Zynerba Rockets Forward

The stock of cannabinoid therapy concern Zynerba Pharmaceuticals rocketed ahead some 60% in trading last week.

One catalyst was an upcoming presentation at a healthcare event in the week ahead.  Positive analyst coverage on the stock has also risen recently.

We revisited this ‘Busted IPO’ that suddenly ‘en fuego’ in the paragraphs below.

A government is the only known vessel that leaks from the top.” ― James Reston

The other day we discussed the big rise in Busted IPO Forum model portfolio holding Iovance Biotherapeutics (IOVA). Today, we will examine the even bigger rally this week of fellow Busted IPO Forum model portfolio holding Zynerba Pharmaceuticals (ZYNE).

Company Overview:

Zynerba is a small ‘Tier 4‘ biotech concern based just outside of Philadelphia. The company is focused on developing pharmaceutically-produced transdermal cannabinoid therapies for rare and near-rare neuropsychiatric disorders. The shares currently trade just above $8.50 a share. After this week’s surge, the stock has a market capitalization of approximately $175 million.

Pipeline
Analyst Commentary & Balance Sheet:

Positive analyst commentary had been picking up on Zynerba in recent weeks before this week’s big run. On March 7th, Cantor Fitzgerald reiterated their Overweight rating and $11 price target on Zynerba with the following commentary.

We rate ZYNE Overweight. We focus our valuation on FXS, where we are encouraged by the open-label, long-term data, with meaningful and durable improvements that we see having predictive value for the pbo-controlled pivotal CONNECT-FX trial. On epilepsy indications, we await further data after a disappointment in focal epilepsy. Section may be found on pages 4 – 5. We use a discounted NPV revenue calculation that yields ~$8 for ZYN002 in the U.S. FXS market and ~$3 in the EU.

Five days later, Ladenburg maintained their Buy rating and $26 price target on ZYNE. The following week, H.C. Wainwright reissued their Buy rating with $18 price target and the following updated view on the upcoming events.

We remain optimistic for positive data, though concede that investors will view this as extremely risky given only open-label data to date, and other companies’ failures in the indication. That said, on the Phase 3 primary “social avoidance” endpoint, open-label FAB-C Phase 2 showed a 55% improvement by week-12, which improved to over 75% at 12-months. Phase 3 will have steady-state dosing approximately double the length of at higher average dose per patient. CONNECT-FX is powered assuming placebo improvement of approximately 20% (higher than the 10-18% seen in the prior ganaxalone trial) and 40% improvement on Zygel (lower than seen in Phase 2). Ahead of FXS data, we expect open-label Phase 2 data for Zygel in rare developmental and epileptic encephalopathies (DEE), which is not yet even in our model.

Zynerba ended FY2018 with just over $60 million in cash on the balance sheet. The firm is currently burning through approximately $8 million to $9 million a quarter. It should also be noted that Zynerba has just over $30 million left on an Open Market Sales Agreement, or “at-the-market” (ATM) offering program with Jefferies that it initiated in the summer of 2017.
The company seems well-funded at the moment given this.

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