There was good news and bad news for Zynerba Pharmaceuticals (NASDAQ:ZYNE) in 2017. First, the good news: The cannabinoid-focused biotech stock is up more than 90% over the last three months. What's the bad news? That gain wasn't enough to offset Zynerba's previous decline. The stock is still down over 20% year to date.

Will Zynerba's fortunes in 2018 be more like the first nine months of this year, or the last part of the year? Whether or not the marijuana stock's rebound continues hinges on what happens with cannabidiol (CBD) gel ZYN002 on several fronts.

Marijuana buds in test tube

Image source: Getty Images.

Next steps loom large

Zynerba should make three major announcements in 2018. The first relates to ZYN002 in treating focal seizures. The biotech is analyzing results from the phase 2 STAR 1 and STAR 2 open-label extension studies. Based on this data, Zynberba plans to tweak the design for another phase 2 study evaluating its CBD gel in treating epilepsy. The company expects to provide more information on its next steps with the ZYN002 epilepsy program in the first quarter of 2018.

Another important next step in the first quarter of next year will be Zynerba's meeting with the U.S. Food and Drug Administration (FDA) to discuss results from its phase 2 study of ZYN002 in treating pediatric and adolescent patients with Fragile X Syndrome (FXS), a rare genetic condition that causes learning disabilities. Based on this meeting with the FDA, the biotech hopes to begin a pivotal phase 3 FXS study in the first half of 2018.

The third major next step for Zynerba also involves the FDA. Zynerba intends to meet with the agency in the first quarter to discuss results from its phase 2 study evaluating ZYN002 in treating osteoarthritis. The company would like to advance the drug to a pivotal phase 2/3 study sometime next year. 

Reasons for worry

There are definitely some reasons to worry about Zynerba's prospects. First, ZYN002 didn't meet its primary endpoint of statistically significant reduction of focal seizures in the STAR 1 study. That failure occurred with patients taking both high and low doses of ZYN002.

Investors will anxiously await GW Pharmaceuticals' (NASDAQ:GWPH) results from a phase 2 study of its cannabidivarin (CBDV) product in treating partial-onset epilepsy in adults. GW Pharma expects to announce those results in the first quarter of 2018. Positive results for CBDV could cause Zynerba stock to drop regardless of its plans for moving forward with ZYN002 in treating epilepsy.

But that's not the only point of concern. ZYN002 also failed to meet the primary endpoint in Zynerba's phase 2 osteoarthritis study. The biotech had hoped that patients taking its CBD gel would report significantly better improvement in average worst-pain scores after 12 weeks of treatment than patients on placebo. It didn't happen. ZYN002 only produced marginally better improvement than placebo.

And those aren't the only reasons for Zynerba shareholders to be apprehensive. GW Pharmaceuticals expects key decisions from the U.S. Patent and Trademark Office (USPTO) in the first half of 2018 regarding several patent applications for its CBD product, Epidiolex, in treating epilepsy. Favorable decisions for GW could be bad news for Zynerba.

Some good news

Could 2018 hold any good news for Zynerba? Sure. For one thing, the biotech shouldn't have to worry about cash. Zynerba had cash and cash equivalents totaling $66.3 million at the end of the third quarter of 2017. The company thinks that's enough to carry it into 2019, so investors probably won't have to worry about a dilution-causing stock offering next year.

In addition, Zynerba presented more encouraging data for ZYN002 in treating focal seizures at the American Epilepsy Society annual meeting earlier this month. This data included results from the ongoing STAR 2 open-label extension study and showed a correlation between reductions in focal seizures and continued treatment with ZYN002.

Remember also that ZYN002 performed with flying colors in the phase 2 FXS study. There's reason for optimism that Zynerba will achieve success in the pivotal study planned for next year, as well.

Will Zynerba stock roar back in 2018? I'd say it's only a "maybe." Missing primary endpoints in two different studies doesn't build confidence. It's possible that Zynerba scores some victories, and the stock soars next year. However, there's also a good chance that this beaten-down marijuana stock stays beaten down.

Keith Speights 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.