ACB $1.430 (1.42%)

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BIO:CNX $0.013 (0%)

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OH:CNX $5.330 (0%)

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PILL:CNX $0.230 (-17.86%)

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XXII $1.740 (-12.12%)

ZDPY $0.740 (-2.63%)

ZYNE $1.190 (-0.83%)


Cannabis Stock Trends and Opportunities: Banking on Biotech Part 2

Dec 19, 2016 • 11:34 AM EST
7 MIN READ  •  By Michael Berger
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Agencies across the globe continue to recognize the medical benefits associated with cannabis. It is only a matter of time before this incredible plant will be legalized in the United States.

From the National Cancer Institute (NCI) to the National Institute on Drug Abuse (NIDA), the medical benefits associated with cannabis can no longer be ignored. Last year, the NCI updated its website to include various studies that reveal how cannabis may inhibit tumor growth by killing cells. The NIDA revised their April 2015 publication to say that marijuana can kill certain cancer cells and reduce the size of others.

The recent medical findings, the NIDA’s admission, company developments, the opinion of Dr. Sanjay Gupta, and of the United States Surgeon General should be enough to reschedule cannabis and promote suitable research into the plant.

The biotech sector will be one of the greatest beneficiaries of the legal cannabis movement and recent sector weakness has created opportunities for investors.

Deep Pipeline of Products to Create Catalysts for Years to Come

Earlier this month, Nasdaq-traded biotech firm GW Pharmaceuticals (GWPH) announced additional positive Epidiolex Phase 3 data in poster presentations at the 70th Annual Meeting of the American Epilepsy Society.

GW Pharmaceuticals is a biopharmaceutical company that engages in discovering, developing, and commercializing cannabinoid prescription medicines. GW commercialized the world’s first plant-derived cannabinoid prescription drug, Sativex, which is approved in 27 countries outside the United States for the treatment of spasticity due to multiple sclerosis.

GW Pharmaceuticals was founded in 1998 and is based in Cambridge, England. The company operates in the United Kingdom, Europe, the United States, Canada, and Asia. GWPH is the bellwether stock for the cannabis industry as it is typically used to gauge the performance of the sector.

The studies represented in the posters presented by GW investigated the efficacy and safety of cannabidiol (CBD) when added to concomitant antiepileptic drug therapy in Dravet syndrome and Lennox-Gastaut syndrome (LGS).

GW has continued to deliver favorable FDA results to its shareholders over the last two years and has a deep pipeline of cannabinoid product candidates that are in advanced stages of clinical testing. We continue to view GWPH as one of the top long-term cannabis investments due to its continued execution and its impressive pipeline which will provide catalysts for years to come.

GW recently released an update on its cannabinoid product pipeline and we want to provide highlights from this update:

  • Part A of the company’s CBDV Phase 2 partial-onset epilepsy study in adults is complete and Part B is underway with data expected mid-2017
  • CBDV pre-clinical research is ongoing within the field of autism spectrum disorders. Phase 2 trials are expected to commence in the third quarter of 2017.
  • In December, GW commenced Phase 1 trials for its Neonatal Hypoxic-Ischemic Encephalopathy (NHIE) intravenous CBD program
  • Completed a Phase 1b/2a study with THC:CBD for the treatment of Recurrent Glioblastoma Multiforme (GBM) with data expected in the first quarter of 2017
  • The company has completed a Phase 2 study for Sativex in children with spasticity due to cerebral palsy with data expected in the first quarter of 2017

As of September 30th, GW reported to have $483.4 million in cash and cash equivalents. This capital will help the company continue to advance its pipeline and bring its products to market.

Unlike Zynerba Pharmaceuticals (ZYNE) and Insys Therapeutics (INSY), GW is focused on developing treatments from the actual cannabis plant. In late September, GW reported its second positive Stage 3 Clinical trial for its Epidiolex product for the treatment of seizures associated with LGS.

An Attractive Biotech Cannabis Investment Opportunity

Earlier this month, Zynerba Pharmaceuticals (ZYNE) announced additional results from its Phase 1 study on its ZYN002 cannabinoid (CBD) product candidate. These studies assessed safety, tolerability and effects on cognition and mood of ZYN002 in both healthy adults and adult epilepsy patients with focal seizures.

