IPO Report: Zynerba Pharmeceuticals (ZYNE)

Francis Gaskins |

Zynerba Pharmeceuticals (ZYNE) is a ten-year-old specialty pharmaceutical company focused on developing and commercializing proprietary next-generation synthetic cannabinoid therapeutics formulated for transdermal delivery. It is based in Devon, PA.

Six other companies are scheduled for the week of Aug. 3. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: Jefferies, Piper Jaffray
Co-managers: Canaccord Genuity, Oppenheimer & Co.

End of lockup (180 days): Monday, February 1, 2016
End of 25-day quiet period: Monday, August 31, 2015

ZYNE scheduled a $42 million IPO with a market capitalization of $122 million at a price range midpoint of $14 for Wednesday, Aug. 5, 2015 on Nasdaq.

Zynerba Pharmeceuticals Summary

ZYNE is a ten-year-old specialty pharmaceutical company focused on developing and commercializing proprietary next-generation synthetic cannabinoid therapeutics formulated for transdermal delivery.

ZYNE is evaluating two patent-protected product candidates, ZYN002 and ZYN001, in five indications. ZYNE intends to study ZYN002 in patients with refractory epilepsy, Fragile X syndrome, or FXS, and osteoarthritis, or OA.

Zynerba Pharmeceuticals Valuation

Glossary

Accumulated deficit (mm)

.

.

-$12

     

Per share dilution

.

.

-$9.05

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Zynerba Pharmeceuticals (ZYNE)

$122

2,175.0

-20.3

2.9

2.8

34%

             

Zynerba Pharmeceuticals Conclusion

Neutral slightly plus

Next-generation synthetic cannabinoid therapeutics

Hasn't entered Phase 1 trials

No collaborations

Shareholders not buying on the IPO

Price to book of 2.9

P/E of -20

Zynerba Pharmeceuticals Business

ZYNE is a ten-year-old specialty pharmaceutical company focused on developing and commercializing proprietary next-generation synthetic cannabinoid therapeutics formulated for transdermal delivery.

ZYNE’s management team is highly experienced and has a successful history of development, regulatory approval and commercialization of patch and gel transdermal delivery products.

 ZYNE is evaluating two patent-protected product candidates, ZYN002 and ZYN001, in five indications. ZYNE intends to study ZYN002 in patients with refractory epilepsy, Fragile X syndrome, or FXS, and osteoarthritis, or OA.

Zynerba Pharmeceuticals Synthetic Transdermal Cannabinoid Product Candidates

ZYNE'spatent-protected synthetic transdermal cannabinoid product candidates, ZYN002 and ZYN001, represent next-generation cannabinoid therapeutics for several indications including refractory epilepsy, FXS, OA, fibromyalgia and peripheral neuropathic pain.

Treatments for these indications represent markets with underserved patient populations which we believe can benefit from cannabinoid therapies.

With the FXS indication, ZYNE has requested orphan drug designation from the Food and Drug Administration, or FDA, in the second half of 2015.

ZYE believes its proprietary synthetic transdermal product candidates will effectively address these indications and provide a solution to the limitations of botanically-derived and oral and oral mucosal delivered cannabinoid therapeutics.

First & only synthetic...

ZYN002 is the first and only synthetic CBD formulated as a permeation-enhanced gel for transdermal delivery, and is patent-protected through 2030. In preclinical animal studies,

ZYNE intends to study ZYN001 in patients with fibromyalgia and peripheral neuropathic pain. ZYNE believes these product candidates will provide new treatment options for patients, as well as additional treatment options for patients not currently receiving adequate relief from current treatment regimens.

Phase 1 clinical trials in Austrialia

ZYNE expects to initiate Phase 1 clinical trials in the second half of 2015 for ZYN002 and by mid-2016 for ZYN001.

ZYNE plans to conduct its Phase 1, and possibly Phase 2, clinical trials for ZYN002 in Australia (subject to applicable regulatory approval), and does not expect at this time to file an IND with the U.S. Food and Drug Administration, or FDA, prior to the commencement of those clinical trials.

ZYNE must file an IND with the FDA and receive approval from the U.S. Drug Enforcement Agency, or DEA, prior to commencement of any clinical trial in the United States.

ZYNE plans to conduct its Phase 1 clinical trials for ZYN001 in the United States, subject to applicable regulatory approval. ZYNE plans to submit New Drug Applications, or NDAs, for ZYN002 and ZYN001 to the FDA upon completion of all requisite clinical trials.

Cannabinoids are a class of compounds derived from Cannabis plants.

The two primary cannabinoids contained in Cannabis are cannabidiol, or CBD, and D9-tetrahydrocannabinol, or THC.

Clinical and preclinical data suggest that CBD has positive effects on treating refractory epilepsy, FXS and arthritis and THC has positive effects on treating pain. Interest in cannabinoid therapeutics has increased significantly over the past several years as preclinical and clinical data has emerged highlighting the potential efficacy and safety benefits of cannabinoid therapeutics.

The cannabinoid therapeutics market is expected to grow significantly due to the potential benefits these products may provide over existing therapies.

In addition to ZYN002 and ZYN001 potentially offering first-line therapies to patients suffering from FXS, OA, fibromyalgia and peripheral neuropathic pain, ZYNE believes ZYN002 may provide a complementary treatment for patients suffering from epilepsy who are refractory to their current treatment regimens.

ZYNE believes that it offers an attractive alternative to existing cannabinoid therapies by synthetically manufacturing and transdermally delivering its product candidates.

Most cannabinoid therapies have drawbacks and limitations due to their botanical (plant-derived) nature, as well as the fact that they are administered orally.

