Zynerba stock rebounds after selloff driven by failed cannabis-based skin patch trial

Shares of Zynerba Pharmaceuticals Inc. rose 7% in Friday trade, recouping some of their prior-session losses that came after the company said an early-stage trial of a cannabinoid skin patch failed to meet its main goals.

Zynerba  , which is developing cannabis-based therapies for rare neurospsychiatric disorders, said the trial of ZYN001, which delivers tetrahydrocannabinol (THC) through a transdermal patch, did not achieve its goal of target blood levels of 5 to 14 ng/ml THC in healthy volunteers. THC is the psychoactive ingredient in cannabis and the company was trying to find a way to deliver it without patients having to take it orally, which can make them high.

“This Phase 1 study was a single and multiple dose, placebo-controlled first-in-man study to assess the safety and pharmacokinetics of ZYN001 administered as a transdermal patch to healthy adult subjects,” Zynerba said in a statement. “Several formulations and patch wear times ranging from 24 hours to 14 days were assessed in in 60 healthy subjects who were randomized to ZYN001 or placebo.”

The company will now focus its efforts on its ZYN002 treatment for Fragile X syndrome, a genetic autism-spectrum disorder that causes intellectual disability, behavioral and learning challenges that can be accompanied by seizures.

The change will extend Zynerba’s cash runway to the second half of 2019. The company said it has $52.1 million in cash and cash equivalents.

The news disappointed those who have high hopes for medical applications for marijuana and its chemical compounds. In June, the U.S. Food and Drug Administration approved a drug developed by U.K. company GW Pharmacueticals  to treat two severe forms of childhood epilepsy, Lennox-Gastaut syndrome and Dravet syndrome.

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That drug, called epidiolex, contains cannabidiol (CBD), as opposed to THC, which means it does not make patients high. However, the product remains a controlled substance and cannot be sold until the Drug Enforcement Administration makes a final scheduling decision, as MarketWatch’s Emma Court has reported.

Canaccord analyst Arlinda Lee reiterated her buy rating on Zynerba stock and $18 price target on Friday, and said her sum-of-the-parts valuation of the company did not include ZYN001.

Lee is optimistic about Zynerba’s pivotal Fragile X Syndrome trial of patients in the U.S., Australia and New Zealand, noting that the company has received U.S. Orphan Drug Designation for cannabinoid use to treat the disease.

“Following agreement with FDA, we expect rapid enrollment of a pivotal trial in 2018 to result in a positive outcome,” she wrote in a note.

A Phase 2b trial of ZYN002 in treating epilepsy that’s planned for the second half “is designed to show meaningful contrast in treated patients,” versus an earlier trial, she wrote. The new trial will explore higher doses after the first trial failed to meet its main goals.

Zynerba shares have fallen 22% in 2018, while GW Pharma has gained 7%. The S&P 500   has gained 3% and the Dow Jones Industrial Average   has fallen about 1%.