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

Xconomy San Diego — 

When I talked to Zogenix CEO Roger Hawley last summer about the San Diego company’s development of a needle-free drug delivery device, he said the startup’s plan hadn’t changed much since Zogenix (NASDAQ: ZGNX) was founded in 2006. The company began selling its first product, a needle-free device with a fast-acting painkiller for migraines, early last year, after winning FDA clearance for the device-and-drug combo in 2009.

Almost a year later, Hawley says the company’s story still hasn’t changed, even though Zogenix recently disclosed it has signed an agreement to collaborate with Cupertino, CA-based Durect (NASDAQ: DRRX) to develop Durect’s long-lasting reformulation of the anti-psychotic drug risperidone (Risperdal) for use with the Zogenix needle-free injector.

If approved, the companies say the controlled release formulation would be the first once-a-month antipsychotic drug available in a needle-free delivery system. Johnson & Johnson already markets a long-lasting, once every-other-week injectable form of risperidone, under the trade name Risperdal Consta.

If the new antipsychotic drugs sounds like a departure from Zogenix device-and-drug combo debut with the painkiller sumatriptan, Hawley says it’s nevertheless part of the plan. Zogenix always wanted to develop a series of drugs it could combine with its DosePro needle-free device, which is sold by prescription with a single dose and discarded after each use. The company also planned all along to target its drug development on the central nervous system (CNS). Hawley points out that a migraine is just as much a CNS disorder as schizophrenia. It’s just that a neurologist usually writes the prescription for a migraine while psychiatrists usually end up seeing patients with schizophrenia.

Risperidone is one of the most widely prescribed medications used to treat schizophrenia and biopolar I disorder in adults, according to Zogenix. Even though a long-acting version of risperidone already is on the market, Zogenix sees an opportunity because the existing long-acting version requires injecting 2 or more milliliters of the drug into the muscle twice a month —using a 21 gauge hypodermic needle (almost one-third inch in diameter).

Using a Zogenix needle-free device to inject the anti-psychotic drug once a month—and just beneath the skin—could give the psychiatric community a better way to keep schizophrenic patients in compliance with their regular dose regimens, Hawley says. Long-lasting injections are considered useful in 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.”