Why Zogenix Inc. Stock More Than Doubled Today

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What happened

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Shares of orphan drugmaker Zogenix (NASDAQ: ZGNX) opened almost 150% higher after heavy pre-market trading on Friday. The small-cap biotech got its big lift from a positive top line readout for its experimental Dravet syndrome drug, ZX008, which is currently in two late-stage trials.

According to the company, ZX008 significantly reduced the convulsive seizure frequency in children with Dravet syndrome -- a rare but potentially deadly form of pediatric epilepsy -- when compared to those receiving a placebo in the drug's first pivotal study. Data from the second late-stage trial is expected to be released in the first half of 2018.

So what

Though Dravet syndrome is an orphan disease that presently lacks an FDA-approved treatment, British company GW Pharmaceuticals (NASDAQ: GWPH) is reportedly putting the finishing touches on a regulatory application for its own candidate drug, called Epidiolex. Not surprisingly, GW Pharmaceuticals stock dropped by as much as 15% in pre-market trading as a result of the news about ZX008.

Now what

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While the market is clearly celebrating this positive clinical trial data, Zogenix still plans to wait for the drug's second trial to wrap up before filing for its approval with American and European regulatory authorities. In other words, GW Pharmaceuticals will have a good chance of establishing a strong foothold in the Dravet syndrome market with Epidiolex before ZX008 even gets to the review stage.

Another key issue to watch is ZX008's safety profile across these two late-stage studies. This drug, after all, is a low-dose formulation of the former anti-obesity drug fenfluramine, which was taken off the market in 1997 because of its association with serious cardiovascular events. And even at those low doses, ZX008 did reportedly produce a number of serious adverse events in this first pivotal trial. Put simply, ZX008, if approved, may require patients to be monitored on a regular basis by their doctors, which may hamper its ability to compete against Epidiolex.

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George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.