Editor’s note: This column is part of our Best Stocks for 2017 contest. Adam Johnson’s pick for the contest is Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE).
As we’ve reached the end of the first quarter, Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE) has shown serious strength in the Best Stocks for 2017 contest, surging out to an early lead.
ZYNE Stock’s Prospects
ZYNE stock is going full speed ahead on testing to bring its cannabinoid drugs to market. The company in March completed enrollment for two new phase 2 trials. Zynerba synthesizes marijuana ingredient CBD in a lab, then suspends it in a gel which epilepsy and osteoarthritis patients rub into their skin for treatment.
This gel, ZYN002 appears to lower the incidents of seizures among patients suffering from epilepsy, as reflected in an initial Phase I trial focused on Zynerba’s unique transmission mechanism.
An estimated 2.2 million Americans suffer from epilepsy, and another 3.1 million in Europe and Japan. That’s a hefty potential market to address.
Osteoarthritis affects another 31 million Americans, so the potential commercial opportunities here are significant as well.
Another compound, ZYN001, is a patch formulation of synthetic THC. By keeping THC out of the digestive tract, hallucinatory side effects are avoided and clinicians can instead focus on the perceived pain-relieving (analgesic) benefits of THC.
Phase II studies begin early in 2017 for two applications: Fibromyalgia and neuropathy, or chronic pain. These are also potentially significant markets in the U.S., with 5.6 million and 14 million patients respectively.
Zynerba owns its two proprietary compounds outright, with patent protection for over a decade.
There’s a reason ZYNE has been running so strong. Initial trials have demonstrated strong results, enabling Zynerba to issue stock two months ago in a highly successful secondary common stock offering. Proceeds will fund its ongoing Phase II and IIb trials, the results of which may become available during the third quarter.
Zynerba’s transdermal application has fewer side effects than a competing oral equivalent from GW Pharmaceuticals Plc-ADR (NASDAQ:GWPH), though GWPH trades at 10x the market cap because it is closer to commercialization.
Strong data from Zynerba later this year could narrow the valuation gap, implying significant upside for holders of ZYNE.
Adam Johnson is Founder and Author of Bullseye Brief, an investment newsletter that presents thematic and actionable ideas. As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @AJInsight.
