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Zogenix Reports Second Quarter 2012 Financial Results

Research and development expenses for the second quarter 2012 were $6.4 million, representing a 28% decrease from $8.9 million in the second quarter 2011. The decrease in research and development expenses was the result of lower costs associated with the Phase 3 clinical trials for Zohydro ER, which were completed in 2011.

Selling, general and administrative expenses for the second quarter 2012 were $12.1 million, representing a 20% decrease from $15.0 million in the second quarter 2011. The decrease in selling, general and administrative expenses was due primarily to the March 31, 2012 termination of the Company's co-promotion agreement with Astellas resulting in no service fee being incurred in the second quarter compared to a service fee of $1.7 million in the second quarter of 2011. Also, sampling costs were lower, with decreases partially offset by the expansion of the Zogenix sales force completed in the fourth quarter 2011.

Other expenses for the second quarter 2012 were $2.3 million, which included the cost of interest expense on the Company's debt obligations with Oxford Finance LLC and Silicon Valley Bank, as well as royalty payments and non-cash mark-to-market adjustments for derivatives and warrant liabilities related to the Company's July 2011 financing agreement with Healthcare Royalty Partners (previously called Cowen Healthcare Royalty Partners). The Company records interest expense on the Healthcare Royalty Partners debt obligation on an effective interest method at a rate in the mid-to-high teens, while actual quarterly royalty payments are made at a rate of 5.75% of net product revenues.

Net loss for the second quarter 2012 was $17.2 million, or $0.26 per share, compared to a net loss of $19.2 million, or $0.56 per share, for the second quarter 2011.

The weighted average shares outstanding were 65,449,000 for the second quarter 2012. This does not include the 35,058,300 shares issued in conjunction with the recently completed equity offering.

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