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Zogenix (ZGNX) Stock Surges on Acquisition Offer From UCB

Zogenix’s ZGNX shares surged 65.7% on Wednesday, after it announced that it has signed a definitive agreement with Belgium-based pharmaceutical company UCB, wherein the latter will acquire the former in an all-cash transaction for approximately $1.9 billion (or €1.7 billion).

Per the agreement terms, UCB has offered to pay upfront cash of $26 per share to Zogenix, representing a premium of 66% to Zogenix’s Tuesday’s closing price. The offer also includes a contingent value right of $2 per share that UCB will pay in cash if Zogenix’s sole marketed drug, Fintepla, secures approval for the treatment of seizures associated with Lennox-Gastaut syndrome (LGS) in the European Union (EU) before 2023-end.

Zogenix’s Fintepla was approved in the United States and EU in 2020 for the treatment of seizures associated with Dravet syndrome, a rare form of epilepsy.

Zogenix has also filed for label expansion of Fintepla in the United States and EU as a treatment for seizures associated with LGS, another form of rare epilepsy. While a decision in the United States is expected by Mar 25, the company filed the regulatory application for label expansion in the EU last month.

Following the deal completion, UCB will add Fintepla to its portfolio of marketed drugs. UCB expects the deal to boost earnings from 2023 onward.

For the first nine months of 2021, Zogenix recorded $51.3 million revenues from Fintepla sales.

Zogenix has surged 41.3% in the trailing 12 months against the industry’s 30.8% decline.

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The acquisition deal has been unanimously approved by the boards of directors of both the companies. The transaction — which is expected to be completed by the end of second-quarter 2022 — is subject to customary closing conditions and clearance from regulatory authorities.

Zogenix is currently evaluating MT-1621 in a late-stage study for the treatment of thymidine kinase 2 (TK2) deficiency, a mitochondrial disease.

The acquisition by a big pharma company like UCB, which has a steady stream of cash, would give a small but growing company like Zogenix the opportunity to expand its pipeline development and access UCB’s larger and well-established commercial supply chain and network distribution.

The addition of an already approved drug like Fintepla is expected to expand UCB’s pipeline in epilepsy. Fintepla has the potential to treat seizures in other disorders. Zogenix is also evaluating Fintepla in CDKL5 Deficiency Disorder (CDD), a type of genetic epilepsy.

Jazz Pharmaceuticals JAZZ also markets its own epilepsy medication, Epidiolex, approved in the United States for the treatment of seizures associated with Dravet Syndrome, LGS and tuberous sclerosis complex. This followed the acquisition of GW Pharmaceuticals last year.

Jazz’s Epidiolex poses stiff competition to Fintepla. In fact, Jazz recorded $160.4 million sales from Epidiolex for third-quarter 2021, reflecting a 21% year-over-year increase. Yet, the COVID-19 pandemic hurt new patient starts, especially among pediatric patients.

Zacks Rank & Key Picks

Zogenix bio carries a Zacks Rank #4 (Sell) at present. Some better-ranked stocks in the overall healthcare sector include Alkermes ALKS and BioNTech BNTX, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alkermes’ earnings per share estimates for 2022 have increased from $0.70 to $0.71 in the past 60 days. Shares of Alkermes have risen 12.2% in the past year.

Earnings of Alkermes beat estimates in all the last four quarters, delivering a surprise of 147%, on average.

BioNTech’s earnings per share estimates for 2022 have increased from $31.14 to $32.72 in the past 60 days. Shares of BioNTech have risen 56.6% in the past year.

Earnings of BioNTech beat estimates in all the last four quarters, delivering a surprise of 132.4%, on average.

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