Zogenix Reports Second Quarter 2013 Financial Results

Zogenix Reports Second Quarter 2013 Financial Results

         Conference Call and Webcast Today, August 8, at 4:30 p.m. ET

SUMAVEL^® DosePro^® (sumatriptan injection) Second Quarter 2013 Highlights

  *Net product revenue of $8.9 million, up 11% over the second quarter 2012
  *Generated approximately 20,000 total prescriptions
  *Maintained positive quarterly refill rate at 43%*

Recent Highlights and Milestones

  *Zohydro™ ER New Drug Application (NDA) still under review with FDA
  *Entered exclusive U.S. co-promotion agreement for Migranal®
    (dihydroergotamine mesylate, USP) Nasal Spray and launched product through
    Zogenix sales force in August
  *Implemented significant cost control initiatives to extend cash runway to
    reach key business milestones that may occur over the remainder of the
    year

SAN DIEGO, Aug. 8, 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 second quarter ended June 30, 2013.

Roger Hawley, chief executive officer of Zogenix, stated, "Based on our recent
interactions, the FDA is working on the Zohyrdo ER NDA and has indicated that
it is reviewing the NDA as fast as possible and that nothing has changed with
respect to reaching an action letter this summer. We have been reassured again
that there are no deficiencies in the application. If approved, Zogenix will
be prepared to launch Zohydro ER approximately three to four months after
approval."

Mr. Hawley added, "We had commercial success with SUMAVEL DosePro in the
second quarter and in early June we took important actions to extend our cash
runway in anticipation of potential key business milestones that may occur
over the remainder of the year. Since then, we have signed, and already
commenced our activities under, our exclusive U.S. co-promotion agreement for
Migranal, which leverages our sales force and expertise in migraine. We will
continue to explore other opportunities to build a leading specialty migraine
franchise and expect the Migranal co-promotion agreement will have a positive
impact on our commercial operations. During the quarter we also made good
progress with our partnering discussions for Relday™ and out-licensing
initiatives for the DosePro needle-free delivery system, both of which
represent significant opportunities to build shareholder value."

Second Quarter 2013 Financial Results

Net product revenue for the second quarter 2013 was $8.9 million, up 11%
compared to $8.0 million in the second quarter 2012. The increase in net
product revenue was primarily driven by a higher net selling price in the
second quarter compared to the prior year period.

Cost of sales for the second quarter 2013 was $4.6 million, compared to $4.2
million in the second quarter 2012. Product gross margin of 48% in the second
quarter 2013 was unchanged from the second quarter 2012.

Royalty expense for the second quarter 2013 was $338,000 compared to $315,000
in the second quarter 2012, reflecting the impact of increased net product
revenue.

Research and development expenses for the second quarter 2013 were $3.6
million, representing a 44% decrease from $6.4 million in the second quarter
2012. The decrease in research and development expenses was primarily the
result of lower development costs for Zohydro ER, for which the Company
completed an NDA submission during the second quarter 2012.

Selling, general and administrative expenses were $12.0 million for the second
quarter 2013, down slightly compared to $12.1 million for the second quarter
2012.

Second quarter 2013 operating expenses included an $876,000 restructuring
charge related to the Company's previously announced cost control initiatives.

Other expense for the second quarter 2013 totaled $0.9 million, compared to
$2.3 million in the second quarter 2012. For both periods, other expense is
primarily comprised of interest expense related to the Company's financing
agreements and non-cash income or expense related to fair value adjustments of
the Company's warrant and derivative liabilities. A table with a full
description of other income and expense is included in this release.

Net loss for the second quarter 2013 was $13.3 million, or $0.13 per share,
compared to a net loss of $17.2 million, or $0.26 per share, for the second
quarter 2012. There were 100.9 million weighted average shares outstanding for
the second quarter 2013 compared to 65.4 million for the second quarter 2012.
Non-GAAP net loss adjusted for certain non-cash or non-recurring items for the
second quarter 2013 was $0.13 per share as detailed in the non-GAAP financial
results table included in this release.

