There are several factors both short term and long term that might add up to a great buy as long as the chance it goes to zero doesn't ruin you. In the short term Monday will probably bring a reversal of the Massachusetts ban on the drug. In the long term there is a decent chance that Zohydro is prescribed for a larger population than the niche of people who are in chronic moderately severe pain and can't tolerate Tylenol while not needing even stronger drugs that make it hard to function.

Bad publicity brought it down to 2.80 but the tide may be turning. I bought 150,000 shares at under 1.50 and sold 30,000 at about 4. So it is partly for selfish reasons that I want to see a serious analysis of the myriad of factors on this forum. But don't do it just for me.

What scenario do you envision that could bring it to zero, other than the miniscule chance that Congress bans the drug?

I think you made the entire serious analysis right there. I don't think that the Massachusetts ban stands up in court.

I doubt that it gets much traction outside of patients who can't tolerate acetaminophen. Currently, generic vicodin (hydrocodone with acetaminophen)is cheap and I don't see much chance of MDs switching without a good reason to.

The real risk is in the FDA backtracking, or that Karl Marx will finally turn out to be right about opiates.

Purdue Pharma just might come up with a better anti abuse version.

http://www.heraldnews.com/article/20...OPINION/?tag=3

Doctors might become more wary of Tylenol than you expect. Patients themselves might want to take no chances. Doctors also might switch those who are presently taking needlessly stronger drugs without Tylenol. But even without that, if Zohydro doesn't get banned it appears to be a ten dollar stock if the 100,000 or so who truly need it (more as baby boomers age) are prescribed it.

The earliest that Purdue would be able to submit their ANDA for their anti abuse version would be October 2016, per the Hatch-Waxman act. See:

http://www.fda.gov/Drugs/Development.../ucm069962.htm

and

http://www.drugs.com/availability/ge...ohydro-er.html

Zogenix is working on their own formulation in the meantime. So that is not going to be an issue for at least three years.

Plus I'm reading their formulation is not that good.

Meanwhile someone tell me if their is a flaw in this article

http://www.heraldnews.com/article/20...OPINION/?tag=3

I don't know the details about the anti-abuse version they came out with last year as far as effectiveness goes. The person who I would usually ask about it is in jail currently.

I would take Purdue coming out with a super-effective anti-abuse version to be a net positive for ZGNX for what I hope are obvious reasons.

I'd need more info on their prices/costs (including inevitable patient lawsuits) to be able to judge what it could be worth. This would be easier if we had public data on Purdue available. I can do some guesswork, and it could easily be worth $10.

I really don't see much of a reasonable reason for a ban (not, of course, saying that such couldn't happen - we are a puritanical country that believes deeply that drug abusers should get their comeuppance in the form of severe liver disease). To understate things, I don't know too many people who don't abuse opioids because they are concerned about the hepatoxicity of Tylenol.

The author and the cranky conspiracy-theorist tone?

His nurse-practitioner (she is the one on the right, he is the one on the left) http://www.headachedrugs.com/ probably never ever tells her husband that she has a headache.

If you want proper analysis, this post seems like a pretty good starting point. The numbers near the end strike me as unbelievable, but I know nothing about the field so am in no position to contest them.

I don't know how you would analyze this properly without doing something like the linked post and going from there. You have to do a full EV spread on all possible outcomes, narrow the debate down to the few pivotal numbers/probabilities, and then debate their likelihood.

For a long term hold, hand waving about bans or who will use it seems far from useful until we have a robust framework of what these numbers mean for company profits and ultimate valuation.

http://www.schwab.com/public/schwab/...R0J65MJQVFQ6B6

It popped up by 10% after hours.

Quite silly of a market reaction to something that should have been widely expected. I am pretty sure that we were all in agreement that the court would overturn the ban, and we can't be the only smart people in the world.

It would be nice, as TS suggested, if we could find someone with the expertise to actually run some realistic numbers.

http://www.drugs.com/stats/top100/2012/sales

The generics, Fentanyl at $785 million and acetaminophen with hydrocodone at $850 million and beer at $509 billion in sales.

