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Zogenix Reports Fourth Quarter and Full Year 2012 Financial Results



Zogenix Reports Fourth Quarter and Full Year 2012 Financial Results

Conference Call and Webcast Today, March 15, at 8:30 a.m. ET

SUMAVEL^® DosePro^® (sumatriptan injection) Highlights

  o 2012 net product revenue of $35.9 million, up 18% over 2011
  o Fourth quarter net product revenue of $9.5 million, up 12% over third
    quarter
  o Increased total prescriptions to over 83,000 in 2012, up 16% over 2011*
  o Transitioned co-promotion responsibilities to Mallinckrodt's (Covidien)
    sales force, which began focused co-promotion at the beginning of October
    2012
  o Maintained consistent quarterly refill rate at approximately 44%*

Recent Highlights and Milestones

  o Completion of the FDA review of the New Drug Application for Zohydro™ ER
    (hydrocodone bitartrate extended-release capsules) delayed past the
    Prescription Drug User Fee Act (PDUFA) target action date of March 1,
    2013, with FDA indication that delay would likely be brief and last only
    several weeks
  o Reported positive results for Relday™ phase 1 study; extended study to
    potentially accelerate development and partnering opportunities

SAN DIEGO, March 15, 2013 (GLOBE NEWSWIRE) -- Zogenix, Inc. (Nasdaq:ZGNX), a
pharmaceutical company commercializing and developing products for the
treatment of central nervous system disorders and pain, today reported
financial results for the fourth quarter and full year ended December 31,
2012.

Roger Hawley, chief executive officer of Zogenix, stated, "2012 was an
important year of development for the Company. We drove 18% growth in net
product sales of SUMAVEL DosePro and transitioned to a new co-promotion
partner, Mallinckrodt, that is well positioned to work with our team to
further expand product adoption in 2013.

"We continue to move forward with launch preparations for Zohydro ER while we
wait for further communication from the FDA on the NDA. We believe that
Zohydro ER, an extended-release hydrocodone formulation without acetaminophen,
meets an important medical need based on its safety and efficacy profile. If
approved, we anticipate launching the product three to four months after
approval."

Fourth Quarter and Full Year 2012 Financial Results

Total revenues for the fourth quarter 2012 of $9.5 million consisted solely of
net product revenue. During the fourth quarter 2011, total revenues of $7.9
million also included $2.5 million in contract revenue related to the
Company's previous co-promotion agreement with Astellas which ended March 31,
2012. Net product revenues for the fourth quarter 2012 of $9.5 million were up
75% from $5.4 million in the fourth quarter 2011. Total revenues for the full
year 2012, which consist of net product revenue and contract revenue, were
$44.3 million, up 18% from $37.6 million in 2011. Net product revenues for the
full year 2012 were $35.9 million, up 18% from $30.4 million in 2011. Contract
revenue for the full year 2012 was $8.5 million, and includes the final
amortization of license and milestone payments received from Astellas, the
amortization of which was accelerated due to the earlier termination date of
the co-promotion agreement. This compares to contract revenue of $7.2 million
in 2011.

Cost of sales for the fourth quarter 2012 was $6.0 million, compared to $5.0
million in the fourth quarter 2011. Product gross margin was 37% in the fourth
quarter 2012, compared to 9% in the fourth quarter 2011. This improvement in
product gross margin was primarily due to an increase in average net selling
price.

Cost of sales for the full year 2012 was $19.5 million, compared to $19.3
million in 2011. Product gross margin was 46% in the full year 2012, compared
to 37% in 2011. This improvement in product gross margin was primarily due to
a decrease in average unit cost.

Royalty expense for the fourth quarter and full year 2012 was $0.4 million and
$1.4 million, compared to $0.2 million and $1.2 million in the fourth quarter
and full year 2011, reflecting the impact of increased net product revenue.

Research and development expenses for the fourth quarter 2012 were $5.4
million, compared to $5.5 million in the fourth quarter 2011. Research and
development expenses for the full year 2012 were $21.4 million, a 35% decrease
from $33.0 million in 2011. The decrease in research and development expenses
was primarily the result of lower costs associated with the Phase 3 clinical
trials for Zohydro ER, which were completed in 2011, and an upfront fee paid
in July 2011 upon execution of the Relday license agreement.

