Biotech Cannabis Stocks Continue to Outperform the Market

Investors and financial institutions have shown great interest for publicly traded cannabis companies, but many are afraid to invest in them because most trade on the over-the-counter (OTC) exchange. The OTC exchange, also known as the Pink Sheets, is comprised of startups, defunct public shell companies, scams, and a few good companies.

There are more than 300 publicly traded cannabis companies, but only a few trade on an exchange regulated by the SEC. The cannabis stocks that trade on a national exchange have outperformed the market during 2015 and we attribute some of this growth to the lack of investment opportunities available for investors and institutions. The cannabis related companies that trade on a national exchange include, but are not limited to the following:

1. GW Pharmaceuticals (GWPH: NASDAQ)
2. Insys Therapeutics, Inc. (INSY: NASDAQ)
3. Zynerba Pharmaceuticals (ZYNE: NASDAQ)

GW Pharmaceuticals (GWPH: NASDAQ)

GW Pharmaceuticals is focused on developing cannabinoid-based medicines that treat a variety of illnesses. GWPH has a deep pipeline of products which are in various stages of FDA testing. The company currently has four drugs in Stage 3 FDA testing and the company expects to announce the results of these tests in late 2015/early 2016.

Developing treatments for a number of debilitating diseases

GWPH is focused on conducting formal development programs for Epidiolex in the treatment of both Dravet syndrome and Lennox-Gastaut syndrome (LGS). The company received the Orphan Drug Designations for Epidiolex for both Dravet syndrome and LGS, as well as Fast Track Designation for Dravet syndrome. GWPH commenced two Phase 3 trials of Epidiolex in the treatment of Dravet syndrome, as well as two Phase 3 clinical trials for the treatment of LGS. GWPH expects to report top-line data from this trial in early 2016. The company also announced plans to develop Epidiolex for Tuberous Sclerosis Complex (TSC) and expects to commence a TSC Phase 3 clinical program in the second half of 2015. TSC is a genetic disorder that causes non-malignant tumors to form in many different organs, primarily in the brain, eyes, heart, kidney, skin, and lungs. TSC is estimated to affect approximately 50,000 patients in the United States.

The FDA granted GWPH the orphan drug designation for the treatment of newborn children who suffer from neonatal hypoxic-ischemic encephalopathy (NHIE) with CBD. In the United States, there are 6,500 to 12,000 cases of NHIE per year. Of these, 35% are expected to die in early life and 30% may suffer from permanent disability. GWPH developed an intravenous CBD formulation that can treat this patient population. The company held a pre-IND meeting with the FDA and expects to submit an Investigational New Drug Application (IND) in mid-2015 and to commence a Phase 1 trial in the second half of 2015.

Issued patent for the use of cannabidivarin (CBDV) for epilepsy

The United States Patent and Trademark Office issued GWPH a notice of allowance for a patent application which covers the use of cannabidivarin (CBDV) for treating epilepsy. The patent will provide an exclusivity period until March 30, 2031. In 2014, GWPH completed a Phase 1 clinical trial of its CBDV product candidate, known as GWP42006. During the quarter, the company initiated a Phase 2 clinical study of CBDV. The study is a two-part, Phase 2, double blind, randomized, placebo controlled study. Part A is designed to investigate the pharmacokinetics, safety and tolerability of GWP42006 compared with a placebo in 30 patients. Part B will evaluate the efficacy of GWP42006 compared with a placebo in 100 patients.

Insys Therapeutics, Inc. (INSY: NASDAQ)

Insys Therapeutics, Inc. is a commercial-stage specialty pharmaceutical company that develops and commercializes innovative supportive care products. INSY is one of the few companies focused on the development of medicines derived from the cannabis plant.

Commenced dosing of pediatric epilepsy patients in a Phase 1/2 safety

INSY commenced dosing of pediatric epilepsy patients in a Phase 1/2 safety and they announced that a pharmacokinetic study is being conducted on pediatric epilepsy patients. The clinical trial will evaluate INSY’s pharmaceutical CBD oral solution at three different dosage strengths. This is INSY’s first in patient dosing with its pharmaceutical CBD formulation.

In addition to the Phase 1/2 study, INSY’s CBD clinical development program includes Phase 3 clinical trials to evaluate its CBD candidate for the treatment of Lennox-Gastaut syndrome and Dravet syndrome. Earlier this year, INSY’s CBD formulation received orphan drug designation and the FDA granted Fast Track designation for its treatment of Dravet syndrome.

CBD formulation is granted Fast Track designation

In February, the FDA granted INSY Fast Track designation to its pharmaceutical CBD formulation for the treatment of Dravet syndrome. The company’s pharmaceutical CBD is over 99.5% pure CBD, is synthesized to be chemically identical to the CBD extracted from cannabis, and is produced in a controlled environment. The FDA issued a Drug Master File (DMF) to INSY for its CBD active pharmaceutical ingredient in May 2014.

Upcoming Catalysts

INSY is working on a number of initiatives that should serve as catalysts for 2015. The company is:

• Conducting Phase 3 clinical studies for multiple sublingual spray candidates, as well as a clinical trial to support label expansion for Subsys.
• Advancing longer-term pipeline assets, including its pharmaceutical CBD formulation.
• Currently conducting a Phase1/2 safety and pharmacokinetic study in pediatric epilepsy. INSY has started dosing patients.

Zynerba Pharmaceuticals (ZYNE: NASDAQ)

Zynerba Pharmaceuticals is a specialty pharmaceutical company focused on developing and commercializing synthetic cannabinoid therapeutics formulated for transdermal delivery. Zynerba is developing two therapeutic candidates based on proprietary transdermal technologies.  

Filed Form S-1 registration statement

On June 30^th, Zynerba Pharmaceuticals, Inc. filed a registration statement on a Form S-1 which is related to the company’s proposed initial public offering. Zynerba’s registration statement is not yet effective and the number of shares to be offered and the price range for the offering have not yet been determined. Jefferies LLC and Piper Jaffray & Co. will act as joint book-running managers for the offering. Canaccord Genuity and Oppenheimer & Co. will act as co-managers for the offering.

Two preclinical drug treatments in pipeline

Zynerba’s development pipeline consists of two preclinical programs studying synthetic cannabinoid therapeutics.

• THC Pro-Drug Patch – ZYN001: ZYN001 is a pro-drug of THC that enables transdermal delivery via a patch. Zynerba is studying ZYN001 in patients with fibromyalgia and peripheral neuropathic pain. Zynerba expects to initiate ZYN001 Phase 1 clinical studies in the second quarter of 2015.
• CBD Gel – ZYN002: ZYN002 is the first and only synthetic CBD formulated as a patient-protected permeation-enhanced gel for transdermal delivery. Zynerba is studying ZYN002 in patients with refractory epilepsy, Fragile X syndrome and osteoarthritis. Zynerba expects to initiate ZYN002 Phase 1 clinical studies in the third quarter of 2015. 

Important Investor Disclosures:

Technical 420 LLC, and any of its directors, officers, employees, affiliates, or subsidiaries does not accept any form of compensation from companies in return for writing reports on them. Also Technical 420 LLC, and any of its directors, officers, employees, affiliates, or subsidiaries do not hold any stock positions in companies covered by Technical420LLC.

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Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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