ZYN002 CBD gel is a patent-protected, synthetic product that is formulated as a permeation-enhanced gel for transdermal delivery. ZYN002 is in development for the treatment of epilepsy, osteoarthritis and Fragile X syndrome. Highlights from the company’s update include:

  • ZYN002 is being evaluated in the ongoing STAR1 (Synthetic Transdermal Cannabidiol for the Treatment of Epilepsy) Phase 2 multi-center, double-blind, placebo-controlled, multi-dose clinical trial. This trial has been designed to evaluate the efficacy and safety of ZYN002 in patients with refractory focal seizures.
  • Enrollment is continuing and top-line results are anticipated in the first half of 2017.
  • A multi-center, open-label extension clinical trial, STAR 2, for ZYN002 CBD gel has also launched. This study will allow epilepsy patients with refractory focal seizures who complete the STAR 1 study to receive treatment with ZYN002 CBD gel for up to 52 weeks.
  • A second Phase 2 clinical trial of ZYN002 CBD gel, STOP (Synthetic Transdermal Cannabidiol for the Treatment of Knee Pain due to Osteoarthritis (OA)), is enrolling patients. Zynerba expects to report top-line results from this study in the first half of 2017.
  • Initiation of a third Phase 2 clinical trial of ZYN002 CBD gel in patients with Fragile X syndrome is planned before the end of the year. Zynerba expects to report top line results in the first half of 2017.

Earlier this month, Jefferies raised its price target on ZYNE to $32. This price target provides more than 100% upside to current levels. We continue to remain favorable on Zynerba and we see further upside to current levels on account of the company’s pipeline of products in various stages of FDA clinical and pre-clinical trials that should create catalysts for quarters to come.

Insys Plunges More than 15% After Six Former Executives Were Arrested

Insys Therapeutics (INSY) has remained under pressure and the shares fell another 3% last week. The shares are down more than 68% this year and we continue to remain on the sidelines with INSY at current levels.

Earlier this month, six former executives and managers were arrested and charged with conspiring to defraud health insurers and bribe doctors in exchange for prescribing the company’s fentanyl painkiller, Subsys. Eleven former employees have been charged with breaking federal law so far this year.

Insys’ previous CEO Michael Babich was arrested and charged with conspiracy to commit racketeering, conspiracy to commit wire and mail fraud, and conspiracy to violate the anti-kickback law. Also charged were Alec Burlakoff, former vice president of sales, Richard Simon, former national sales director, Michael Gurry, former vice president of managed markets, and Sunrise Lee and Joseph Rowan, former regional sales directors.

Although INSY looks attractive from a valuation standpoint, we continue to remain on the sidelines with the shares due to its bearish market sentiment, its weakening fundamentals and its negative trend. 

PharmaCyte Trades Flat After Delivering its Pre-IND Meeting Package to the FDA 

PharmaCyte Biotech (PMCB) traded in a volatile manner last week and PMCB saw a mixed reaction from the market after announcing that it submitted its Pre-Investigational New Drug (Pre-IND) meeting package to the FDA on Friday.

The package delivered to the FDA provides the agency with a full history of PharmaCyte’s therapy, including information on the previous preclinical studies and the clinical trials performed using the Cell-in-a-Box technology combined with low doses of a chemotherapy drug.

The package also provides detailed information on the manufacturing process used to produce the Cell-in-a-Box capsules and a synopsis of the structure of the clinical trial that PharmaCyte plans to conduct in the United States and Europe.

The FDA’s response to the pre-IND submission will be provided after the pre-IND meeting. The regulatory agency’s response will serve as a roadmap for the full IND application which must be deemed acceptable by the FDA before clinical trials can begin.

PMCB has rallied more than 165% in the last month and the shares saw jumped higher after the FDA granted the company a Pre-IND meeting with the Center for Biologics Evaluation and Research. The recent increase in market volatility keeps us on the sidelines at current levels.


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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of 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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