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NEW YORK (TheStreet) -- Shares of Zogenix (ZGNX) - Get Zogenix, Inc. Report are up 9.76% to $1.35 after Brean Capital initiated coverage on the company yesterday with a "buy" rating and $2.50 price target.

The San Diego, CA-based pharmaceutical company has commercialized Zohydro ER, a controversial pain relief drug, analysts said, adding that the market under-appreciates the medical value this product brings to patients and pain-treating specialists.

Analysts noted upcoming catalysts that may lift shares from their current "depressed state," including supplemental new drug application (sNDA) approval of abuse deterrent formulation of Zohydro ER with the target date of January 31, 2015 and further Zohydro ER uptake.

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Additionally, analysts see possibilities for potential business development deal announcements to either expand revenue or reduce costs, a successful capital raise, and the start of Phase III trials for Dravet syndrome during the third quarter of 2015, which the company announced last week.

Separately, 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 unimpressive growth in net income, weak operating cash flow and generally disappointing historical performance in the stock itself."

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 decreased by 18.2% when compared to the same quarter one year ago, dropping from -$10.85 million to -$12.83 million.
  • Net operating cash flow has significantly decreased to -$30.54 million or 217.49% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • ZGNX's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 65.22%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • ZOGENIX INC has improved earnings per share by 10.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth 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 (-$0.67 versus -$0.72).
  • 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.
  • You can view the full analysis from the report here: ZGNX Ratings Report

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