Selling, general and administrative expenses for the fourth quarter 2012 were
$11.9 million, a 33% decrease from $17.8 million in the fourth quarter 2011.
The decrease in selling, general and administrative expenses was primarily the
result of a $5.7 million decrease in service fees to Astellas due to the
termination of the co-promotion agreement on March 31, 2012.

Selling, general and administrative expenses for the full year 2012 were $49.5
million, an 18% decrease from $60.5 million in 2011. The decrease in selling,
general and administrative expenses was primarily the result of a $10.8
million decrease in service fees to Astellas due to the March 31, 2012
termination of the co-promotion agreement and a decrease in advertising and
promotional expenses. This was partially offset by an increase in field sales
force costs.

Other income for the fourth quarter was $13.6 million, which includes a $15.4
million non-cash mark-to-market adjustment in the fair value of the Company's
outstanding warrants. Other income for the full year 2012 was not significant
on a net basis. A table with a full description of other income and expense is
included in this release.

Net loss for the fourth quarter 2012 was $0.6 million, or $0.01 per share,
compared to a net loss of $23.7 million, or $0.36 per share, for the fourth
quarter 2011. There were 100.7 million weighted average shares outstanding for
the fourth quarter 2012 compared to 65.2 million for the fourth quarter of
2011. Non-GAAP net loss adjusted for certain non-cash or non-recurring items
for the fourth quarter 2012 was $0.16 per share as detailed in the non-GAAP
financial results table included in this release.

Net loss for the full year 2012 was $47.4 million, or $0.59 per share,
compared to a net loss of $83.9 million, or $1.96 per share, for 2011. There
were 80.6 million weighted average shares outstanding for the full year 2012
compared to 42.7 million for the full year 2011. Non-GAAP net loss adjusted
for certain non-cash or non-recurring items for the full year 2012 was $0.72
per share as detailed in the non-GAAP financial results table included in this
release.

Cash and cash equivalents as of December 31, 2012, were $41.2 million.

Because of the pending decision from the FDA regarding the potential approval
of Zohydro ER, and the related business implications, the Company is not
providing full year 2013 financial guidance at this time.

Conference Call and Web Cast

Zogenix will hold a conference call today, March 15, 2013 at 8:30 a.m. ET to
discuss financial results and operational highlights for the fourth quarter
and full year ended December 31, 2012.

To participate, please dial (866) 202-3048 (U.S.) or (617) 213-8843
(International); participant passcode: 73489853. To access the live webcast
please visit the Zogenix Investor Relations website at http://ir.zogenix.com.

A replay of the conference call will be available beginning March 15, 2013 at
10:30 a.m. ET (7:30 a.m. PT) until March 22, 2013, by dialing (888) 286-8010
(U.S.) or (617) 801-6888 (International); passcode: 78479681. A replay of the
webcast will also be accessible on the Investor Relations website for one
month, through April 15, 2013.

Discussion during the conference call may include forward-looking statements
regarding such topics as, but not limited to, the Company's commercial
activities relating to SUMAVEL DosePro, prescription trends, the Company's
financial status and performance, the Zohydro ER development program, the
Relday development program and any comments the Company may make about its
future plans or prospects in response to questions from participants on the
conference call.

About Zogenix

Zogenix, Inc. (Nasdaq:ZGNX), with offices in San Diego and Emeryville,
California, is a pharmaceutical company commercializing and developing
products for the treatment of central nervous system disorders and pain.
Zogenix's first commercial product, SUMAVEL® DosePro® (sumatriptan injection)
Needle-free Delivery System, was launched in January 2010 for the acute
treatment of migraine and cluster headache. Zogenix's lead investigational
product candidate, Zohydro™ ER (hydrocodone bitartrate), is an oral,
extended-release formulation of various strengths of hydrocodone, without
acetaminophen, intended for administration every 12 hours for around the clock
management of moderate to severe chronic pain. In May 2012, Zogenix submitted
to the FDA a New Drug Application for Zohydro ER. Zogenix's second
investigational product candidate, Relday™, is a proprietary, long-acting
injectable formulation of risperidone for the treatment of schizophrenia; an
investigational new drug application was submitted to the FDA in May 2012.

