatment(s)
Chronic pain	50 million	635 billion	OTC pain relievers, anti-inflammatory steroids, therapy (physical & psychological), Medical Devices: Neurostimulators, Patient Controlled Analgesia
Depression (major)	46.4 million	16 billion	Medication: Selective serotonin reuptake inhibitors (SSRIs), Serotonin and norepinephrine reuptake inhibitors (SNRIs), Norepinephrine and dopamine reuptake inhibitors (NDRIs), others; Medical devices: deep Transcranial Magnetic Stimulation (TMS), Vagus Nerve Stimulation (VNS)
Migraines/ cluster headaches	37 million	20 billion	OTC pain relievers, anti-inflammatory steroids, tripans, ergotamines, triptan+anti-emetic combination therapy, Botulinum toxin (Botox)
Hearing loss/deafness	37 million	14.75 billion	Hearing aids, cochlear implants
Bipolar disorder	5.7 million	42 billion	Mood stabilizers: Lithium, anticonvulsants, antipsychotics; Antidepressants,; Medical device: deepTMS (under investigation by Brainsway Israel)
Alzheimer’s disease	5.4 million	216 billion	Cholinesterase inhibitors: donepezine, rivastigmine, galantamine; Glutamate blocker: memantine
Autism spectrum disorders	3.5 million	35 billion	Virtually no medication – antidepressants occasionally used to treat symptoms; educational programs
Schizophrenia	3.4 million	32 billion	Typical antipsychotics, Atypical antipsychotics; Medical device: deepTMS (under investigation by Brainsway Israel)
Epilepsy	3 million	17.6 billion	Anti-epileptic drugs (AEDs): sodium valproate, carbamazepine, lamotrigine, topamax, vigabatrin; Medical device: VNS
Brain/head injury	1.7 million annually	48 billion	Neurosurgery, physical therapy
Blindness	1.3 million		Retinal prosthesis, visual cortex neuroprosthesis (under development), stem cell therapy (under development)
Stroke	795,000 annually	38.6 billion	Hemorrhagic: anticoagulants, surgery; Ischemic: clot busters, surgical clot removal (3-4-hour window); Sphenopalatine Ganglion (SPG) stimulation (24-hour window—under investigation by BrainsGate Israel)
Parkinson’s disease	500,000	23 billion	Levodopa; Dopamine agonists: pramipexole, ropinirole; Catechol O-methyltransferase (COMT) inhibitors, Monoamine oxidase-B (MAO-B) inhibitors; Medical devices: Activa® implanted brain stimulator, deepTMS (under investigation by Brainsway Israel)
Multiple sclerosis	400,000	10 billion	Interferon-beta-1a and -1b, glatiramer acetate, mitoxantrone, natalizumab, fingolimod, teriflunomide, dimethyl fumarate; Stem Cell therapy: currently in clinical trials
Spinal cord injury	12,000 annually	14.5 billion	Neuroprosthetics, Stem Cell Therapy, antioxidant medication (methylprednisolone, lazaroids)
Amyotrophic Lateral Sclerosis (ALS)	5,600 annually	6 billion	Riluzole (only FDA-approved medication); Clinical trials: Arimoclomol, tirasemtiv, NurOwn™-adult stem cell therapy (under investigation by BrainStorm Cell Therapeutics Israel)

Perhaps the most significant contributing factor to the Golden Age of Neuroscience has been the rapid advancement of our understanding of this field at the basic level. Rapidly growing annual numbers of academic neuroscience publications bear testimony to the intensification of research in this sphere (fig. WE KNOW MORE

Perhaps the most significant contributing factor to the Golden Age of Neuroscience has been the rapid advancement of our understanding of this field at the basic level. Rapidly growing annual numbers of academic neuroscience publications bear testimony to the intensification of research in this sphere (fig. 1), but neuroscience success is even more evident in the highly-publicized neuro-breakthroughs of late, and in the number of academic and government initiatives which have been launched in recent years.

Vital signs seem to point towards the fact that the neuroscience revolution happening today bears striking resemblance to the biotechnology revolution circa 2000, which witnessed the tremendous efforts to sequence the human genome and resulted in colossal leaps in spheres such as genetic engineering and bacterial- and plant-derived production. 

The President of the USA is a heavy investor this time around, with US$ 100 million to spend in just one year on novel neuro-technologies and brain mapping—outshined only by the EU, whose commitment to a novel EU Brain Project was recently unveiled with a whopping €1.19 billion pledge. One needn’t be an expert in the field to sense that something big is happening. 

FIGURE 1. NUMBER OF NEUROSCIENCE PUBLICATIONS, 1950-2012, PUBMED[1]

The SOCIETY FOR NEUROSCIENCE (SfN) was founded in Washington, D.C. in 1969, and is now the largest professional society for basic neuroscientists and physicians in the world. SfN has been a strong advocator of academic neuroscience and has played a pivotal role in funding and investment in the basic research of grey matter.

