Why Investors Should Watch Zynerba Pharmaceuticals Inc
Cannabis stocks are having a rough go of it right now. Even the shares of some of the most profitable pot companies have been taking a hit. So it’s probably not a surprise to learn that shares of one of the most promising clinical-stage cannabis companies, Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE), have been taking an outsized hit.
As of this writing, ZYNE stock is down by:
- 39% over the last month
- 57% over the last three months
- 73% over the last six months
- 66% year to date
- 82% year over year
Despite the shellacking, the outlook for Zynerba Pharmaceuticals stock is exceptional. Analysts’ average 12-month share-price target for Zynerba Pharmaceuticals Inc is $8.00, suggesting a potential gain of 716%.
Chart courtesy of StockCharts.com
Potential Growth Drivers for ZYNE Stock
Why the bullishness for Zynerba Pharmaceuticals stock?
As a clinical-stage company, Zynerba Pharmaceuticals Inc hasn’t been generating any revenue yet, but its product pipeline is incredibly compelling. The company’s potential medications, which are in various stages of development, target unmet rare medical conditions.
The company develops transdermal (through the skin) cannabidiol (CBD) therapies to treat rare conditions like fragile X syndrome (FXS), autism spectrum disorder (ASD), 22q11.2 deletion syndrome (22q), and rare forms of epilepsy. (Source: “Corporate Overview: May 2022,” Zynerba Pharmaceuticals Inc, last accessed June 6, 2022.)
Zynerba Pharmaceuticals’ lead product is “Zygel,” a pharmaceutically manufactured” CBD gel.
Because the company develops therapies for rare and near-rare neuropsychiatric disorders for which there are currently no treatments, Zynerba Pharmaceuticals Inc has received orphan drug designation for CBD (the active ingredient in Zygel) from the U.S. Food and Drug Administration (FDA) for the treatment of 22q. The company has also gotten orphan drug designation for CBD from the European Commission for the treatment of FXS.
The FDA also approved Zygel for “Fast Track” designation for the treatment of behavioral symptoms of FXS.
During the first quarter of 2022, Zynerba Pharmaceuticals Inc continued to enroll FXS patients in its Phase 3 pivotal trial, with top-line results expected in the second half of 2023.
The company plans to initiate a pivotal Phase 3 program for patients with ASD in the second half of 2022.
Zynerba Pharmaceuticals Inc completed the enrollment in its Phase 2 trial on 22q patients. Furthermore, the company has filed an Investigational New Drug (IND) application with the FDA for a Phase 3 trial on ASD patients, which it expects to initiate in the second half of 2022.
Zynerba Pharmaceuticals Inc’s Financial Situation
As a development-stage biotech company, Zynerba Pharmaceuticals Inc’s financial results aren’t as important as positive drug trials, patents, and approval from the FDA and other governing bodies.
During the first quarter of 2022, the company announced a net loss of $8.5 million, or $0.21 per share. Its research and development costs in the first quarter were $5.1 million, while its general and administrative expenses were $3.8 million. (Source: “Zynerba Pharmaceuticals Reports First Quarter 2022 Financial Results and Operational Highlights,” Zynerba Pharmaceuticals Inc, May 16, 2022.)
Zynerba Pharmaceuticals has virtually no debt and roughly $70.0 million in cash. The company says it has enough money to fund its operations and capital requirements into the second half of 2023.
Because of the outlook for its products, Zynerba Pharmaceuticals Inc hasn’t had any problem over the years in drumming up investor support for additional capital. The company has entered sales agreements with Cantor Fitzgerald, L.P., Canaccord Genuity Group Inc, H.C. Wainwright & Co., LLC, and Ladenburg Thalmann & Co. Inc., through which the company may sell, from time to time, up to $75.0 million of its own common stock.
While some investors might have fears of overdilution, Zynerba Pharmaceuticals Inc only has 43.6 million shares outstanding. Over the last number of years, ZYNE stock has faced significantly less dilution than many of the biggest cannabis stocks.
The next year or so will give investors a clearer view of Zynerba Pharmaceuticals Inc’s long-term, multi-billion-dollar potential.
Zynerba Pharmaceuticals stock continues to be a great cannabis penny stock with tremendous near- and long-term growth potential. The company hasn’t been generating revenues yet, but its product pipeline is moving toward commercialization.
As a development-stage company, Zynerba Pharmaceuticals Inc’s shares will be more prone to popping on positive clinical test results. To that end, the company expects to report important milestones as early as the middle of this year.