Botanical cannabinoids create significant challenges for drug manufacturers because of the natural resources and security measures required to grow Cannabis, as well as the strict batch controls required by regulatory agencies in pharmaceutical manufacturing.

 In addition, ZYNE believes all currently approved and development-stage cannabinoid therapeutics, except ZYN002 and ZYN001, are designed to be administered orally which can lead to limitations in safety and efficacy including low bioavailability, inconsistent plasma levels, degradation by stomach acids, and significant first-pass liver metabolism.

irst-pass liver metabolism refers to the process by which the liver breaks down therapeutics ingested directly or indirectly through the gastrointestinal system, such as through oral or oral mucosal delivery methods, allowing only a small amount of drug to be absorbed into the circulatory system.

In contrast, transdermal therapeutics are absorbed through the skin directly into the systemic circulation, avoiding first-pass liver metabolism and degradation by stomach acids, and potentially enabling lower dosage levels of active pharmaceutical ingredients and rapid and reliable absorption with high bioavailability, fewer negative psychoactive effects and fewer drug-drug interactions.

Zynerba Pharmeceuticals Intellectual Property

ZYNE’s intellectual property related to ZYN002 and ZYN001 was internally developed. ZYNE’s ZYN002 patent portfolio currently consists of two issued patents in the United States, five issued patents in France, Germany, Ireland, Switzerland and the United Kingdom and two pending patent applications in Canada and Japan.

The issued patents will expire between 2026 and 2029, and any patents that issue from ZYNE’s currently pending patent applications will expire in 2030. ZYNE’s ZYN001 patent portfolio currently consists of two issued patents in the United States, one issued patent in Japan, one allowed patent in Europe and patent applications pending in the United States, Europe, Canada and Japan.

The issued patents will expire between 2028 and 2031, and any patents that issue from ZYNE’s currently pending patent applications will expire in 2028.

Zynerba Pharmeceuticals Competition

Cannabinoid Competition

Cannabinoids, such as GW Pharmaceuticals, PLC, or GW's Epidiolex® and CBD more generally, have shown promise clinically and anecdotally as a treatment for epilepsy.

No CBD products or combination THC/CBD products have been approved in the United States. GW is currently investigating Epidiolex, a liquid formulation of highly concentrated CBD, in the United States for the treatment of DS, (severe, infantile-onset, genetic drug-resistant epilepsy with no FDA approved treatments) and LGS (a rare disorder with onset typically between three and five years of age featuring multiple seizure types with slow spike wave complexes on EEG) and childhood epilepsy syndromes. Insys Therapeutics Inc., or Insys, is also developing a synthetic CBD compound for the treatment of DS, LGS, childhood epilepsy syndromes and glioblastoma.

In the combination THC/CBD space, GW's Sativex®, a plant extract combination of THC/CBD for treatment of spasticity associated with multiple sclerosis, is approved in 27 countries outside the United States as an alternative to baclofen and tizanidine.

Additional activity in this space includes companies supplying synthetic cannabinoids, Cannabis extracts, and herbal Cannabis to researchers for preclinical and clinical investigation.

General Competition and Standard of Care

Within epilepsy, ZYNE intends to treat refractory patients who have not responded to previous treatment with AEDs such as depakote, pregabalin, gabapentin, topiramate, and lacosamide. Second and third generation AEDs continue to improve upon first generation therapies, but experts contend that a better understanding of the disorder accompanied by fundamentally innovative treatments will be required to effectively improve treatment outcomes for the high percentage of patients undertreated by AEDs. The majority of AEDs have frequent safety concerns including serious CNS adverse events and drug-drug interactions.

In FXS, ZYNE’s expected type of therapy is monotherapy, first-line therapy in patients with FXS. There are no drugs approved for the treatment of FXS, although various classes of medications are used off-label for the treatment of behavioral and mental health conditions associated with FXS. Some patients with FXS benefit from medications that treat attention deficient disorders and other patients who experience general anxiety, social anxiety and other chronic conditions may benefit from different types of anti-anxiety medications.

ZYNE is aware of several drugs in development for the treatment of behavioral and mental health conditions associated with FXS, including a number of generic drugs used for other indications such as donepezil, memantine, sertraline, and minocycline. Companies developing compounds include Roche, Afraxis, Neuren Pharmaceuticals and Marinus Pharmaceuticals.

Zynerba Pharmeceuticals 5% Shareholders Pre-IPO

Michael D. Rapoport  23.44%   

Ethan Benovitz  8.77%  

Jamie Hartman 8.77%   

Armando Anido  6.99% 

Philip R. Wagenheim  5.79%     

Zynerba Pharmeceuticals Dividends

No dividends are planned.

Zynerba Pharmeceuticals Use of Proceeds

ZYNE expects to receive $36 million from its IPO and use it for the following:

$16.4 million in the aggregate to fund the development efforts of ZYN002 for its target indications through Phase 2, of which ZYNE expects:

$9.9 million will fund the general development efforts, including preclinical studies and Phase 1 clinical trials; and

$6.5 million in the aggregate will fund three Phase 2a clinical trials, one for each target indication of refractory epilepsy, FXS and OA;

$14.2 million in the aggregate to fund the development efforts of ZYN001 for its target indications through Phase 2, of which ZYNE expects:

$9.7 million will fund the general development efforts, including preclinical studies and Phase 1 clinical trials; and

$4.5 million in the aggregate will fund two Phase 2a clinical trials, one for each target indication of fibromyalgia and peripheral neuropathic pain.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ZYNE Zynerba Pharmaceuticals Inc. 16.18 0.65 4.15 116,752

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