For additional information, please visit www.zogenix.com.

Forward Looking Statements

Zogenix cautions you that statements included in this press release and the
conference call that are not a description of historical facts are
forward-looking statements. Words such as "believes," "anticipates," "plans,"
"expects," "indicates," "will," "intends," "potential," "suggests,"
"assuming," "designed" and similar expressions are intended to identify
forward-looking statements. These statements are based on the company's
current beliefs and expectations. These forward-looking statements include
statements regarding: the potential to accelerate development and partnering
opportunities for Relday; the expected sales growth and adoption of SUMAVEL
DosePro, including through the efforts of Mallinckrodt; the delay in the
target action date for the FDA to complete its review of the Zohydro ER NDA;
and the expected launch timing of Zohydro ER, if approved. The inclusion of
forward-looking statements should not be regarded as a representation by
Zogenix that any of its plans will be achieved. Actual results may differ from
those set forth in this press release due to the risk and uncertainties
inherent in Zogenix's business, including, without limitation: the market
potential for migraine treatments, and Zogenix's ability to compete within
that market; Zogenix's ability to successfully execute its sales and marketing
strategy for the commercialization of SUMAVEL DosePro; Zogenix's reliance on
Mallinckrodt to co-promote SUMAVEL DosePro;  inadequate therapeutic efficacy
or unexpected adverse side effects relating to SUMAVEL DosePro that could
prevent its ongoing commercialization, or that could result in recalls or
product liability claims; the potential for Zohydro to receive regulatory
approval on a timely basis or at all, including as a result of the delay in
the PDUFA target action date for the Zohydro ER NDA; the potential for adverse
safety findings relating to Zohydro ER or negative publicity concerning
opioids in general to delay or prevent regulatory approval or
commercialization; the potential for delays associated with any additional
data required by the FDA to be submitted by Zogenix in support of the NDA; the
ability of Zogenix and its licensors to obtain, maintain and successfully
enforce adequate patent and other intellectual property protection of its
products and product candidates and the ability to operate its business
without infringing the intellectual property rights of others; difficulties in
identifying, negotiating and carrying out strategic transactions relating to
Zohydro ER  and Relday; the inherent risks of clinical development of Relday,
including potential delays in enrollment and completion of clinical trials,
and Zogenix's dependence on its collaboration with DURECT Corporation to
develop Relday; and other risks described in Zogenix's filings with the
Securities and Exchange Commission. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof, and Zogenix undertakes no obligation to revise or update this press
release to reflect events or circumstances after the date hereof. All
forward-looking statements are qualified in their entirety by this cautionary
statement. This caution is made under the safe harbor provisions of Section
21E of the Private Securities Litigation Reform Act of 1995.

In this press release, Zogenix's financial results are provided both in
accordance with accounting principles generally accepted in the United States
(GAAP) and using certain non-GAAP financial measures. In particular, Zogenix
provides its net loss and net loss per share for the three months and twelve
months ended on December 31, 2012 and 2011, adjusted for certain non-cash or
non-recurring items, which are non-GAAP financial measures. Management
believes these non-GAAP financial results reflect the Company's ongoing
business in a manner that allows for meaningful period-to-period comparisons
and analysis of trends in the Company's business, as they exclude certain
income or other expenses that are not reflective of ongoing operating results.
Management also believes that these non-GAAP financial results provide useful
information to investors and others in understanding and evaluating the
Company's operating results and future prospects in the same manner as
management, and in comparing financial results across accounting periods and
to those of peer companies.. Non-GAAP financial measures should be considered
in addition to, but not as a substitute for, the information prepared in
accordance with GAAP. A reconciliation of the non-GAAP financial results to
GAAP financial results is included in the attached financial statements.

SUMAVEL ^®, DosePro ^®, Relday^TM and Zohydro^TM ER are trademarks of Zogenix,
Inc.

