Zynerba's FDA Meeting Lands It One Step Closer To FDA Approval
Summary
- Zynerba Pharmaceuticals achieves positive meeting with the FDA, expected to initiate pivotal late-stage study to treat patients with fragile x syndrome.
- Pivotal phase 3 study is expected to begin by mid-2018, which should act as a potential catalyst.
- The prior phase 2 study met on the endpoint of Aberrant Behavior Checklist in Fragile X Syndrome, which is exactly what the phase 3 endpoint is set as.
- Zynerba has enough cash to carry it well into 2019, which means there is no near-term risk of dilution.
- Zynerba is using its cannabinoid technology to target a multitude of diseases with unmet medical needs.
On Monday, Zynerba Pharmaceuticals (NASDAQ:ZYNE) announced that it had held a positive meeting with the FDA in regards to a pivotal clinical trial design for its drug ZYN002 treating fragile x syndrome. Fragile X syndrome is a genetic disease characterized by intellectual disability, and autism spectrum disorder. Shares of Zynerba closed lower on this news, but it is my opinion that it provides a great entry point at $9.66 per share. What makes this a great opportunity is the unmet medical need that exists in fragile x syndrome. There are currently no FDA approved drugs available to treat this disease. In addition, there are no drugs that adequately treat the symptoms associated with the disease either.
Phase 3 Study Planned
The pivotal phase 3 trial that is going to help Zynerba potentially file for approval of ZYN002 for fragile syndrome is expected to start in mid-2018. That is a catalyst that could potentially push the stock higher. The trial is expected to recruit up to 200 pediatric and adolescent patients. The primary endpoint and the secondary endpoint were agreed upon with the FDA. They are to include the observational behavior in patients as reported by the caregiver using a checklist known as Aberrant Behavior Checklist in Fragile X syndrome (ABC-FXS). Considering the positive data from the phase 2 study I think that the primary and secondary endpoints have a high probability of success. However, that doesn't take away from the risk involved in terms of the variability of the data. That's because the observation will be made by a human, and then they will interpret what they are seeing according to their perception. Which then has to be translated to a checklist. The risk here is that observations can sometimes vary from person to person. Therefore, that is a risk to consider with respect to this trial design.
Prior Study Data
The ability for Zynberba to advance to late-stage clinical testing is because of the positive data it had obtained in a prior phase 2 study. These results were from an open label phase 2 study known as FAB-C. This trial recruited a total of 20 patients who were given treatment with ZYN002. The trial met on the primary endpoint of the study. Now, here is where it gets interesting. The primary endpoint for this phase 2 dealt with another scale known as ADAMS, which stands for Anxiety, Depression, Mood Scale. This was to be evaluated over a 12-week period. There was a 46% improvement in the ADAMS scale compared to baseline, which gave a p-value of p < 0.0001). As you can tell, this phase 2 primary endpoint is not the same the one developed for phase 3. Not to worry though. That's because in the phase 2 study ZYN002 was also able to achieve clinically meaningful improvements for a secondary endpoint using another scale known as ABC-FXS (which is set as the phase 3 primary endpoint noted above). The trial showed that patients improved in all measures of the ABC-FXS scale including: Social avoidance, temper tantrums, repetitive moments, and hyperactivity. I have no doubt that the phase 3 study will likely show a clinically meaningful outcome as well.
Financials
According to the 10-Q SEC filing, Zynerba has cash and cash equivalents of $66.3 million as of September 30, 2017. The company believes that it has enough cash to fund operations well into 2019. It expects that it will be able to develop at least five phase 3 programs and one pivotal program heading into 2019. It is hard to say exactly when the company will raise more cash, but it is highly likely that it may have to sometime in late 2018. The reason why I state that is because Zynerba raised an additional $3 million in net proceeds from shares that were sold in September and October of 2017 by utilizing an ATM agreement.
Conclusion
Zynerba Pharmaceuticals remains a strong buy. It's fragile x syndrome has a huge shot at achieving success in its late-stage study. The risk with respect to the trial is if the addition of more patients alters the data. That's because the trial is expecting to recruit a total of 200 patients. This is a lot more than the 20 patients recruited in the prior phase 2 study. However, I feel confident that ZYN002 is a strong treatment for these patients. Especially, considering that there is no FDA approved treatment available for them. The second risk would be dilution, although I don't expect it to happen in the near-term. As I stated before it is highly likely that the company may not need to raise until it gets closer to 2019. With this fragile x syndrome program moving on, and a pipeline full other clinical candidates I believe that Zynerba Pharmaceuticals is a good buy.
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