After Zynerba Pharmaceuticals (NASDAQ:ZYNE)released the pricing information of its recently announced secondary common stock offering, its shares fell by more than 16% as of 11:20 a.m. EST on Thursday.
Zynerba Pharmaceuticals announced that it is selling 2.8 million shares of its common stock at a price of $18.00 per share. The offering is expected to net the company slightly more than $50 million. In addition, the underwriters of the deal are also being granted a 30-day option to purchase up to 420,000 additional shares of common stock, which could potentially pad its bank account by another $7 million.
Traders are not reacting kindly to this news because Zynerba's stock ended Wednesday's trading session at $22.46. Thus, the pricing terms of the deal suggest that the company was forced to offer a 25% discount in order to attract enough demand from investors. That's not exactly an encouraging sign.
Zynerba said that the proceeds of the deal will be used to fund the clinical development its two transdermal synthetic cannabinoid product candidates -- which are called ZYN002 and ZYN001 -- as well as for general corporate purposes.
The markets responded to the disappointing pricing terms by knocking down the company's share price by double digits.
After this transaction is complete, Zynerba's cash balance should exceed $80 million. If its current spending levels hold, then it should easily have enough capital to fund itself for at least two more years. That should be enough time for the company to make a lot of progress on its clinical development.
Here's a look at Zynerba's pipeline as it stands today.
ZYN002 remains the most interesting drug for investors to watch since it is nearing the end of two phase 2 clinical trials. This product candidate is a cannabinoid-based get that delivers its payload through the skin. The company believes that it could be used to treat a variety of diseases such as refractory epilepsy, osteoarthritis of the knee, and Fragile X syndrome. With top-line results for its STAR 1 and STOP trials expected to be released in the next few months, investors won't have to wait long to see how this interesting product candidate performs in the clinic. However, until those results are released, I'd suggest that potential shareholder should keep Zynerba as a watchlist-only stock for now.