Will Zynerba Zygel trial be extended amid safety warning?

Zynerba Pharmaceuticals (NASDAQ: ZYNE) stock retreated on Wednesday after serious adverse events in phase 2 clinical trial of transdermal cannabidiol gel, Zygel. The shares were weak lately as the stock has fallen over 17% in the past month and over 31% in the past three months. Investors remained concerned about the company’s future and raised doubts about the trial extension due to the adverse events.

The company achieved positive results from the trial evaluating topical gel Zygel in children and adolescents with developmental and epileptic encephalopathies, a group of rare pediatric epilepsy syndromes including Dravet and Lennox-Gastaut. Through six months of therapy, 96% of patients experienced a treatment-emergent adverse event and 60% experienced a treatment-related adverse event.

This raised doubts and widens Zynerba’s hopes of turning profitable by the end of next year. The company has incurred losses and negative cash flows from operations since inception and has an accumulated deficit of $138.2 million as of June 30, 2019. The company is expected to incur additional losses until significant revenue from its product candidates is achieved. The primary source of liquidity for Zynerba has been the issuance of equity securities.

The company’s operations and capital requirements are anticipated to be funded by current cash and cash equivalents and the proceeds anticipated from the advance overseas finding until the second half of 2021. Also, Zynerba is likely to go for additional financings for funding its operations and completing clinical development of its product candidates.

Zygel has completed three Phase 2 clinical trials and two of those studies have open-label extensions that are ongoing. For the continuation of the trials, the company required additional funding. However, traders fear that the company raising additional capital could cause dilution to its existing stockholders, restrict operations or require it to relinquish rights to its technologies or product candidates.

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Zygel is a cannabidiol (CBD) permeation-enhanced transdermal gel. The company is focused on developing a transdermally-delivered cannabinoid therapeutics for patients affected by rare and near-rare neuropsychiatric conditions.

The company’s shares have been highly dependent on sentiment across the broader cannabis space. The company’s valuation has turned out to be risky due to extremely volatile stock movements that attract speculators and cannabis enthusiasts blinded by emotion.

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