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Cash-Rich Zynerba's Synthetic Cannabinoid Product Line Ready to Rumble

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Zynerba Pharmaceuticals specializes in developing and commercializing synthetic cannabinoid therapeutics formulated for transdermal delivery. The Devon, Pennsylvania-based company's Q4/16 financial results disclose a substantial cash kitty of ~$78M available to fund its pipeline of medical marijuana products, ZYN001 and ZYN002.

The pace of investment is heating up for the emerging bull market in cannabinoid products. Zynerba Pharmaceuticals Inc.'s (ZYNE:NASDAQ) share price has doubled from a year ago. The company raised ~$54 million in January, debt-free, a sign of confidence in its potential. Top flight medical industry analysts are targeting Zynerba stock to double again in the wake of the company's successful year.

Zynerba's transdermal drugs are cannabinoid therapeutics for treating refractory epilepsy, Fragile X syndrome (FXS), osteoarthritis (OA), fibromyalgia and peripheral neuropathic pain—all diseases that have no known cures.

Armando Anido, chairman and CEO of Zynerba Pharmaceuticals, told investors at the end of March, "We are moving into 2017 with great momentum, expecting a transformational year with several key milestones in the coming months. This includes top-line results from the three ZYN002 clinical trials and the commencement of our clinical program for ZYN001, our patent-protected pro-drug of THC."

Zynerba's double drug future is bright, says ROTH Capital Partners' Michael Higgins, who explains the difference between the two products. "ZYN001 is a pro-drug of delta-9-tetrahydrocannabinol (THC) that enables transdermal delivery through a patch. In preclinical animal studies, ZYN001 demonstrated effective skin permeation with sustained delivery and rapid conversion of ZYN001 to THC. And ZYN002 is a synthetic cannabidiol (CBD) formulated as a permeation-enhanced gel for transdermal delivery. In preclinical animal studies, ZYN002's permeation enhancer increased delivery of CBD through the layers of the skin and into the circulatory system," ROTH analyzes.

ZYNOO1's prodrug THC patch is on track for a Phase 1 clinical trial in late Q2, with Phase 2 in fibromyalgia and neuropathic pain slated to start by year-end. ZYN002 is proceeding as planned through a series of Phase 2 clinical trials targeting specific applications. Top-line data from the Fragile X trial with ZYN002 are slightly delayed due to the complexity of dealing with children and their families. Those results should be available in the third quarter.

Corey Davis of H.C. Wainwright & Co. is enthusiastic about Zynerba Pharmaceuticals' near-term prospects. After talking with company executives, Davis reported, "Zynerba specified that both its Phase 2 studies with ZYN002 (CBD in a gel formulation), STAR 1 (epilepsy) and STOP (osteoarthritis pain), will read out in July or August, with epilepsy coming first. Our positive thesis continues to hinge on ZYN002, which we think has a high chance of working for several reasons: 1) "medical marijuana" clearly has utility in a number of different settings and regulators would prefer to have the active compound isolated, regulated, and delivered in a consistent manner, with formal clinical trials as proof of its therapeutic activity; 2) GW Pharma has already shown proof that CBD (cannabidiol) works in two different subsets of epilepsy; 3) Zynerba has proven its gel formulation penetrates the skin and enters the blood in a consistent manner with low side effects; 4) the pK profile of ZYN002 matches closely that of GW's Epidiolex. There is not yet any human data in osteoarthritis pain, so that study is inherently riskier, but we take the very fast enrollment of 320 patients (in Australia) as a good sign that patients and physicians are having a positive experience (albeit blinded)."

At PiperJaffray, Charles C. Duncan projects that Zynerba's store of cash can amply fund its pipeline progress well into H1/19. Duncan notes, "Importantly, this runway should include the first clinical efficacy data from lead candidate ZYN002 in three indications and potential progress on an initial Phase III program. We see efficacy from ZYN002 in the lead indication of adult epilepsy as most important for addressing the investor questions on the company's pipeline potential for moving through pivotal studies. Clinically meaningful results from STAR 1 would support: bioavailability and optimized dosing of ZYN002; trial design/conduct acumen; further validation of the target in seizure control; and advancement to Phase III. Therefore we recommend ZYNE shares in front of STAR 1, followed by STOP 1 and FABC, results during 3Q17."

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