The society receives government grants, stages annual high-profile neuroscience meetings of over 30,000 attendees from 75 countries, and runs The Journal of Neuroscience - the world’s most cited neuroscience journal which publishes more research than the next five leading neuroscience journals combined. It is of no surprise that the health of SfN is often cited as a key indicator of the success of the scientific field itself. Over the past decade the society has gained nearly 20,000 members from across the world, and has grown its revenue, 23% of which originates from the scientific journal, by 10% in just eight years (fig. 2).

FIGURE 2. SOCIETY FOR NEUROSCIENCE MEMBERSHIP & REVENUE GROWTH, 2000-2012 

Basic neuroscience indicators tell a tale of a rapidly growing R&D environment which is continuously gaining new members and producing qualitative output. The Journal of Neuroscience has doubled the number of publications it contains since 2001—a growth rate which is unmatched by any other journal in the life science field, but what are the emanating breakthroughs which scientists are so eager to share with the world? Below are some examples of what neuroscience has accomplished in recent years.

MIND READING

Using electrodes to detect spikes in brain activity, scientists have been able to map areas of the brain responsible for a plethora of thoughts, actions and emotions. Back in 2007 scientists were able to predict with astonishing accuracy whether a subject would decide to add or subtract a number based on their brain activity in an fMRI scanner. However, already at the dawn of the new decade fMRI brain mapping achieved a much more incredible feat: reading and replicating vision. Subjects were asked to watch short clips inside an fMRI scanner, whose output scientists used to externally replicate clips of what the person was seeing. With this level of accuracy, it is only a matter of time before mind-reading becomes as easy as, well, reading.

STILLS FROM ACTUAL CLIPS SHOWN TO SUBJECTS (TOP) AND THE EQUIVALENT FMRI READINGS OF THE BRAIN (BOTTOM)

Image source; shinji nishimoto

Neuroscientists demonstrated their mind-reading prowess by quite literally communicating with a comatose patient with the use of an fMRI scanner. A man believed to be in a vegetative state for 12 years was able to communicate to doctors that he was not in pain, kick-starting what has since become a revolution in our understanding of the comatose state.

The occurrence caused medical books to be rewritten, as it gave us the ability to communicate with thousands of patients previously “trapped in their own skulls”, like Israel’s ex-PM Ariel Sharon, who has been in a coma following a stroke seven years ago.

In January of 2013 physicians at Beersheba’s Soroka Medical Centre announced that fMRI scan results of Sharon’s brain demonstrated significant activity, as MRI spikes were documented in response to images and voices of family members shown and played to the patient.

To advance fMRI matters further, researchers at Bar-Ilan University in Israel have used the scanner to read motion signals from a student’s brain and wirelessly transmit them to a thought-controlled robot thousands of miles away—at a laboratory in France.  The development is part of an international initiative called “Virtual Embodiment and Robotic Re-Embodiment” (VERE). The fMRI scannee could see a video relayed from a camera attached to the robot, and direct the robot as he wished by thinking motion, and thus creating certain discernible activity spikes for the robot to obey.

NEUROGENESIS and STEM CELL TRANSPLANTS FOR NEUROLOGICAL DEFICITS

"For more than a century, medical science firmly believed that our brain

could not repair itself and that we were born with all the brain cells we would ever have."

-Society for Neuroscience, 2007

Just six years ago aspiring neuroscientists would have been taught that brains are born with a set amount of neurons, and, whilst new synapses (or neuronal intersections) are able to form throughout a lifetime, new nerve cells are no longer generated within the brain. But researchers have recently delivered more uplifting news: neurogenesis has been documented to occur in several brain areas: the hippocampus, responsible for memory formation, the olfactory bulb, responsible for the sense of smell, and the subventricular zone, which has been likened to the neuro-stem-cell “breeding ground” in the brain. About 10,000 new neurons daily are now said to be born in the olfactory and hippocampal areas.

Rapidly putting the newfound knowledge to use, researchers at the University of Wisconsin-Madison have accomplished a notable feat in stem cell research, having transformed human embryonic stem cells into neuro-regenarative cells in the brains of neuro-deficient mice. Following transplantation, the mice were able to regain their abilities to learn and remember.

Once we know that adult neurogenesis takes place, it is likely to be a matter of time before scientists elucidate the mechanisms which guide new neuron formation, and are able to apply these to other, non-neurogenerative areas of the brain—an accomplishment which would have tremendous implications.