Cash and cash equivalents as of June 30, 2013 were $16.1 million. In March
2013, Zogenix established a controlled equity offering program, pursuant to
which Zogenix may from time to time sell up to $25.0 million of its common
stock through Cantor Fitzgerald & Co. As of August 7, 2013, the Company had
agreed to sell 3,013,724 shares of its common stock pursuant to this program
at a weighted average price of $1.66 per share, for a total of $5.0 million in
gross proceeds. None of the proceeds are included in the Company's cash and
cash equivalents as of June 30, 2013.

Ann Rhoads, chief financial officer of Zogenix, said, "In conjunction with our
cost control initiatives, we decided to raise capital under our controlled
equity offering program in an effort to maintain an adequate cash position as
we wait for the FDA's decision on Zohydro ER."

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 financial guidance at this time.

Conference Call and Web Cast

Zogenix will hold a conference call today, August 8, 2013 at 4:30 p.m. ET to
discuss financial results and operational highlights for the second quarter
ended June 30, 2013.

To participate, please dial (800) 322-2803 (U.S.) or (617) 614-4925
(International); participant passcode: 66351191. 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 August 8, 2013 at
6:30 p.m. ET until August 15, 2013 by dialing (888) 286-8010 (U.S.) or (617)
801-6888 (International); passcode: 21413433. A replay of the webcast will
also be accessible on the Investor Relations website for one month, through
September 8, 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
co-promotion of Migranal, the Company's efforts to secure a development and
commercialization partner for Relday, the Company's out-licensing initiatives
for the DosePro needle-free delivery system, 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;
the expected launch timing of Zohydro ER, if approved; the potential for the
co-promotion of Migranal to help the Company achieve profitability; the
possibility of adding complementary migraine therapies to the Company's
product portfolio; efforts to secure a strategic development and
commercialization partner for Relday; and efforts to out-license the DosePro
needle-free delivery system. 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 ER 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 and recent FDA determinations
concerning abuse deterrent properties of existing opioid drugs; 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; Zogenix's ability to successfully sell Migranal to
Zogenix's customer base of prescribers; unexpected adverse side effects
relating to Migranal that could prevent its ongoing commercialization, or that
could result in recalls or product liability claims; the potential early
termination of the Migranal co-promotion agreement; the inherent risks of
clinical development of Relday, including potential delays in enrollment and
completion of clinical trials; and Zogenix's dependence on its existing
collaboration with DURECT Corporation and potential new partners 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 ended on
June 30, 2013 and 2012 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, April – June
2013

                                     FPR

Zogenix, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
                                                                 
                              Three Months Ended      Six Months Ended
                              June 30,                June 30,
                              2013        2012        2013        2012
                              (unaudited)             (unaudited)
Revenues:                                                       
Net product revenue            $8,942    $8,030    $15,924   $17,915
Contract revenue               --         --         --         8,462
Total revenues                 8,942      8,030      15,924     26,377
                                                               
Operating expenses:                                             
Cost of sales                  4,630      4,167      8,789      9,229
Royalty expense                338        315        620        672
Research and development       3,577      6,381      6,814      12,345
Selling, general &             12,000     12,068     26,482     26,717
administrative
Restructuring                  876        --         876        --
Total operating expenses       21,421     22,931     43,581     48,963
Loss from operations           (12,479)   (14,901)   (27,657)   (22,586)
Total other expense, net       (853)       (2,268)     (6,732)     (4,870)
Net loss before income taxes   (13,332)    (17,169)    (34,389)    (27,456)
Provision for income taxes     --        --        --        (5)
Net loss                       $(13,332) $(17,169) $(34,389) $(27,461)
                                                               
Net loss per share, basic and  $(0.13)   $(0.26)   $(0.34)   $(0.42)
diluted
                                                               
Weighted average shares        100,876     65,449      100,843     65,409
outstanding, basic and diluted


Zogenix, Inc.
Condensed Consolidated Balance Sheets
(in thousands)

                                                    June 30,    December 31,
                                                    2013        2012
                                                    (unaudited) 
ASSETS                                                          
Current assets:                                                 
Cash and cash equivalents                            $16,121   $41,228
Trade accounts receivable, net                       4,138      5,643
Inventory, net                                       13,185     12,886
Prepaid expenses and other current assets            2,044      2,254
Total current assets                                 35,488     62,011
Property and equipment, net                          13,414     13,561
Other assets                                         4,496      5,114
Total assets                                         $53,398   $80,686
                                                               
