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Investors, it is time to set aside some cash! On Wednesday, Zynerba Pharmaceuticals, Inc. (ZYNE) will have its initial public offering (IPO) on the NASDAQ exchange. Zynerba will issue 3,000,000 shares and they will be offered in the $13.00-$15.00 range. The total offering amount is $51.75 million (total expenses are $2.8 million).
Company history
Zynerba was incorporated in Delaware in January 2007 under the name AllTranz, Inc. In June 2007, the company merged with AllTranz LLC, a Kentucky limited liability company. AllTranz, Inc. was the surviving entity of the merger.
In May 2014, the company was reorganized and recapitalized pursuant to a merger agreement with BCM Partners IV, Corp. Again, Alltranz was the surviving entity. In August 2014, AllTranz changed its name to Zynerba Pharmaceuticals, Inc.
Zynerba is a ten-year-old specialty pharmaceutical company focused on developing and commercializing proprietary synthetic cannabinoid therapeutics formulated for transdermal delivery. The company is evaluating two patent-protected product candidates, ZYN002 and ZYN001, in five areas.
Zynerba plans to study ZYN002 in patients with refractory epilepsy, Fragile X syndrome, and osteoarthritis. The company will study ZYN001 in patients with fibromyalgia and peripheral neuropathic pain. Zynerba expects to initiate Phase 1 clinical trials for ZYN002 in the second half of 2015 and ZYN001 by mid-2016.
During the last twelve months, Zynerba generated $940,000 in revenue and incurred a $6.9 million net loss.
Capitalizing on high demand for cannabinoids
The demand for cannabinoids has been increasing at exponential rates during 2015 and there is no slowdown in sight.
In September 2014, the Drug Enforcement Agency (DEA) released its established aggregate production quotas for Schedule I and II Controlled Substances in the Federal Register. The document lists the amount of each Schedule I and II substance that can be produced in the United States during 2015.
The DEA’s initial 2015 production quota for marijuana was 125,000 grams. In April 2015, in a Federal Register posting, the DEA said it will further increase the production quota for marijuana to 400,000 grams due to increased demand for cannabidiol (CBD). In mid-June, the DEA requested another increase to the production quota. The agency increased the production quota to 658,000 grams. The DEA has not only received increased demand from companies who want to research cannabis. The agency also received increased demand from the National Institute on Drug Abuse (NIDA)
Interest in cannabinoid therapeutics has increased significantly over the past several years as preclinical and clinical data has emerged highlighting the potential efficacy and safety benefits of cannabinoid therapeutics. The cannabinoid therapeutics market is expected to grow significantly due to the potential benefits these products may provide over existing therapies.
What are cannabinoids?
Cannabinoids are a class of compounds derived from cannabis. The two primary cannabinoids found in cannabis are cannabidiol (CBD) and delta-9-tetrahydrocannabinol (THC). Data from clinical and preclinical studies suggest that CBD has positive effects on treating refractory epilepsy, FXS and arthritis. Studies have also found that THC can be an effective treatment for pain.
In April 2015, NIDA reported that marijuana can kill certain cancer cells. The monthly publication was revised to say the following:
“Recent animal studies have shown that marijuana can kill certain cancer cells and reduce the size of others. Evidence from one animal study suggests that extracts from whole-plant marijuana can shrink one of the most serious types of brain tumors. Research in mice showed that these extracts, when used with radiation, increased the cancer-killing effects of the radiation.”
Outlook
Investors and financial institutions have been patiently waiting for a new cannabis-related company to commence trading on a national exchange. GW Pharmaceuticals (GWPH) and INSYS Therapeutics, Inc. (INSY) are two NASDAQ traded biotech companies that are focused on developing treatments derived from cannabis. During the last two years, GWPH and INSY are up 1163% and 614% respectively and they are currently trading at very rich valuations.
We expect Zynerba’s IPO to be a profitable investment due to the strong demand for cannabis related investments from investors and financial institutions who want to invest in company that trades on a national stock exchange (not the OTC).
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