Zynerba Pharmaceuticals

Today, Zynerba Pharmaceuticals (ZYNE) announced its stock would be added to the Russell 2000 Index and the Russell 3000 Index. Zynerba Pharmaceuticals stock has been on fire this year and has risen more than 350% year-to-date. Zynerba Pharmaceuticals is a specialty pharmaceutical company that focuses on developing transdermally delivered cannabinoid therapeutics for neuropsychiatric conditions. The company is developing a non-euphoric cannabinoid gel called Zygel.

Zygel

Last month, Zynerba Pharmaceuticals announced that it has received a patent in the US for “treatment of Autism Spectrum Disorder with Cannabidiol.” According to Zynerba Pharmaceuticals, “This new patent, which expires in 2038, is part of an expanding intellectual property portfolio covering the Company’s cannabidiol (or CBD) product candidate, Zygel.” The stock soared after the announcement. Notably, in May, Zygel received a fast track designation from the FDA.

What does inclusion in the index mean?

Zynerba Pharmaceuticals is trading higher today amid the gains in broader markets. After the inclusion in indexes, Zynerba could see buying interest from ETFs that track the relevant index. The iShares Russell 2000 Index ETF (IWM) tracks the Russell 2000 index. It is worth noting that the small and mid-cap indexes have been underperforming their large-cap peers this year. Last week, J.P. Morgan’s chart analyst Jason Hunter referred to small-cap stocks’ and cyclicals’ underperformance to drive home the point that something is amiss in this rally even as the broader markets had their best first half in years.

Financials

Zynerba Pharmaceuticals is not expected to post meaningful revenues either in 2019 or 2020, as it is still a clinical stage company. However, analysts expect Zynerba Pharmaceuticals to post revenues of $63 million in 2021. However, it is expected to be EBITDA negative in 2021 as well. We should remember that clinical stage pharmaceutical companies could be a risky proposition and tend to be more volatile as compared to broader markets. News flow over clinical trials invokes sharp price action in such companies, Zynerba Pharmaceuticals being no exception.

Zynerba Pharmaceuticals has received a “buy” or higher rating from five analysts while one analyst has a “hold” rating on the stock. Zynerba Pharmaceuticals’ mean consensus price target of $21.75 represents a potential upside of 53%.

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