In case you haven't noticed, the marijuana industry is growing by leaps and bounds. According to cannabis research firm ArcView, the legal weed industry in North America is estimated to grow by 26% on an annual basis through the year 2021 , leading to a market worth nearly $22 billion. It's not often that an industry comes along that can sustain a 26% annual growth rate for five years, or longer, which is why investors have latched onto marijuana stocks – and they haven't disappointed. Many of the largest marijuana stocks have jumped by 100% or more over the trailing year.

But not everything is "green" when it comes to marijuana. The U.S. federal government continues to categorize the substance as schedule I, meaning it has no recognized medical benefits, and is therefore entirely illegal. This categorization makes it very difficult for pot-based businesses to receive basic financial services, such as a checking account, from banks. It also leads to tax disadvantages, with marijuana companies unable to take normal corporate income-tax deductions.

Those disadvantages aside, some marijuana companies are mired in steep losses by their own doing. Clinical-stage cannabinoid drug developer Zynerba Pharmaceuticals (NASDAQ:ZYNE) is a prime example.

A frustrated investor covering his face with his hand and holding a tablet depicting a plunging stock chart.

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Zynerba has lost half its value over the past year

As recently as April, Zynerba was valued at nearly $26 a share and sporting a market cap of more than $300 million. Today, Zynerba's share price has dipped below $6, with its stock down a clean 50% over the trailing 12-month period. The drop has nothing to do with the uncertainties surrounding how the federal government will address states' rights, and everything to do with the disappointment surrounding Zynerba's lead clinical drug, ZYN002, a cannabidiol (CBD)-based gel. CBD is the non-psychoactive component of cannabis.

Zynerba announced in its second-quarter press release  that a trifecta of data on ZYN002 awaited investors over a span of just two months. It was expected to report top-line data in the phase 2 Stop trial in adults with osteoarthritis (OA) of the knee, the midstage Star 1 study in patients with adult epilepsy, and a midstage study involving pediatric Fragile X syndrome patients. Thus far, the first two have led to significant disappointments.

Star 1 and Stop both missed the mark

The Star 1 study in adult epilepsy patents with focal seizures was a complete disaster for Zynerba. Not only was it the first true efficacy data that investors got wind of, but it offered essentially no positive takeaways. Tested in two doses, the low dose achieved an 18.4% median reduction in focal seizures from baseline during the treatment period, whereas the high dose achieved a 14% median reduction, Comparatively, the placebo led to an 8.7% median reduction.  Thus, ZYN002 missed its primary endpoint of a statistically significant reduction in focal seizure frequency, and it left development at a dead-end with the head-scratching result of the lower dose outperforming the higher dose.

A doctor holding a marijuana leaf in his hands.

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The Stop trial didn't fare too much better. Two doses were once again tested, with the same result: a failure to reach the study's primary endpoint. Overall, the low dose (250 mg) achieved a 2.64 mean reduction from baseline in average worst knee pain scores in OA patients, while the higher dose (500 mg) achieved a 2.83 mean reduction. The placebo delivered a mean reduction of 2.37 from baseline in worst knee pain score. The only saving grace of this study was the achievement of a handful of secondary endpoints, including the responder rate based on a greater than 30% reduction in worst pain severity at week eight for the low-dose.  Zynerba's management believes the success of these secondary endpoints merits moving ZYN002 into phase 3 studies.

Is Zynerba running out of chances to succeed?

Nonetheless, after two disappointing studies, and its other drug in development, ZYN001, still a ways away from delivering efficacy results that investors can wrap their hands around, the following thought has to be in the forefront of investors' minds: Is Zynerba running out of chances to succeed?

According to its second-quarter earnings press release, the company is due to release data on its phase 2 pediatric Fragile X syndrome patients any time now. The primary endpoint of the study is to evaluate intra-patient changes in anxiety, depression, and mood, as measured by the ADAMS scale, versus baseline over a 12-week period.  Given that Fragile X is an orphan disease (i.e., it impacts fewer than 200,000 peope in the U.S.), ZYN002 could command a hefty price point if approved, it just might be an instantly profitable drug for Zynerba. However, if ZYN002 fails to reach its primary endpoint for a third consecutive time, or if it produces marginal results as seen in the Star 1 study, there's a decent chance that Wall Street and investors may give up on Zynerba for good.

A cannabis bud lying atop a physicians' prescription pad.

Image source: Getty Images.

As much as I dislike seeing investors lose money, Zynerba is a great teaching tool for marijuana stock investors. Though marijuana has been regularly touted as medicine by cannabis advocates, it and its cannabinoids are far from a surefire fix for all ailments. Just because a company is associated with marijuana doesn't guarantee that it'll be able to profit from growth within the industry. Until recently, Zynerba hadn't delivered any clinical data with substance, which should have been a red flag for investors.

Long story short, be critical of marijuana stocks and cannabinoid drug developers, and wait until we have concretely positive clinical data before you consider dipping your toes in the water. As for Zynerba, leave it to the speculators until the clinical data gives investors a reason to be optimistic.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.