Pot Stock Watch: Why Is Zynerba Viewed As A Sympathy Play With GW Pharma?

The stocks of pharmaceutical companies often trade in sympathy with one another. It’s common for companies working on similar and/or competing drugs to trade in tandem or inversely when one company gets major news about one of its drug candidates. For example, if a drug candidate gets rejected by the FDA, shares of a drug company working on a rival drug often skyrocket on the news.

At the same time, if two companies are working on similar drugs and one company delivers positive trial results, the second company’s stock might rise as traders assume implied efficacy of its drug as well.

Related Link: GW Pharma's Epidiloex Data Is Good News For Zynerba

One of these sympathy relationships involves two of the only pharmaceutical stocks trading on major U.S. exchanges that are working on drugs derived from marijuana. GW Pharmaceuticals PLC-ADR GWPH and Zynerba Pharmaceuticals Inc ZYNE often trade in tandem off of news related to GW Pharma’s leading drug candidates.

Zynerba just held its IPO last year, and its drug candidates are much more early-stage than GW’s candidates. This week, GW reported promising Phase 3 trial data on its epilepsy drug Epidiolex. Zynerba and GW’s treatment targets don’t overlap perfectly, but the two companies are both working on treatments for epilepsy and peripheral neuropathic pain.

When GW delivered the good news on Monday, Zynerba shares surged 10.9 percent. Traders seem to believe that GW is offering a glimpse into Zynerba’s future.