Organization And Basis Of Presentation

9 Months Ended

Sep. 30, 2011

Organization And Basis Of Presentation [Abstract]

Organization And Basis Of Presentation

1. Organization and Basis of Presentation

Zogenix, Inc. (the Company) is a pharmaceutical company commercializing and developing products for the treatment of central nervous system disorders and pain. The Company's first commercial product, Sumavel^® DosePro^® (sumatriptan injection) Needle-free Delivery System, offers fast-acting, easy-to-use, needle-free subcutaneous delivery of sumatriptan for the acute treatment of migraine and cluster headache in a pre-filled, single-use delivery system. Sumavel DosePro was approved by the U.S. Food and Drug Administration (FDA) on July 15, 2009 and was launched in the United States in January 2010.

The Company was incorporated in the state of Delaware on May 11, 2006 as SJ2 Therapeutics, Inc. and commenced operations on August 25, 2006. On August 28, 2006, the Company changed its name to Zogenix, Inc.

The Company has incurred significant net losses since inception and has relied on its ability to fund its operations through equity financings, debt financings, revenues from the sale of its product Sumavel DosePro and proceeds from business collaborations. As the Company continues to incur losses, successful transition to profitability is dependent upon achieving a level of revenues adequate to support the Company's cost structure. This may not occur and, unless and until it does, the Company will continue to need to raise additional cash. The Company expects its cash resources will be sufficient to fund its operations through December 31, 2011.

On June 30, 2011, the Company amended certain terms of its loan agreement with Oxford Finance LLC, as successor in interest to Oxford Finance Corporation (Oxford), and Silicon Valley Bank (SVB) including the deferral of principal repayment to commence on February 1, 2012 (see note 5). Concurrent to the amendment of the Oxford and SVB loan agreement, the Company entered into equity and royalty financing agreements with Cowen Healthcare Royalty Partners II, L.P. (Cowen Royalty) pursuant to which the Company committed to borrow $30,000,000 from Cowen Royalty and to sell $1,500,000 of its common stock for $29,484,000 in net proceeds. The Cowen equity and royalty financing closed on July 18, 2011 (see note 5).

On September 21, 2011, the Company completed a public offering (Offering) of common stock pursuant to a Registration Statement that was declared effective on September 15, 2011. As a result of the Offering, the Company sold 30,000,000 shares of its common stock, at a price of $2.00 per share. The underwriters were granted an option to purchase up to 4,500,000 additional shares of common stock at $2.00 per share, of which 711,566 shares were sold on October 4, 2011. As a result of the Offering, the Company raised a total of $57,919,000 in net proceeds (including the underwriters October purchase) after deducting underwriting discounts and commissions of $2,586,000 and offering expenses of $918,000. Costs directly associated with the Company's Offering were capitalized and recorded as deferred offering costs prior to the closing of the Offering. These costs have been recorded as a reduction of the proceeds received in arriving at the amount recorded in additional paid-in capital.

Management expects operating losses and negative cash flows to continue for at least the next several years as the Company continues to incur costs related to the continued development of its product candidates and commercialization of its approved product. Management may pursue additional equity or debt financings if required to help support its planned operations beyond December 31, 2011. There can be no assurance that the Company will be able to obtain any source of financing on acceptable terms, or at all.