Zynerba Pharma (ZYNE) Gains on Chatter Following Sector Deal
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Zynerba Pharma (NASDAQ: ZYNE) gains on chatter following the $7.2B acquisition of GW Pharmaceuticals by Jazz Pharmaceuticals. Ladenburg Thalman analyst Michael Higgins highlighted ZYNE amid the sector deal.
Higgins said the deal highlights the value of Rx CBD platforms. He reiterated an $8 price target on ZYNE.
The analyst commented, "This morning, Jazz Pharmaceuticals (JAZZ, $157.29; NR) announced its intention to acquire GW Pharma (GWPH, $146.25; NR) for $7.2B (~90% cash; ~10% new shares). Not surprisingly, we are seeing ZYNE shares up in the pre-market (~15%), as both GW and Zynerba have and are developing, respectively, Rx cannabidiol (CBD) products. Also, this is not the first time ZYNE shares have jumped off GW’s news. On March 14, 2016, GW PR’d positive Phase 3 pivotal results with Epidiolex in 120 Dravet patients, reducing monthly seizure frequency by 39% over 14 weeks vs. 13% for placebo (p=0.01). ZYNE shares spiked on the news, from a March 11 close of $8.44, ZYNE closed at $21.03 on Monday, March 14 (vs. the NBI up 1.4%). However, ZYNE was running three Phase 2 trials in 2016, including FAB-C in 20 Fragile X kids, but not in Dravet or any other developmental epileptic encephalopathy (DEE) indication. Today, we await Zynerba’s announcement in 1H’21 of which specific DEE indication it expects to advance Zygel (CBD topical gel). We are not surprised ZYNE shares are rallying today and expect it to continue without reaching yesterday’s $3.56 level. This view comes from discussions with investors in and out of the stock who see ZYNE as a cheap GWPH, with most discussions including an assessment of when to buy the stock, acknowledging that ZYNE doesn’t have a pivotal DEE readout near-term. Still, we may find GW’s takeout as a rallying point for ZYNE as it is valued at 1-2% of GW’s acquired price yet has shown efficacy in Phase 2 that Zygel is at least as effective as Epidiolex with distinct tolerability advantages, despite no head-to-head trials."
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