Zynerba Pharmaceuticals (ZYNE) is a Devon, Pennsylvania-based specialty pharmaceutical company that develops transdermal cannabinoid therapies for rare and near-rare neuropsychiatric disorders including Fragile X syndrome (FXS), Autism Spectrum Disorder (ASD), 22q deletion syndrome and a heterogeneous group of rare and ultra-rare epilepsies known as developmental and epileptic encephalopathies (DEE). The company was founded in 2007 and was listed on NASDAQ in 2015.
The company’s focus is the cannabidiol (CBD) gel Zygel. In October, the company received a patent on the “Treatment of Fragile X Syndrome with Cannabidiol” which includes claims directed to a method of treating FXS comprising administering 250mg or 500mg of synthetic or purified cannabidiol in a pharmaceutically acceptable carrier. Earlier this month, the company announced plans to review the design and protocol for a new clinical trial through a Type C meeting with the U.S. Food and Drug Administration (FDA) during the first half of 2021, with a new clinical trial commencing before the end of year.
“We believe that Zygel has the potential to meaningfully relieve the behavioral symptoms of the most impacted individuals with Fragile X syndrome,” said Armando Anido, chairman and CEO of Zynerba. “We are thankful for our ongoing constructive dialogue with the FDA on our path forward to NDA [new drug application] submission.”
Although Anido added the company will be concentrating its main efforts on the FXS trial, ZYNE will continue developing Zygel therapies for the treatment of other diseases.
Here’s how our proprietary POWR Ratings system evaluates ZYNE:
Trade Grade: F
ZYNE is trading at $3.37, which is closer to its 52-week low of $2.55 than its 52-week high of $7.45. The stock began to gain momentum after the Nov. 9 announcement of its Q3 earnings, but it started to lose its footing into December and continued to slide as the month progressed.
Much of the stock’s ongoing weakness can be traced to the residue of an announcement from Sept. 18, 2019, when ZYNE released results from a phase 2 clinical study that used Zygel to treat children and adolescents with DEE. The company admitted that 96% of patients treated with Zygel experienced a treatment emergent adverse event, while 60% of patients experienced a treatment related adverse event and 10 patients experienced a serious adverse event. ZYNE closed nearly 22% lower that day at $8.84 per share and has been on the decline ever since. Complicating matters was a class action lawsuit filed after the announcement by investors who claimed the company made materially false and misleading statements regarding its business, operational and compliance policies.
The recent Q3 earnings report found the company burdened by a net loss of $9 million with a $0.31 basic and diluted net loss per share. ZYNE recorded Q3 cash and cash equivalents of $64.3 million as of Sept. 30, compared to $70.1 million as of Dec. 31, 2019. Q3 research and development expenses were $5.8 million, including stock-based compensation of $500,000, while general and administrative expenses were $3.4 million, including stock-based compensation expense of $700,000.
The company added its current cash and cash equivalents were sufficient to fund operations and capital requirements until late in Q4 2021.
Buy & Hold Grade: F
The stock’s proximity to its 52-week high is a key factor that our Buy & Hold Grade considers, and ZYNE is too far from that level to earn a higher grade. Although the stock has its fans – roughly one-quarter of all ZYNE shares are currently owned by institutional investors and hedge funds – it is not one of the stellar attractions of its category.
Peer Grade: D
ZYNE is ranked #157 out of 240 stocks in the Medical – Pharmaceuticals category. In view of the surplus number of successful category competitors with diverse product offerings, ZYNE’s status as a borderline bottom-feeder is no surprise.
Industry Rank: A
The Medical – Pharmaceuticals category ranks #17 out of 123 stock categories, with an average POWR Rating of “B.”
Overall Power Rating: D (Sell)
More than a year has passed since ZYNE’s disastrous acknowledgment of a not-successful clinical study and the stock is still trading too low for comfort.
ZYNE deserves commendation for focusing on treatments for diseases that rarely receive the level of medical attention that they require. And, to its credit, it is moving beyond the bad news from September 2019 – along with the aforementioned patent in treating FXS, the company recently received FDA orphan drug designation for using Zygel in treating the rare 22q deletion syndrome and more recent clinical trials involving DEE and autism spectrum disorder patients have yielded promising results.
While more work is needed to bring Zygel to market, more work is also needed to bring investors back to the ZYNE stock. As we go into 2021, ZYNE is not a necessary addition to your portfolio.
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ZYNE shares were trading at $3.24 per share on Thursday morning, down $0.08 (-2.41%). Year-to-date, ZYNE has declined -46.36%, versus a 17.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Phil Hall
Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series. He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output. More...
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