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A Higher Probability For Success Is Not Baked Into Zynerba's Valuation

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A Higher Probability For Success Is Not Baked Into Zynerba's Valuation

H.C. Wainwright & Co. believes that the current valuation of Zynerba Pharmaceuticals Inc (NASDAQ: ZYNE) has not taken into consideration the potential increased success rate of ZYN002 for epilepsy. Therefore, the firm believes the stock has the potential to deliver more than 60 percent upside rewards and initiated the stock with a Buy rating and a $22 price target.

Analyst Corey Davis is not worried about the company's trial in the second stage since the active ingredients, cannabinoid (CBD) and tetrahydrocannabinol (THC), were legalized. He pointed out that pharmaceutical firms started to use cannabinoids only recently with the prospects of getting approval from the FDA. Therefore, he thinks that there is every reason to look for higher success rate than for a normal pre-second-stage study company.

Related Link: Pot Stock Watch: Why Is Zynerba Viewed As A Sympathy Play With GW Pharma?

"Given the validation of CBD from the success that GW Pharma has recently had with Epidiolex three Phase 3 trials in specific epilepsy types, and the results of Phase 1 showing that Zynerba can indeed get predictable levels of CBD across the skin, we think the Phase 2 epilepsy trial has the highest likelihood for success. ZYN002 for osteoarthritis and Fragile X Syndrome," the brokerage viewed in the research note.

The analyst cited that two indications for 002 have a fair chance of success based on the CBD mechanism. He thinks that the first of 2017 would be key with the expectation of three phase two studies.

The target price is reached on the basis of 20x multiple to the brokerages EPS estimate of $5.62 for the year 2023 besides a 30 percent discount that back six years.

On Thursday, the stock closed at $13.22. At last check in Friday's pre-market session, Zynerba was up 3.03 percent at $13.62.

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Latest Ratings for ZYNE

DateFirmActionFromTo
Jul 2020NeedhamDowngradesBuyHold
May 2020Cantor FitzgeraldMaintainsOverweight
Oct 2019NeedhamInitiates Coverage OnBuy

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