NEW YORK (TheStreet) -- Zogenix (ZGNX - Get Report) shares are down as much as 22.7% this afternoon on the news that rival Purdue Pharma has completed testing of an abuse-resistant version of its painkiller hydrocodone. Purdue Pharma, which also produces the popular painkiller OxyContin, plans to apply for regulatory approval later this year.
Purdue's announcement looks to undercut the sales of Zogenix's just released hydrocodone drug Zohydro as physicians would seemingly be more inclined to prescribe the form of drug that is least subject to abuse. Ultimately the Food and Drug Administration could even go as far as pulling Zohydro from the market if it finds that Purdue's drug is safer.
Zogenix has replied by stating that it is working on its own version of an abuse-proof Zohydro, but says that it would not be ready for testing until 2016.
Hydrocodone based painkillers are the most prescribed painkillers in the U.S. with over 130 million hydrocodone products prescribed annually. Some 3 out of every 4 prescription pill overdose fatalities are attributed to painkillers.
TheStreet Ratings team rates ZOGENIX INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ZOGENIX INC (ZGNX) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally high debt management risk and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 5439.0% when compared to the same quarter one year ago, falling from -$0.64 million to -$35.62 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, ZOGENIX INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ZOGENIX INC is currently lower than what is desirable, coming in at 25.03%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -358.99% is significantly below that of the industry average.
- Currently the debt-to-equity ratio of 1.56 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, ZGNX's quick ratio is somewhat strong at 1.34, demonstrating the ability to handle short-term liquidity needs.
- ZOGENIX INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ZOGENIX INC reported poor results of -$0.72 versus -$0.64 in the prior year. This year, the market expects an improvement in earnings (-$0.58 versus -$0.72)
- You can view the full analysis from the report here: ZGNX Ratings Report