NEUROPROSTHETICS and THOUGHT-CONTROLLED ROBOTS

Basic knowledge of the motor cortex has reached the level of excellent in recent years, with thought-powered robot limbs not only doing their owners’ precise bidding, but also offering their brains sensory input in return. In other words, whilst neuroprosthetic wearers had to rely solely on their vision when reaching for an item with, for instance, a thought-powered arm, scientists are now beginning to devise cunning ways of allowing the users to feel the object their prosthetic is interacting with. Sense-able neuroprosthetics could utterly revolutionize this field, and have wider-reaching implications in sectors such as gaming and technology. Image credit: Rehabilitation Institute of Chicago

Every wireless technology started with a wire, and neuroprosthetics are no exception. Normally bulky neuroprosthetic electrodes have to be implanted into the brain, but scientists at the National Institute of Biomedical Imaging and Bioengineering (NIBIB), part of the NIH in the US, have built a compact, self-contained sensor which can record and relay the activity of small groups of cells wirelessly (and invisibly). The sensor is the size of a baby aspirin and is made of silicon containing 100 hair-thin electrodes[i]. Not only is this technology much more compact and aesthetically pleasing than its predecessors, but it also offers unfathomable opportunities for thought-control of—pretty much anything—in stealth mode.

CURING BLINDNESS

Image credit: Martin Cleaver/AP

In February of 2013 a monumental breakthrough testified to neurotechnology’s legitimacy when the first ever bionic eye received marketing approval from the FDA. The Argus II Retinal Prosthesis system, marketed by Second Sight Medical Products, provides electrical stimulation to the retina in patients suffering from retinitis pigmentosa—a degenerative disease which is caused by dystrophy of the retinal pigment epithelium. The device is a retinal implant which relays external images to the brain by stimulating cells in the retina via implanted electrodes.

A step further in the technology may soon be taken by Israeli Nano Retina Inc: the company’s artificial retina technology Bio-retina incorporates nano-size components in a tiny, flat implant that is implanted by a small incision and “gluing” of the device to the damaged retina. The sensors transform naturally received light into an electrical signal that stimulates the neurons, which send the pictures received by Bio-Retina to the brain. The technology is due to embark on clinical trials by 2015.

Success of devices like Argus II and Bio-retina also provides immense hope for people who have been affected by blindness since a very young age. For some time now it has been known that blind people are able to “see” just with their brains, and a prosthetic device which detects the external environment and generates basic images in the brain, bypassing the retina, is only half a decade away. Currently, a team of scientists at the University of Texas are generating a detailed map of the visual cortex, and are hoping to begin working on a visual prosthetic device which would communicate directly with this brain area.

SAMSUNG’S THOUGHT-CONTROLLED TABLET

Researchers at Samsung’s Emerging Technology Lab, in collaboration with the University of Texas, are exploring users’ ability to launch applications with the power of their thoughts in a novel Galaxy Note 10.1 interface. The technology would require the user to wear an Electroenchepalography (EEG) cap which would translate thought into basic functions like powering a device on and off, selecting a contact or a song from a list, or launching an application, and much more refined actions in the future.

Although the company does not intend to make a brain-controlled phone or tablet in the near future, Samsung’s goal is to demonstrate and ameliorate the feasibility of such an interface, which would be particularly useful to people unable to interact with devices due to mobility issues.

AN electroencephalography (EEG) cap, able to read brain activity and communicate it to an electronic interface Image Credit: Samsung

Although we may not see EEG-clad commuters on the bus playing telepathic Sudoku any time soon, the recent neurotech developments herald a quiescent truth: in this lifetime we are likelier than not to witness a world where thought alone suffices to command the electronic power around us.  

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[i] "Wireless, Implanted Sensor Broadens Range of Brain Research." U.S National Library of Medicine. N.p., 19 Mar. 2013. Web. 11 May 2013.http://www.nih.gov/news/health/mar2013/nibib-19.htm

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[1] The number of annual publications was extrapolated based on a publication search on the PubMed database (http://www.ncbi.nlm.nih.gov/pubmed – a National Center for Biotechnology Information, U.S. National Library of Medicine database), using the search term “neuron”

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[i] "Growing Brain Disorders Lead to Call for More Research." British Neuroscience Association. N.p., 7 Jan. 2013. Web. 11 May 2013; http://www.bna.org.uk/news/view.php?permalink=SIXTE0PS9P

[ii] "Neurological Diseases on the Rise." European-Hospital. N.p., 21 June 2010. Web. 11 May 2013.; http://www.european-hospital.com/en/article/7274-Neurological_diseases_on_the_rise.html

[iii] Fox, Maggie. "Alzheimer's Fastest-growing Health Threat, Report Says." NBC News. N.p., 5 Mar. 2013. Web. 11 May 2013; http://vitals.nbcnews.com/_news/2013/03/05/17196908-alzheimers-fastest-growing-health-threat-report-says?lite