There are three different general types of marijuana stocks on the market. Some are marijuana growers. Others provide supplies to marijuana growers. Then there's the third type of marijuana stock: the biotechs.
Zynerba Pharmaceuticals (NASDAQ:ZYNE) belongs to the last kind of marijuana stock. Like other cannabis-focused biotechs, Zynerba really doesn't develop drugs made from marijuana plants but instead creates medications that use synthetic cannabinoids. Whether you're looking to potentially buy Zynerba stock or are just interested in the company, here are five key things you need to know.
1. Pipeline candidates
Zynerba's pipeline includes two products. Lead candidate ZYN002 is a synthetic form of cannabidiol (CBD), a non-psychoactive chemical found in cannabis plants, that is delivered through a transdermal gel. ZYN002 is currently in three phase 2 clinical studies for treatment of epilepsy in adults with focal seizures, osteoarthritis, and fragile X syndrome (a genetic disease that can cause learning disabilities).
ZYN001 is a pro-drug form of THC, the primary psychoactive chemical in marijuana. Pro-drugs are inactive until converted to an active drug within the body. ZYN001 is delivered through a transdermal patch. Zynerba is evaluating ZYN001 in two phase 1 clinical studies for treating fibromyalgia and peripheral neuropathic pain.
2. Management team
Zynerba CEO Armando Anido has a 30-year track record in the biopharmaceutical industry. Anido joined Zynerba in 2014 after serving as CEO of NuPathe, which was acquired by Teva Pharmaceutical (NYSE: TEVA). Prior to working at NuPathe, he was CEO of Auxilium Pharmaceuticals, which was later bought by Endo International (NASDAQ: ENDP).
Anido has filled Zynerba's executive team primarily with others from NuPathe and Auxilium. Zynerba President Terri Sebree worked at both companies, as did Suzanne Hanlon (general counsel and vice president of human resources) and Carol O'Neill (vice president, development). Zynerba's heads of commercial, manufacturing, and medical also came from Auxilium.
Each of the diseases that Zynerba's pipeline candidates target have significant unmet medical needs. In terms of potential market size for lead candidate ZYN002, osteoarthritis is the biggest with an estimated 31 million patients, followed by adult epilepsy with focal seizures with around 1.5 million U.S. patients.
Cantor Fitzgerald analyst Elemer Piros thinks that the drug could generate peak annual sales of $2 billion if approved for the epilepsy indication in both the U.S. and Europe. ZYN002's transdermal delivery avoids metabolism by the liver and could give the drug an advantage.
Zynerba has several upcoming catalysts. It expects to report results from the phase 2 studies of ZYN002 in treating epilepsy in adults with focal seizures and osteoarthritis within the next few weeks. The company also should announce results from the fragile X study in September.
There are two primary rivals also developing cannabinoids. GW Pharmaceuticals (NASDAQ:GWPH) has completed several late-stage studies for its CBD candidate, Epidiolex, in treating two rare forms of childhood epilepsy. GW is also evaluating another cannabinoid in a phase 2 study for treating epilepsy with focal seizures -- the same indication targeted by ZYN002.
Insys Therapeutics (NASDAQ:INSY) is developing a CBD product for treating pediatric epilepsy as well. However, the company hasn't announced any plans to target the same indications on which Zynerba is focused.
Zynerba's main risks are those shared by all clinical-stage biotechs. If clinical studies don't go as well as expected, the stock will take a beating. And it's a long road to regulatory approval, with lots of potential hurdles along the way.
Even if Zynerba wins approval for its lead product, it could face stiff competition. GW Pharmaceuticals or another biotech might not even be the most worrisome rival. Legalization of medical marijuana could prove to be the most serious threat for ZYN002 as well as for GW Pharmaceuticals' and Insys Therapeutics' cannabinoid drugs.
The risks for Zynerba are shown by its stock performance. Just this year, the biotech's share price has gone through half a dozen swings of 20% or more. There's great potential for the company if all goes well for its pipeline candidates, but there's an equally great risk.