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Zynerba’s 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 eyeing opportunities defined by marijuana-adjacent companies

Doctor with cannabis leaf

Quick facts: Zynerba Pharmaceuticals

Price: 6.77 USD

NASDAQ:ZYNE
Market: NASDAQ
Market Cap: $157.05 m
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  • The company is developing novel transdermal CBD treatments to treat patients suffering rare epilepsies and neurological disorders
  • It's lead development candidate Zygel offers a potential goldmine of therapies for multiple conditions
  • On track to report top-line results from tests of its CBD gel treatment for children and adolescents with Fragile X syndrome in 2H 2019

What Zynerba does:

Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE) is doing trailblazing work pushing clinical trials for cannabis-derived treatments that Big Pharma is too skittish to undertake. 

The Devon, Pennsylvania, specialty pharma company is developing novel transdermal CBD treatments for patients suffering rare epilepsies and neurological disorders. The company’s main product candidate is Zygel, a patent-protected CBD skin gel, which was earlier known as ZYNOO2.  

Zygel offers a potential goldmine of therapies for multiple conditions. In addition to Fragile X syndrome, Zygel 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 can affect every system in the body. 

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

How is it doing:

In September, Zynerba shared positive top-line results from BELIEVE 1, an open-label, multidose Phase 2 clinical trial evaluating the potency and safety of Zygel for children and adolescents with developmental and epileptic encephalopathies.

The trial also assessed the safety and efficacy of Zygel in various DEEs, including Dravet syndrome and Lennox-Gastaut syndrome that may be associated with severe cognitive impairment and behavioral disturbances.

The BELIEVE 1 trial enrolled 48 patients between the ages of three and 16 who received weight-based initial doses of 250 mg, or 500 mg daily of Zygel. In a positive sign, Zygel achieved a 44% median seizure reduction in focal impaired awareness and convulsive seizures in DEE patients by month two, and reductions were sustained through month six of treatment.

After completing an analysis of the promising data, the company intends to seek a meeting with the US Food and Drug Administration, likely in the first half of next year, to discuss the clinical pathway to approval.

In a boost for the company, the US Patent and Trademark Office recently granted Zynerba a patent for treating Autism Spectrum Disorder, which is characterized by challenges with social skills and speech, with CBD.

At the start of August, Zynerba reported second-quarter earnings that showed growing cash reserves as it heads into other key trials. The company revealed that, as of June 30, it had cash and cash equivalents of $88.7 million, compared to $59.8 million on December 31.

Included in that cash pile was $27 million in net proceeds from the sale of 2,082,031 shares at $13.50 per share during the second quarter.

Management said the company's $88.7 million war chest plus the anticipated proceeds from an Australian R&D cash credit will be sufficient to fund operations beyond the expected New Drug Application submission and potential approval of Zygel in Fragile X syndrome and into the second half of 2021.

In July, Zynerba secured a positive decision from the Australian government regarding qualifying research cash credits spread over three years starting in 2018. The company said this will generate $7 million to $9 million in cash tax credits over the next 18 to 24 months.

Clearly, the company has extended its cash runway into the second half of 2021 and set the stage for the next 12 months to be potentially transformational as it reports on its CONNECT-FX pivotal trial.

Inflection points:

What GW Pharmaceuticals PLC (NASDAQ:GWPH) has achieved with its cannabis-derived Epidiolex treatment for seizures underlines the latent potential of Zynerba. A positive data readout for Zynerba in any one of its many clinical trials can create serious momentum.

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, Zygel is looking at double the market for just Fragile X syndrome and almost a million patients are diagnosed with autism.  

The company is on track to report top-line results from tests of its CBD gel treatment for children and adolescents with Fragile X syndrome, the most common form of inherited learning disability and attention deficit disorder.

Those results are expected in the second half of 2019 from its CONNECT-FX clinical trial, which will evaluate the potency and safety of Zygel 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. The company has indicated that it could be filing a New Drug Application for Zygel in the first half of 2020 for Fragile X Syndrome. 

If successful, Zygel has the potential to become the first product for the treatment of behavioral symptoms of Fragile X syndrome. Children with Fragile X syndrome are deeply impacted by this genetic condition and its debilitating behavioral and emotional challenges, including anxiety, social withdrawal, irritability, inattention and aggression.

In addition to Phase II/III clinical trials to treat children and adolescent patients with Fragile X syndrome, Zygel is also in Phase 2 clinical development in patients with refractory epilepsy, Autism Spectrum Disorder and 22q11.2 Deletion Syndrome.

What the boss says:

In a recent interview, Zynerba Pharmaceuticals CEO Armando Anido told Proactive: “A lot of the heavy lifting for this program has already been done. Zygel 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.”

He added: “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.”  

What the brokers say:

Analysts have weighed in positively on Zynerba’s lead candidate Zygel in multiple indications. 

“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,” said Cantor Fitzgerald analysts Charles Duncan and Pete Stavropoulos in a note to clients.

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 $7.50 range. 

Similarly, HC 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,” said Livnat. 

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

In a note in September, analysts at ROTH Capital also highlighted the “DEE opportunity” and drew comparisons with GW Pharmaceuticals Epidiolex treatment for seizures associated with Lennox-Gastaut Syndrome in patients two years of age or older. The FDA’s approval of that 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. 

ROTH senior analyst Jerry Isaacson said: “GW Pharma's Epidolex, is currently approved for a subset of DEE, Dravet syndrome and Lennox-Gastaut syndrome. GW Pharma reported $68.4 million in revenue for Epidiolex in Q2.”

“Zynerba's trial includes a broader group of DEE patients. Potential advantages of Zynerba's product include the need for a much smaller dose of CBD, which may help with safety and ease of administration. We are looking for a reduction in seizures of at least 35% from baseline in this open label trial,” he added.

The analyst assumes approval for Fragile X Syndrome in 2021 and DEE in 2023, with pricing starting at $20,000 annually per patient.

“This pricing is justified by the $32,500 annual price tag for Epidiolex. Using a 12% discount rate, 60% chance of approval in FXS and 40% chance of approval in DEE, we estimate $560 million in total sales in 2029,” Isaacson said in the note.

“Potential approval in ASD provides upside to current estimates,” he added. 

ROTH has a “Buy” rating on Zynerba Pharmaceuticals and a 12-month price target of $36.

Contact Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

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