Troubled pharmaceutical company Zogenix Inc. (Nasdaq: ZGNX) has filed a lawsuit in Massachusetts in response to Gov. Deval Patrick’s executive order prohibiting the sale of painkiller Zohydro ER. "The use of oxycodone and other narcotic painkillers, often as a route to heroin addiction, has been on the rise," Patrick says. The governor directed the Massachusetts Department of Public Health to ban Zohydro ER, which he says is not available in an "abuse-deterrent form."

On April 7, San Diego-based Zogenix filed a lawsuit in the U.S. District Court in Massachusetts requesting that the court grant a temporary restraining order to delay an executive order from Patrick that bans the sale of Zohydro ER. The painkiller is an extended-release hydrocodone, an opioid derived from codeine One of the advantages Zogenix says is offered by Zohydro ER is that the medication does not include acetaminophen, which has been linked to liver damage.

Patrick issued an order on March 27 prohibiting prescribing and dispensing the drug. Zogenix argues in the lawsuit that the executive order conflicts with the U.S. Food and Drug Administration's approval of the drug, and that the FDA has the authority to decide if a drug is safe and effective.  The FDA approved the drug in October 2013.

Zogenix issued a statement in March to address allegations that Zohydro is stronger than other opioids, or medications with morphine-like effects, are "gross misstatements."

The news comes after a March 7 filing with the U.S. Securities and Exchange Commission in which the company's accountant, Ernst & Young LLP, raised doubts about Zogenix’s ability to continue as a going concern, citing recurring losses from operations and lack of sufficient working capital. In the filing, Zogenix says the warning means that it will likely need additional infusions of capital from external sources to keep operating. Ernst & Young previously raised the same concerns. For more, see "Troubled Zogenix to Raise $56M." 

Zogenix has been funded through equity and debt financings since it was established in 2006. Through December 31, the company raised about $417.5 million through selling stock. Most recently, in November 2013, the company sold almost 31 million shares of common stock, raising $64.5 million.

The company has about $3 million in debt that matures in 2014, and about $16 million that matures in 2015. As of Dec. 31, the company had a deficit of about $410 million. Losses in previous years were $80.9 million, $47.4 million and $83.9 million, for 2013, 2012 and 2011, respectively.

For last week's edition of Turnaround Tuesday, see "Eco Building Secures Loan, Raises Capital." 

To view Mergers & Acquisitions' list of struggling companies, check out the Distressed Company Watch List

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