The prescriptions, Oxycontin, 2.7 billion, Lyrica 1.9 billion (probably not relevant), Celebrex 1.9 billion (probably not relevant), and Lidoderm 935 million (probably not relevant).

No margin numbers are available for Oxycontin...

Back of napkin (and ignoring debt loads and other uninteresting things that make things difficult and realistic), figure 15% net margin (generous) and a p/e of 15 (very generous), and the company is probably worth something between $0 and one gazillion dollars. (sorry, I don't really know how to value a single line drug company)

I think I might buy a stake if this one goes to $1.5-$2 range.

Since there was a 20% chance the judge would be on the take and a negative ruling might practically put the company out of business, the pop was reasonable.

If ZGNX takes 10% of the generic customers they get more than 10% of the money spent on them.

But the biggest reason to buy the stock is that if it goes to 20 or so I will start talking to a higher class of people. So you need to edge against that eventuality.

It was just Connecticut that was trying to ban it... I haven't checked the warning label, but I don't imagine that it was only for use in the Nutmeg State.

(I understand that other states could have followed suit)

Yes. I don't have a way of making a reasonable guess as to what that number would actually be.

1. Why does every analyst on the street have this stock rated as sell?

2. Why do we care how many shares OP bought?

http://www.reuters.com/finance/stock...?symbol=ZGNX.O

http://biocenturytv.com/player/34761.../3477507389001

I did some preliminary research on the company. I gotta say this seems like a complete gamble and to be honest it looks like a much better candidate to short than to hold long.
- The MA reversal provided only a minor spike and led to a sell off pretty quickly after.
- The reversal in itself is facing a lot of negative backlash.
- The company has a very high cash burn rate, a relatively large amount of debt, and not much cash.
- They already did a second equity offering after this drug was FDA approved which makes it difficult to see how they could find more cash while they try and ride this out.
- Only plausible options would be a potentially awful long term high yield convertible bond, or a buyout from a stable buyer who believes in the drug. Both of these would need to come soon as time is not on their side. In either scenario your upside is greatly reduced since it is now essentially capped. A high yield convert bond will dilute you significantly should they find success, and any buyout won't pay a ridiculous premium given their current position.
- All statistical research based analysis rates the stock at sell or underperform, despite the 4 human analysts rating them as a buy as per your reuters link.

I would strongly recommend avoiding this one but can understand if you seem to know something very specific about this drug that suggests it will rescue the company in some way.

EDIT: Also looking at those analysts' consensus for sales and EPS forecasts suggests that the company will not only not hit anything near their CEO's lofty projections, but as sales estimates rise through the end of 2015, their EPS goes very negative in 2014 and remains even worse than it is now through the end of 2015.

Nobody commented on my analysis, but I am now even further bearish with this news today: http://seekingalpha.com/news/1688143...-zohydro-act-2

You missed the option that actually occurred today. They sold the migraine treatment part of their company for eighty some million. I would think that means less dilution, an increased possibility of going to zero, and of course an upside that is not as capped as you predicted. Its now appears to be a pure poker pot odds situation. Yipee!

Yes I see that today, but you see clearly why they chose that route. The options I listed kept the company in tact without removing its current core revenue source. They realized what I realized I guess in that the options I listed all sucked, and so they chose the lesser of all evils. This now injects the company with cash, practically eliminates all immediate revenue, and places the risk squarely on the drug release taking widespread dominance. I don't know that it's a pure pot odds situation as we still haven't found a correct market share/revenue estimation for their drug if it does hit mass market.

Looks like they are all in with Zohydro.

40% of the float is short, so yeah, with the sale of their only other revenue source either this stock goes to zero or we see the mother of all short squeezes.

Not really per your fundamental analysis but with a cult stock like this that's off highs, the odds of this getting pumped towards $4 are pretty good. I'd be surprised Seeking Alpha doesn't try to run it.

Still holding?

Almost at break-even if you bought at $1.50.

The buy-and-pray small biotech sector was on fire for a while. A few of my holdings just deteriorated over the past 3 months. I don't think its from a rotation into mega-cap pharma.

It might be due to the momo massacre.

It also might be due to me knowingly buying bull**** stocks and now becoming a bagholder.