Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Zogenix, Inc. (ZGNX) Still Has Upside Potential of 40% Says This Analyst

Page 1 of 2

Following an increase in price target from Brean Capital’s Difei Yang, shares of  Zogenix, Inc. (NASDAQ:ZGNXspiked by more than 12% in yesterday’s trading. Yang hiked the price target to $28 from $20 after the company’s successful Key Opinion Leader meeting focused on Dravet syndrome and Zogenix’s treatment for it, an orphan drug ZX008. The analyst felt that the assumptions previously used to value the company were more conservative than they ought to be. For example, the 35% operating income margin for an orphan disease company like Zogenix might have been in line with other specialty pharma companies, but not the orphan drug universe, for which it stands in the 50% range. Moreover, strong long-term clinical data on ZX008 and a lower efficacy bar for the drug owing to the absence of alternative therapies has led the analyst to revise the success rate of pending trials to 80% from 70%.


Hedge funds have been optimistic about Zogenix, Inc. (NASDAQ:ZGNX)’s future prospects for a while. Among the funds that we track, a total of 14 firms had invested about $40.11 million in the company at the end of March as compared to 11 funds with $31.87 million invested at the end of the previous quarter. Zogenix, Inc. (NASDAQ:ZGNX)’s stock price appreciated by a little over 5% during this period, and is up considerably since (by over 80%).

Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 139% over the ensuing 34 months, outperforming the S&P 500 Index by nearly 80 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.

We also track insider activity because it can provide useful insights into the company’s future prospects as seen from the management’s lens. It should be noted that insider purchases are a much stronger indicator than insider selling, which can occur due to a number of reasons and not just a bearish outlook. Hence the fact that no insider sales have been detected in Zogenix, Inc. (NASDAQ:ZGNX) so far this year, while Director Roger Hawley made an insider purchase to the tune of 150,000 shares in two separate transactions this year, gives a strong bullish signal.

Now let us take a deeper look at the hedge fund activity surrounding Zogenix before we pass our final judgement on the stock.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!