Big medical bet: Why this Philly area pharma company’s shares jumped 65 percent in a week

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Before Paula Fasciano takes her boys out to Citizens Park for a Phillies game, she gives them a dropper full of CBD.

Fasciano’s boys — Benjamin, 16, and Matthew, 22 — live with Fragile X syndrome, a rare genetic disorder that can cause intellectual disabilities. People with Fragile X are also extraordinarily sensitive to noise, socially anxious, and subject to behavior problems.

The CBD tincture — derived from hemp — helps to allay the boys’ anxiety for nine innings, Fasciano said.

“They don’t love it,” the Bucks County insurance broker said. “That’s because it’s an oil and they have to keep it under their tongues [to be absorbed]. It doesn’t taste good.”

For their entire lives, the boys have never taken a drug specifically approved to treat Fragile X. Neither have tens of thousands of Americans diagnosed with the syndrome. Every previous drug developed for the disorder has failed to make it to market. That could change soon.

Zynerba Pharmaceuticals in suburban Philadelphia is in the final stages of a clinical trial of a CBD drug with a novel delivery method. The company’s Zygel is a transdermal (through the skin) gel that could be available by late 2020.

Zynerba shares have jumped almost 65 percent since last Friday.

Zygel is primarily targeted for Fragile X, which is said to affect one in 4,000 males and one in 6,000 girls. The Food and Drug Administration has granted the gel orphan-drug status, which puts the federal approval process on a fast-track for approval to be sold in the U.S.

Most new pharmaceuticals fail in trials, even those that reach the crucial Phase 3. But if approved, Zynerba’s patented drug could rocket the tiny Devon company into the pharmaceutical stratosphere.

GW Pharma last year received the go-ahead to market Epidiolex, a purified CBD formulation extracted from English-grown marijuana plants, for rare cases of childhood epilepsy. Following the FDA’s approval, GW Pharma’s market cap has reached $4.9 billion.

Zynerba’s CBD is not derived from marijuana. It’s a synthetic cannabinoid created in the lab. The company’s Zygel formula suspends the CBD in a clear-alcohol gel. Packaged in a small “sachet,” the gel looks and smells similar to the popular hand sanitizer Purell.

Zygel is turbocharged with a patented substance that allows it to easily penetrate into the skin in about 30 seconds. The method delivers the CBD into the blood stream without having to go through the digestive system.

For Fasciano, and thousands of parents like her, the prospect of a new CBD treatment for Fragile X is highly anticipated. “A transdermal gel would make it so much easier to give it to them,” she said. “So many children have real difficulty with the pills and oils.”

Zygel also could be used for children with autism spectrum disorders who suffer from similar anxiety and behavioral problems.

Armando Anido joined Zynerba five years ago as its chief executive officer. Previously Anido led NuPathe through FDA approval of the first transdermal patch for migraine headaches. NuPathe was acquired by Teva Pharmaceuticals in 2014 for $144 million.

The company’s top management team is comprised of pharmaceutical veterans with decades of experience. President Terri Sebree; vice president of medical Donna Gutterman; general counsel Suzanne Hanlon; and vice president of development Carol O’Neill also spent years at NuPathe. Other senior managers worked at industry stalwarts, including Antares Pharma, GSK and Cipher Pharmaceuticals.

Zynerba, Anido said, opted for a synthetic CBD to ensure purity. Unlike nearly all cannabis plant-derived CBD products, Zygel won’t contain even a trace amount of intoxicating THC. CBD created in a laboratory also is much less expensive to produce.

“And we didn’t want to become farmers,” Anido said. “We didn’t want to grow weed and extract the CBD out and purify it, all the things GW Pharmaceuticals does. Developing it as a strict pharmaceutical was the right way to go.”

Though Anido said the drug holds promise for a variety of other rare neuropsychiatric disorders, Zynerba chose to focus on Fragile X because “we believed it would be our fastest way to FDA approval.”

Orphan-drug status is granted to novel pharmaceuticals that treat conditions affecting fewer than 200,000 U.S. patients. If approved, the designation would grant the company a seven-year monopoly to market CBD for Fragile X, in addition to tax credits for clinical research costs.

Other medical cannabis companies sell non-regulated transdermal patches and ointments, Anido said, “but they are probably not getting much of it into the blood.”

The company also has a THC product in the pipeline that Anido hopes will find applications for Tourette’s syndrome. “We’ve done some Phase 1 trials, but we haven’t gotten it to the right blood levels,” Anido said. “So for the moment it has been back-burnered. We’ll come back to it when we figure it out.”

Zynerba, with a market cap of about $163 million, has issued about 17.5 million shares. The stock (ZYNE) was trading at $8.8 on NASDAQ Friday afternoon.

Shares have jumped almost 65 percent since last Friday, apparently on the announcement that the FDA would hold hearings on CBD and news that Zynerba’s CEO, Anido, would address the 2019 H.C. Wainwright Global Life Sciences Conference in London on April 9.

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