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                  
Current liabilities:                                            
Accounts payable                                     $6,337    $4,592
Accrued expenses                                     14,570     18,569
Common stock warrant liabilities                     12,488     9,493
Total current liabilities                            33,395     32,654
Long-term debt, less current portion                 28,638     28,481
Other long-term liabilities                          7,452      5,078
Stockholders' equity (deficit)                       (16,087)   14,473
Total liabilities and stockholders' equity (deficit) $53,398   $80,686


Zogenix, Inc.
Net Product Revenue
($ in thousands)
                                                              
                        Three Months Ended June 30, Six Months Ended June 30,
                        2013          2012          2013         2012
                        (unaudited)                 (unaudited)
                                                              
U.S. Units Shipped       126,600      138,120      247,140     287,460
                                                              
U.S. Gross Product Sales $ 12,310     $12,389     $23,756    $25,785
                                                              
Product Sales                                                  
Allowances:
Allowance for Product    2,931        3,006        5,738       6,390
Sales Discounts
Allowance for Product    437          1,355        2,094       1,879
Returns
Total Product Sales      3,368        4,361        7,832       8,269
Allowances
                                                              
U.S. Net Product Revenue 8,942        8,028        15,924      17,516
                                                              
EU Net Product Revenue   --           2            --          399
                                                              
Total Net Product        $8,942      $8,030      $15,924    $17,915
Revenue


Zogenix, Inc.
Other Income (Expense)
(in thousands)
                                                              
                    Three Months Ended June 30,   Six Months Ended June 30,
                    2013           2012            2013          2012
                    (unaudited)                    (unaudited)
                                                              
Interest income      $3           $10           $11         $29
                                                              
Interest expense:                                              
Healthcare Royalty
Partners interest    (1,459)       (1,369)        (2,921)      (2,705)
expense^1
Imputed interest
expense on Astellas  (146)         (164)          (287)        (321)
tail payments
Oxford/SVB interest  --            (1,054)        --           (2,235)
expense^2
Other interest       10            (2)            --           (6)
expense
Total interest       (1,595)       (2,589)        (3,208)      (5,267)
expense
                                                              
Change in fair value
of warrant           1,264         (91)           (2,995)      (42)
liabilities^3
                                                              
Change in fair value
of embedded          (480)         330            (562)        368
derivatives
                                                              
Other income         (45)          72             22           42
(expense)
                                                              
Total other income  $(853)       $(2,268)      $(6,732)    $(4,870)
(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 months ending June 30, 2013 and 2012
were $514,000 and $462,000, respectively, and for the six months ended June
30, 2013 and 2012 were $916,000 and $936,000, 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 six months ended June 30,
2013 was driven primarily by changes in the Company's stock price at the
warrant liability measurement dates.


Zogenix, Inc.
Non-GAAP Financial Results*
(in thousands, except per share amounts)
                                                             
                    Three Months Ended June 30,   Six Months Ended June 30,
                    2013           2012           2013          2012
                    (unaudited)                   (unaudited)
                                                             
Net loss (as         $(13,332)    $(17,169)    $(34,389)   $(27,461)
reported, GAAP)
Net loss per share,
basic and diluted    $(0.13)      $(0.26)      $(0.34)     $(0.42)
(as reported, GAAP)
                                                             
Adjustments for
certain non-cash or                                           
non-recurring items:
Restructuring        (876)         --            (876)        --
expenses
Change in fair value
of warrant           1,264         (91)          (2,995)      (42)
liabilities
Change in fair value
of embedded          (480)         330           (562)        368
derivatives
Total Adjustments to (92)          239           (4,433)      326
Net loss
                                                             
Net loss adjusted
for certain non-cash $(13,240)    $(17,408)    $(29,956)   $(27,787)
or non-recurring
items
Adjusted net loss    $ (0.13)       $ (0.27)      $ (0.30)     $ (0.42)
per share (non-GAAP)
                                                             
Weighted average
shares outstanding,  100,876       65,449        100,843      65,409
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:
         Amy Wheeler | The Ruth Group
         646.536.7025 | awheeler@theruthgroup.com