Health and Healthcare

Can Zynerba Pharma Shares Really Still Double in These High Times?

Jon C. Ogg

Published: January 29, 2018 2:05 pm

Last Updated: January 12, 2020 3:59 am

Zynerba Pharmaceuticals Inc. (NASDAQ: ZYNE) has multiple issues that may be working in its favor. The small-cap stock is often lumped in with legalized marijuana and medical marijuana stocks, as one would expect. Zynerba calls itself a clinical-stage specialty pharmaceutical company dedicated to developing and commercializing innovative pharmaceutically produced transdermal cannabinoid treatments.

While the company’s share price is still roughly half of last year’s peak, Zynerba has gotten attention from Wall Street with big upside in analyst calls in recent days. One analyst even thinks Zynerba can double, standing out above and beyond other recent analyst calls with upside price targets. Zynerba is quite volatile and is far from suitable for conservative investors. With shares trading near $12.50, it has a 52-week range is $5.42 to $25.95.

It was just at the start of 2018 that the company provided 2018 clinical and corporate outlooks for the year. The company will now concentrate its focus on rare orphan diseases and near-rare neurological and psychiatric disorders with high unmet medical needs. Zynerba intends to develop ZYN002 in a pivotal Phase 2/3 program in Fragile X syndrome and in Phase 2 programs in refractory epilepsies, including adult refractory focal epilepsy and developmental and epileptic encephalopathies in pediatric and adolescent patients. The company also plans to initiate Phase 2 development of ZYN001 in Tourette syndrome by year-end 2018.

24/7 Wall St. recently covered six biotech and biohealth stocks that could have upside of 50% to 250%. Zynerba was not one of those companies, because the big call had not been seen, and its $170 million market cap might be too small for even the bravest speculative investors.

After that corporate and clinical update in which the company said it was discontinuing its investment into the pain space, the company said it was capital intensive and that it had seen inconsistency with its rare and near-rare neuropsychiatric focus.

Cantor Fitzgerald maintained an Overweight rating with a $17 target on January 3, and Piper Jaffray reiterated its Overweight rating and $20 price target on January 4. Back in December, Canaccord Genuity raised its price target on Zynerba to $18 from $15.

Zynerba also has a place in exchange traded fund coverage launching around the medical and legalized marijuana ETFs and funds. It’s also listed as a top legalization play in the StockTwits universe.

What has been seen in recent days is positive coverage coming from Wall Street.

Zynerba was started with a Buy rating and assigned a $16 price target at Seaport Global on January 26. The stock closed up at $12.07 on Friday, compared with an $11.50 close from before the analyst call. That’s a 4.9% gain.

Zynerba was also started with a Buy rating and assigned a massive $25.50 target price at Ladenburg Thalmann on January 29. Its shares were up over 4% at $12.56 on Monday’s afternoon session on a rare day that the stock market was trading lower. What matters here is that the prior street-high analyst price target was listed as $20. This almost sounds like a crazy analyst price target going above the street high and with a 100% premium projection, but we can’t ignore that some analysts used to be even more positive in 2016 and 2017, and considering that the target is actually under its 52-week high.

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Still, it’s important to look at both sides of the coin and understand that it is not just all upside to the moon on Wall Street as far as how Zynerba is followed by analysts. Jefferies reiterated its Hold rating and $14 price target back on January 4 after its corporate and clinical update. Jefferies believes that ZYN002 will be advanced in FXS and epilepsy, while development in osteoarthritis pain is axed. And in November, Oppenheimer reiterated its Perform rating, noting that the firm continues to view Zynerba as a high-risk high-reward stock.

When a stock trades at half of its 52-week high and is still up about 100% from its 52-week low, you have to know it’s a volatile one. After a 4.4% gain to $12.60 on Monday afternoon, there are now six analysts covering the stock in the Thomson Reuters sell-side universe, and the consensus analyst target price is $15.50. That compares with a $12.14 consensus target of $12.14 at the end of October.

Zynerba shares are not even up 1% so far in 2018 (from a $12.52 close at the end of 2017). Investors also should consider that this is after two analysts made big calls and that the stock market has continued its bullish run higher in January.

Before getting excited about any massive upside from analysts, investors need to consider that Thomson Reuters shows the consensus revenue estimates of $0 (yes, zero) for 2017, 2018 and 2019. And through September 30, 2017, Zynerba had an accumulated retained earnings of −$69.86 million as it has lost money every year with no revenues to date.