Zogenix Enters $30-Million Royalty Financing Agreement

Zogenix, Inc., a pharmaceutical company commercializing and developing products for the treatment of central nervous system disorders and pain, recently announced it has entered into a $30-million royalty financing agreement with Cowen Healthcare Royalty Partners II, L.P. In addition, Cowen Royalty will make an equity investment of $1.5 million in Zogenix common stock and will receive warrants exercisable for 10 years into 225,000 shares of Zogenix common stock at an exercise price of $9.00 per share.

Under the terms of the structured royalty financing agreement, Cowen Royalty will invest $30 million in exchange for 5%, stepping down to 0.5%, of worldwide annual net sales of SUMAVEL DosePro, Zohydro (hydrocodone bitartrate) extended-release capsules (previously known as ZX002), and other products developed or marketed by Zogenix, co-promotion revenue and out-license revenues generated by Zogenix during the agreement term, subject to certain exclusions. Cowen Royalty will also receive fixed payments totaling $30 million, the last of which is payable in the first quarter of 2017, with the royalty obligation continuing through the first quarter of 2018.

Concurrent with this agreement, Zogenix amended its $25 million term loan with Oxford Finance Corporation and Silicon Valley Bank to defer principal repayment to February 1, 2012, eliminating $3.7 million of principal payments in 2011.

“We are very pleased to announce this royalty financing with Cowen Royalty,” said Roger Hawley, Chief Executive Officer of Zogenix. “We believe this financing structure provides us with minimally dilutive capital, which enables us to continue executing our operating plan. We are presently driving continued adoption of SUMAVEL DosePro, completing Phase III clinical development for Zohydro in anticipation of an NDA filing by early 2012, and leveraging our DosePro delivery platform for additional CNS products.”

“Zogenix is ideally positioned to address unmet needs in the CNS and pain markets with its currently promoted product, SUMAVEL DosePro, which addresses the multi-billion dollar migraine market, as well as its development pipeline,” added Todd C. Davis, Managing Director of Cowen Royalty. “Our investment with Zogenix fits our strategy of focusing on unique commercial stage products and companies with attractive risk/reward profiles.”

Zogenix, Inc., with offices in San Diego and Emeryville, California, is a pharmaceutical company commercializing and developing products for the treatment of CNS disorders and pain. Zogenix’s first commercial product, SUMAVEL DosePro (sumatriptan injection) Needle-free Delivery System, was launched in January 2010 for the acute treatment of migraine and cluster headache. Zogenix’s lead product candidate, Zohydro (hydrocodone bitartrate), is a novel, oral, single-entity extended-release capsule formulation currently in Phase III clinical trials for the treatment of moderate-to-severe chronic pain in patients requiring around-the-clock opioid therapy.