In a stunning turn of the tables, beleaguered cannabinoid therapeutics developer Zynerba Pharmaceuticals (NASDAQ:ZYNE) skyrocketed on Monday following an announcement early this morning of a buyout. Specifically, Harmony Biosciences (NASDAQ:HRMY) — which focuses on innovative therapies for patients with rare neurological diseases — will acquire Zynerba. Subsequently, ZYNE stock gained 270% before moving toward 280% up in the early afternoon session.
According to the official press release, Harmony will commence a tender offer to buy out all outstanding shares of ZYNE stock for an acquisition price of $1.1059 per share or $60 million in aggregate. Also, the deal calls for one non-tradeable contingent value right (CVR) per share, representing the right to receive potential additional payments of up to $140 million in aggregate.
Notably, the above arrangement is contingent upon the achievement of certain clinical, regulatory and sales milestones. Though ZYNE stock struggled for traction (prior to the buyout news), Zynerba has impressed within the clinical realm. Its lead asset Zygel is currently undergoing a pivotal Phase 3 clinical trial for patients living with fragile X syndrome (FXS), a genetic disorder that prevents a protein production needed for brain development.
Significantly, Zygel also demonstrated positive signals in an open-label Phase 2 trial in patients living with 22q11.2 deletion syndrome, a disorder caused by the deletion of a small piece of chromosome 22, per MedlinePlus.
ZYNE Stock Gains on Promising Medicinal Marijuana Implications
A rare condition, fragile X syndrome affects about 1 in 4,000 males and 1 in 6,000 to 8,000 females in the U.S., according to the National Organization for Rare Disorders. Likewise, the therapeutic market for fragile X is small, valued at $20.8 million last year. Experts do project that it will grow at a compound annual growth rate (CAGR) of 7% between 2023 to 2031, culminating in a valuation of $37.71 million.
Given the tricky nature of focusing on a critical but narrow market, investors lacked confidence in ZYNE stock. Even with today’s remarkable rally, Zynerba shares still slipped around 4% in the trailing one-year period. Over the past five years, they’re down more than 79%.
At the same time, the added scale of Harmony — which currently commands a market capitalization of $1.93 billion — may add more firepower to Zynerba. Therefore, the upside in ZYNE stock enjoys some fundamental justification.
In addition, it’s unavoidable that Zynerba carries strong implications for the medicinal marijuana industry. Per the aforementioned press release, Zygel is the first and only pharmaceutically manufactured synthetic cannabidiol. Because the drug is not extracted from the cannabis plant, it’s completely devoid of delta-9-tetrahydrocannabinol (THC), the primary psychoactive cannabinoid.
Potentially, Zynerba can help reduce the stigmatization of medicinal marijuana, putting the focus on its therapeutic application rather than its recreational associations.
Why It Matters
Nominally, FXS affects approximately 80,000 people in the U.S., causing intellectual disabilities and behavioral challenges. Although progress in this area has been ongoing, FXS remains a significant unmet medical need. Further, no therapies by the U.S. Food and Drug Administration (FDA) exist, presenting both the challenge and the opportunity for Zynerba.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risk.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