*Source Healthcare Analytics, Source® PHAST Prescription Monthly, January –
December 2012

Zogenix, Inc.
Consolidated Financial Results
(in thousands, except per share amounts)
                                                                    
                                 Three Months Ended    Twelve Months Ended
                                 December 31,          December 31,
                                 2012      2011        2012        2011
                                 (unaudited)            
Revenues:                                                           
Net product revenue               $ 9,496   $ 5,425     $ 35,864    $ 30,411
Contract revenue                  --        2,476       8,462       7,165
Total revenues                    9,496     7,901       44,326      37,576
                                                                    
Operating expenses:                                                 
Cost of sales                     6,018     4,961       19,496      19,293
Royalty expense                   357       232         1,353       1,205
Research and development          5,409     5,503       21,414      33,043
Selling, general &                11,920    17,818      49,494      60,459
administrative
Total operating expenses          23,704    28,514      91,757      114,000
Loss from operations              (14,208)  (20,613)    (47,431)    (76,424)
Total other income (expense)      13,565    (3,121)     50          (7,488)
Loss before income taxes         (643)     (23,734)    (47,381)    (83,912)
Income tax                        --        29          (5)         9
Net loss                          $ (643)   $ (23,705)  $ (47,386)  $ (83,903)
                                                                    
Net loss per share, basic and     $ (0.01)  $ (0.36)    $ (0.59)    $ (1.96)
diluted
                                                                    
Weighted average shares          100,714   65,215      80,558      42,712
outstanding, basic and diluted
                                                                    

Zogenix, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
 
                                            December 31, December 31,
                                            2012         2011
                                                          
ASSETS                                                    
Current assets                                            
Cash and cash equivalents                    $ 41,228     $ 56,525
Trade accounts receivable, net               5,643        4,913
Inventory, net                               12,886       16,776
Prepaid expenses and other current assets    1,968        2,210
Total current assets                         61,725       80,424
Property and equipment, net                  13,561       14,590
Other assets                                 5,400        5,626
Total assets                                 $ 80,686     $ 100,640
                                                          
LIABILITIES AND STOCKHOLDERS' EQUITY                      
Current liabilities                                       
Accounts payable                             $ 4,592      $ 5,168
Accrued expenses                             18,569       14,553
Common stock warrant liabilities             9,493        345
Revolving credit facility                    --           5,081
Long-term debt, current portion              --           9,758
Deferred revenue                             --           8,462
Current liabilities                          32,654       43,367
Long-term debt, less current portion         28,481       42,070
Other long-term liabilities                  5,078        5,891
Stockholders' equity                         14,473       9,312
Total liabilities and stockholders' equity   $ 80,686     $ 100,640
                                                          

Zogenix, Inc.
Net Product Revenue
($ in thousands)
                                                                     
                                      Three Months Ended  Twelve Months Ended
                                      December 31,        December 31, 
                                      2012      2011      2012      2011
                                      (unaudited)         (unaudited)
                                                                     
U.S. Units Shipped                     145,020   115,440   565,980   438,720
2010 Deferred Product Revenue Units    --        --        --        50,053
Total Product Revenue Units            145,020   115,440   565,980   488,773
                                                                     
                                                                     
Gross U.S. Wholesaler Product Sales    $ 13,549  $ 10,353  $ 51,309  $ 38,483
Gross 2010 Deferred Product Revenue    --        --        --        4,190
Total Gross U.S. Product Sales         13,549    10,353    51,309    42,673
                                                                     
Product Sales Allowances:                                            
Allowance for Product Sales Discounts  3,575     2,543     12,951    7,873
Allowance for Product Returns          518       2,387     2,934     4,394
Total Product Sales Allowances         4,093     4,930     15,885    12,267
                                                                     
U.S. Net Product Revenue               9,456     5,423     35,424    30,406
                                                                     
EU and Other Net Product Revenue       40        2         440       5
                                                                     
Total Net Product Revenue              $ 9,496   $ 5,425   $ 35,864  $ 30,411
                                                                     

Zogenix, Inc.
Other Income (Expense)
(in thousands)
                                                                  
                         Three Months Ended         Twelve Months Ended
                         December 31,               December 31, 
                         2012         2011          2012         2011
                         (unaudited)                (unaudited)
                                                                  
