Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE) Just Proved Us Right

Back at the start of August, we published this piece highlighting our thoughts and expectations on Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE).Our thesis was relatively simple.This is a stock that markets had written off year-to-date and that was trading at what we saw as a significant discount to its potential forward valuation as a result. ZYNE Daily ChartWe highlighted some upcoming trial data as potentially turning this undervaluation around and put forward what we wanted to see from the data is supportive of our thesis. At the time, Zynerba was trading for a little above six dollars a share, primarily because it had just missed on some osteoarthritis data and markets sold off on the company as a result.We pointed to some upcoming fragile X data and said that, if the numbers hit press as positive, the gap would almost certainly close.Fast-forward a couple of months and we just got the data we were looking for. Further, it did hit press as indicative of efficacy in the target population – those suffering from the above-mentioned fragile X.Subsequent to the release, markets immediately started trading up on Zynerba and, at close of play on Thursday, the company traded for a 52.5% premium on the price at which it opened the session.Early morning trading on Friday (premarket) has added a few more percentage points to the run and the company will open up the session just shy of $9.70 a share.For anybody that picked up an exposure in line with our thesis, nice trade.The question now is, what's next?First up, let's have a quick look what the data told us.The drug is called ZYN002 and it is a cannabidiol gel designed to help pediatric and adolescent patients suffering from fragile X syndrome. As a note, these two categories account for the vast majority of patients in this population, since the condition is genetic and comes on soon after birth. Life expectancy in this population is between five years and 25 years.So, the study successfully met its primary endpoint, achieving a 46% improvement (p<0.0001) in the total score of Anxiety, Depression, and Mood Scale (ADAMS), which is an industry gold standard scale, at week twelve compared to baseline. ZYN002 also achieved clinically meaningful improvements in all measures of the Aberrant Behavior Checklist for Fragile X (ABC-FXS), which address the key symptoms of FXS including social avoidance, temper tantrums, repetitive movements, and hyperactivity.All told, that's pretty strong data.Some will complain that this was an open-label trial and that this makes it difficult to say with complete certainty that ZYN002 brings about benefit in excess of placebo. Sure, there is some credence to that sort of suggestion, but readers have to remember that this is a very small population and the ethics of including a placebo arm in the study are questionable.It's also a population that doesn't have any real treatment options available to patients right now, so there is a strong chance that the FDA would approve an asset that can seemingly show it brings about benefit, so long as it is safe, especially if ZYN002 can replicate these results in an expanded population.So that brings us to what comes next – expanded data.The company has said that it will meet with the FDA during the first half 2018 with the goal of agreeing on a protocol for a pivotal phase 2/3 trial in this indication.An ideal outcome from this meeting will be the FDA agreeing that said pivotal can be open-label and that it can also rest on the same endpoints outlined above – if this happens, Zynerba is going to run on the news and as it moves into trial enrollment.Keep in mind that, regardless of the justification outlined above, a portion of markets may take the placebo concerns as indicative of uncertainty and, in turn, may induce a near-term selloff. If this is the case, however, any dip might be a nice opportunity to pick up an exposure at discounted prices.Check out our previous coverage of ZYNE here. We will be updating our subscribers as soon as we know more. For the latest updates on ZYNE, sign up below!Image courtesy of Stew Dean via FlickrDisclosure: We have no position in ZYNE and have not been compensated for this article.