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Zynerba Pharmaceuticals’ quest for CBD gel to treat Fragile X syndrome ventures where big pharma fears to tread

Snapshot

With top-line data from the CONNECT-FX trial on the way, investors are eying the opportunity defined by marijuana-adjacent companies like Zynerba Pharmaceuticals

A doctor's stethoscope and a marijuana plant

Quick facts: Zynerba Pharmaceuticals

Price: 6.17 USD

NASDAQ:ZYNE
Market: NASDAQ
Market Cap: $143.13 m
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Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE) and GW Pharmaceuticals PLC (NASDAQ:GWPH) are both doing trailblazing work pushing clinical trials for cannabis-derived treatments that some pharma giants are too scared to undertake.  

With pluck, these two companies are working on dazzling discoveries, designing cannabis-derived treatments that can help patients suffering rare epilepsies and neurological disorders. 

GW Pharmaceuticals has done a great service to the space,” Zynerba CEO Armando Anido told Proactive Investors. “It was meticulous in carrying out studies and clinical trials. It left no stone unturned in getting regulatory approval. It set good standards.”    

READ: Zynerba Pharmaceuticals stock soars amid slew of positive drivers

The first in a new category of anti-epileptic drugs, the Food and Drug Administration granted a license in June last year to GW Pharma’s cannabis-derived Epidiolex treatment for seizures associated with Lennox-Gastaut Syndrome in patients two years of age or older.  

Approval was based on three studies and an open-label extension study, showing Epidiolex when added to other drugs significantly reduced the frequency of seizures in patients. GW Pharma is now developing Epidiolex in tuberous sclerosis, and if approved in the third indication, sales could break through the billion-dollar annual sales barrier. 

Taking a page out of GW Pharma’s playbook 

What GW Pharmaceuticals has achieved underlines the latent potential of Zynerba, which is developing novel cannabinoid treatments delivered via the skin to treat neurological and psychiatric disorders. 

In fact, Devon, Pennsylvania-based Zynerba is on track to reporting top-line results from tests of its cannabidiol gel treatment for children and adolescents with Fragile X syndrome, the most common form of inherited learning disability and attention deficit disorder. 

Topline results are expected in the second half of 2019 from its CONNECT-FX clinical trial, which will evaluate the potency and safety of ZYN002, a CBD gel, in children aged three to 17 with Fragile X syndrome. 

Fragile X is also the most commonly known single gene cause of autism spectrum disorder.  

Top-line data  

“We started enrolling the trial in the second half of last year. We should be in a position to report our top line data in the second half of 2019, so all is a go at this point,” said Anido. 

The company could be filing a New Drug Application for ZYN002 in the first half of 2020 for Fragile X Syndrome, Anido added. 

The CEO pointed out that if successful, ZYN002 has the potential to become “the first product” for the treatment of behavioral symptoms of Fragile X syndrome.  

“Children with Fragile X syndrome are dramatically impacted by this genetic condition and its debilitating behavioral and emotional challenges, including anxiety, social withdrawal, irritability, inattention and aggression,” said Elizabeth M Berry-Kravis, professor of pediatrics, neurological sciences and biochemistry at Rush University Medical Center. 

Interestingly, ZYN002 is a synthetic cannabidiol (CBD), which is a non-psychoactive cannabinoid, formulated as a patent-protected permeation-enhanced gel for transdermal delivery through the skin and into the circulatory system. 

Analysts weigh in positively  

Pharma investing is always a high-risk, high-reward proposition as the sector’s ever-volatile stocks show. However, analysts have weighed in positively on Zynerba’s ZYN002 candidate in multiple indications. 

In addition to Fragile X syndrome, ZYN002 is also in Phase 2 clinical development in patients with refractory epilepsy, Autism Spectrum Disorder and 22q11.2 Deletion Syndrome, a disorder caused by a small missing piece of the 22nd chromosome. This tiny missing portion of chromosome 22 can affect every system in the body. 

ZYN002 is also being tested for a heterogeneous group of rare and ultra-rare epilepsies known as developmental and epileptic encephalopathies (DEE). 

“ZYN002 visibility enhanced, expanded with pipeline updates,” wrote Cantor Fitzgerald analysts Charles C Duncan and Pete Stavropoulos in a note to clients. 

“The positive open-label data from the Fragile X syndrome trial on social and behavioral scales is suggestive of efficacy in the new indications, in our view, especially given the mechanistic rationale that we believe is supported externally,” they added. 

Cantor Fitzgerald sees Zynerba as “great value for money” and has an Overweight rating and a $21 price target on the shares, which currently trade in the $5 range. 

Bullish investment case

Similarly, H.C. Wainwright analyst Oren Livnat describes Zynerba as a “severely discounted” stock less than “a year from potential transformational” data. The analyst said Zynerba has reiterated “all expected pipeline timelines,” and exhibited “financial discipline.” 

“With the prospects of very dramatic upside on potential positive FXS pivotal data less than a year away, and a multi-billion dollar comparable for CBD in DEE indications from GW Pharma, and the company is relatively well capitalized through all 2019 data, we see exceptional potential risk-reward at this extremely discounted $34 million enterprise value,” wrote Livnat. 

H.C Wainwright has a Buy rating and $23 price target on Zynerba stock. 

Zynerba has $59.8 million in cash to fund operations and reach clinical milestones in the first half of 2020. 

Since pharma companies are embarked on voyages into the unknown, it can be tough for investors to weigh the risks. However, if a company is sufficiently far along with clinical trials, it’s a good indication it won’t flame out. 

“A lot of the heavy lifting for this program has already been done. ZYN002 has already been in over 600 patients, in some for as long as two years, so we already know a lot about its safety and activity,” said Anido.  

“Thanks to that data, we are now in the midst of a period of time where we have a number of near-term catalysts, including two new Phase 2 clinical trial initiations, Phase 2 DEE data, pivotal Fragile X data, and soon thereafter, ASD and 22q data,” he added. 

Zynerba is also looking at a big addressable market. If GW Pharma’s Epidiolex is aimed at 35,000 to 40,000 patients suffering rare epilepsies, ZYN002 is looking at double the market for just Fragile X syndrome.  

“For Fragile X it is 71,000 patients, for a heterogeneous group of rare and ultra-rare epilepsies known as developmental and epileptic encephalopathies it is 45,000, and almost a million patients are diagnosed with autism,” said Anido.  

Contact Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive

 

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