Shares of Zogenix Inc. (ZGNX) are taking a shelling Monday following news after the closing bell on Friday that the Food and Drug Administration advisory panel voted 11-2 against approving the company’s proposed pure hydrocodone painkiller Zohydro™ ER (hydrocodone bitartrate extended-release capsules).

San Diego, California-based Zogenix has been developing Zyhydro as an extended release, pure alternative to today’s approved drugs, such as Vicodin, that are a combination of hydrocodone and other ingredients.  By increasing the levels of hydrocodone to as much as 50 milligrams, Zyhydro decreases the number of doses needed by patients on a daily basis to only two, as compared to treatments every four to six hours for Vicodin, which is 5 milligrams of hydrocodone coupled with acetaminophen.  Acetaminophen has been shown to cause liver damage if use to frequently.

The FDA panel cited concerns about abuse and addiction issues related to opioids, suggesting that guidelines to curb abuse should be explored before approving another, even more potent narcotic.

This decision spurred mixed reactions as to influences on the regulatory pathway changing.  Dr. Bob Rappaport, director of the FDA’s division of anesthesia, analgesia and addiction products, questioned the whether the recommendation was made upon tangible data differences between Zohydro and previously approved drugs or not.

If the guidance was not offered based on clinical data, “you’re punishing this company and this drug because of the sins of the previous developers and their products. And from a regulatory standpoint, that’s not really something we can do,” said Rappaport.

“Zogenix recognizes and appreciates that prescription opioid misuse and abuse is a critical issue,” said Stephen Farr, Ph.D., president and chief operating officer of Zogenix. “However, it is also important to remember that there is a documented patient need for an extended-release hydrocodone medicine without acetaminophen.”  Farr said that Zogenix will continue to work through the review process with the FDA to bring the treatment to specific patients in need.

The committee members voted 7-6 that the drug was effective against pain, but also voted 9-5 that the drug was not safe for patients with moderate to severe chronic pain intended to take it.  The panel said that the drug could carry a higher degree of abuse risk than current painkillers available – and already abused – today.

Zogenix acknowledged that the Drug Enforcement Administration would probably classify Zohydro as a Schedule II product if it wins approval, which means stricter guidelines on sales and greater doctor/patient interaction.  Vicodin and other combination drugs are classified as Schedule III drugs and carrying less stringent regulations.

The recommendation from the Anesthetic and Analgesic Drug Products Advisory Committee (AADPAC) panel is often followed by FDA officials, however, it is still up to FDA to decide on whether or not to allow Zogenix to bring Zohydro to market.  That decision will be made on March 1, 2013.

Wall Street analysts predict that Zohydro could generate up to $500 million in annual sales by 2019.  Zogenix is only expected to report sales of about $45 million for all of 2012.

Shares of ZGNX were halted on Friday ahead of the FDA panel decision and closed at $2.36, but have jettisoned $1.09, or 46.19%, per share to $1.27 in late morning trading Monday.