Interest income           $ 13         $ 16          $ 53         $ 37
                                                                  
Interest expense:                                                 
Healthcare Royalty
Partners interest         (1,444)      (1,442)       (5,577)      (2,666)
expense^1
Imputed interest expense
on Astellas tail          (136)        --            (550)        --
payments
Oxford/SVB interest       --           (1,216)       (4,176)      (4,953)
expense^2
Other interest expense    (3)          (2)           (10)         (25)
Total interest expense    (1,583)      (2,660)       (10,313)     (7,644)
                                                                  
Change in fair value of   15,422       (101)         11,811       445
warrant liabilities^3
                                                                  
Change in fair value of   (313)        (377)         (147)        (240)
embedded derivatives
                                                                  
Other income (expense)                                            
Warrant issuance costs^4  --           --            (1,423)      --
Other                     26           1             69           (86)
Other income (expense),   26           1             (1,354)      (86)
net
                                                                  
 Total other income       $ 13,565     $ (3,121)     $ 50         $ (7,488)
(expense)
                                                                  
                                                                  
1. The Company accrues interest expense on the Healthcare Royalty Partners
(previously called Cowen Healthcare Royalty Partners II, LP) debt obligation
using an effective interest method at a rate in the mid-to-high teens, while
actual quarterly revenue interest payments are made at a rate of 5.75% of net
product revenue (prior to April 1, 2012, the rate was 5.0%). The revenue
interest cash payments owed for the three and twelve months ending December
31, 2012 were $546,000 and $1,968,000, respectively.
                                                                  
2. The Company's debt obligations with Oxford Finance LLC and Silicon Valley
Bank were repaid in July 2012, and the expenses relating to these obligations
will not recur in future periods.
                                                                  
3. Change in fair value of warrants issued in the July 2012 public equity
offering and the July 2011 financing agreement with Healthcare Royalty
Partners. Income from this item during the three and twelve months ended
December 31, 2012 was driven primarily by the decrease in the Company's stock
price in December 2012.
                                                                  
4. This non-recurring expense consists of offering costs, including
underwriters discounts and commissions, allocated to the warrants issued in
the Company's July 2012 public equity offering.
                                                                  

Zogenix, Inc.
Non-GAAP Financial Results*
(in thousands, except per share amounts)
                                                                  
                       Three Months Ended          Twelve Months Ended
                       December 31,                December 31,
                       2012          2011          2012          2011
                       (unaudited)                 (unaudited)
                                                                  
Net loss (as reported,  $ (643)       $ (23,705)    $ (47,386)    $ (83,903)
GAAP)
Net loss per share,
basic and diluted (as   $ (0.01)      $ (0.36)      $ (0.59)      $ (1.96)
reported, GAAP)
                                                                  
Adjustments for
certain non-cash or                                               
non-recurring items:
Change in fair value    $ 15,422      $ (101)       $ 11,811      $ 445
of warrant liability
Change in fair value   (313)         (377)         (147)         (240)
of derivatives
Warrant issuance costs 0             0             (1,423)       0
Total Adjustments to    15,109        (478)         10,241        205
Net loss
                                                                  
Net loss adjusted for
certain non-cash or     $ (15,752)    $ (23,227)    $ (57,627)    $ (84,108)
non-recurring items
Adjusted net loss per   $ (0.16)      $ (0.36)      $ (0.72)      $ (1.97)
share (non-GAAP)
                                                                  
Weighted average
shares outstanding,    100,714       65,215        80,558        42,712
basic and diluted
                                                                  
*Management believes these non-GAAP financial results reflect the Company's
ongoing business in a manner that allows for meaningful period-to-period
comparisons and analysis of trends in the Company's business, as they exclude
certain income or other expenses that are not reflective of ongoing operating
results. Management also believes that these non-GAAP financial results
provide useful information to investors and others in understanding and
evaluating the Company's operating results and future prospects in the same
manner as management, and in comparing financial results across accounting
periods and to those of peer companies.
                                                                  

CONTACT: INVESTORS:
         Zack Kubow | The Ruth Group
         646.536.7020 | zkubow@theruthgroup.com
        
         MEDIA:
         Caitlin Cox | The Ruth Group
         646.536.7033 | ccox@theruthgroup.com
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