Zynerba Pharmaceuticals has two things working in its favor – it uses a synthetic cannabis compound and its phase II study results for its core drug is expected this summer.
First off, the benefits of a synthetic cannabis compound. Since Zynerba uses a synthetic version of cannabis, the company doesn't “touch the plant.” This keeps it safe from a crackdown on cannabis and the risk of not having access to cannabis plants. It also makes it an appealing investment for people that want to participate in the rise of the cannabis market, but remain uncomfortable with investing in an illegal product.
Chief Executive Officer Armando Anido said, “Synthetic cannabinoids are currently Schedule 1 because of the relation with marijuana. Once FDA approved, because they will then have a proven medical benefit, they will be rescheduled to probably schedule 3 or 4 (and maybe even descheduled entirely). Today, Marinol (THC in a pill) is approved and a Schedule 3 substance.” If the FDA drags its feet on scheduling, Zynerba can still sell its drugs in other countries.
Anido also pointed out that since its drugs are produced synthetically, it allows for scaling up volumes and said that the compounds are patent protected.” Zynerba differs from other medical marijuana drug companies because its products are absorbed through the skin and not ingested. One product comes in a gel form and the other is in a patch.
The drug that should be delivering Phase II study results this summer is the ZYN002 Gel. Top-line Phase II results for studies on adult epilepsy and osteoarthritis in knees are expected in the July/August time frame. There will also be Phase I result for using the gel for patients with Fragile X Syndrome (FXS). FXS is a genetic disorder and the most common single gene cause of autism according to the National Fragile X Foundation. About 10% of children with autism have FXS and some children with FXS have autism. There is a link between the two, but they remain different issues. There is currently no drug to treat FXS.
There are high expectations that Zynerba will turn in positive results on these studies as investors believe the company can ride the coattails of GW Pharmaceuticals (GWPH). GWPH has had positive results with its cannabis drug studies on epilepsy patients with seizure reductions of 40% and the feeling is that Zynerba should have positive results as well. GWPH has targeted rare epileptic diseases Dravet Syndrome and Lennox Gastaut for its drugs, while Zynerba is focused on the larger population of adult epilepsy patients.
Zynerba recently raised an additional $50.4 million, which after fees netted to $47.2 million. “It's another year plus of capital and should get us most of the way to Phase III studies and NDA filing,” said Anido. He believes that by that time, positive results will boost the stock price and keep the company in good financial standing. The company is currently burning through about $5-6 million per quarter and they will report their fourth quarter results before the end of March.
Jefferies analyst Biren Amin has a buy rating on the stock and a $32 price target. Amin believes that by 2030, U.S. sales will equal $569 million and that is only including the epilepsy patients. Peak sales could get to $2.3 billion. Amin estimates that the Phase III trial will begin in 2017 and assuming positive data , the filing the occur in 2018 and with FDA approval a launch could happen in 2019. The stock is trading at approximately $18 and has risen over 100% during the past year.
ROTH Capital Partners analyst Michael Higgins has a buy rating on the stock and a $25 target price. Higgins was more focused on the Fragile X study and highlighted no treatments for children with FXS and that many have resorted to ADHD medications for lack of medical solutions. There is some limited research on cannabinoids as a treatment for autism, but there is a great deal of interest in more generating studies on whether cannabinoids could help children with autism.
According to Yahoo Finance, there are 6 analysts following the stock and all rate the company with either a buy or outperform rating. The average target price among the analysts is $30.
Anido said the company has a good relationship with the FDA. “We've had good conversations with the FDA. They're looking to help companies willing to listen to them.”
By Deborah Borchardt - Forbes/Jan. 25, 2017
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Big Pharma Hoping to Get FDA Okayed on Skin-Absorption Synthetic Cannabis by Summer