HC Wainwright Unfazed By Zynerba Ending ZYN001: Drug 'Wasn't In Our Numbers'

Zynerba Pharmaceuticals Inc ZYNE stock plummeted 17.8 percent at Thursday’s open after the company ended a Phase 1 study for ZYN001, a tetrahydrocannabinol patch. While there were no adverse effects, the drug failed to meet the targeted top-line results.

Shares regained ground steadily over the day, and were down 3.28 percent at the time of publication late in Thursday's session.

H.C. Wainwright maintained its bullish view of the company and said ZYN001 had never factored into their estimates.

The Rating

H.C. Wainwright analyst Oren Livnat reiterated a Buy rating on Zynerba with a $23 price target.

The Thesis

The drug “wasn’t in our numbers,” Livnat in a Thursday note. “In fact, we view this early-stage ZYN001 termination as a sign of responsible drug development.” (See the analyst's track record here.) 

The analyst’s valuation is entirely based on ZYN002, an orphan-designated transdermal cannabidiol gel for Fragile X syndrome.

The company said it will be focusing its efforts and resources on developing ZYN002.

Zynerba is set to present new short-term and long-term data from its successful open-label “FAB-C” Phase 2 in FXS at the National Fragile X Foundation International Conference on July 12. ZYN002 is expected to enter Phase 3 trials shortly after, with top-line data projected to be available in the second half of 2019.

Livnat’s valuation assumes a 35-percent probability of success in FXS, product launch by 2021 and 30-percent penetration into the FXS population. All this translates to a peak U.S. sales estimate of $700 million.

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