Is It Time to Take Profits on Zynerba Pharmaceuticals Inc (ZYNE) and Buy DexCom, Inc. (DXCM) on Weakness? Canaccord Weighs in

Canaccord analysts debating the impact of recent events on Zynerba and DexCom.


Zynerba Shares Soar on Positive Phase 2 FAB-C Data; Canaccord Boosts PT

Today, Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE) jumped over 50% after announcing positive results from an open-label exploratory Phase 2 clinical trial, FAB-C, assessing lead candidate ZYN002 in pediatric and adolescent patients with Fragile X syndrome (FXS), an inherited autism-like disorder. Following discussions with the FDA on a regulatory plan, the drug maker plans to initiate a pivotal trial in 2018.

In reaction, Canaccord analyst Arlinda Lee reiterates a Buy rating on Zynerba shares, and boosts her price target to $15.00 (from $9.00), which implies an upside of 54% from current levels. (To watch Lee’s track record, click here)

Lee commented, “Following today’s news, we increase our estimated probability of success in FXS from our prior 20% to 40%, raising its contribution to our SOTP contribution to $8/share (prior $3). Additionally, while we continue to model ~$100M capital raises before profitability, we decrease the share counts from these raises to 8M shares (prior 12M). Together, these changes result in an increase to $15 from $9. With $70M cash at 6/30, ZYNE guided to sufficiency into 2019.”

“We view the data as consistent across measures validated for FXS and expect rapid enrollment of a pivotal trial in 2018 following agreement with FDA in 1H to result in a positive outcome. Mgmt. indicates ~100 pts. in a randomized, placebo controlled trial of 12-weeks ZYN002 could provide the basis for regulatory approval. We make no changes to our modeled 2020 launch,” the analyst added.

Overall, most of Wall Street is surveying the soaring biotech stock from the sidelines. Based on 8 analysts polled by TipRanks in the past 3 months, 6 rate a Hold rating on Zynerba stock, while 2 maintain a Buy. The 12-month average price target stands at $9.17, marking a nearly 4% downside from where the stock is currently trading.

DexCom Faces Competitive Battle Following Libre Approval; Canaccord Slashes PT

Shares of DexCom, Inc. (NASDAQ:DXCM) remain in freefall Thursday as investors digest the implications of Abbott’s (NYSE:ABT) FDA PMA approval for its FreeStyle Libre glucose monitoring system for use in diabetic patients 18 years of age or older. Libre can be worn for up to 10 days (post a 12-hour blinded start-up period), requires no patient calibrations, and importantly, can be used to make insulin dosing decisions. For Dexcom’s continuous glucose monitoring (CGM), the approval introduces low priced competition into the MDI segment of the population where Dexcom was previously the sole competitor.

Canaccord analyst Kyle Rose commented, “While we expected the approval would come by YE/17, we did not expect the label to include an insulin dosing indication – a view we believe was widely held by investors […] What we do know is that Libre’s success to date OUS has clearly validated the patient demand for value-added technology at lower costs – which thus expands the market to patients, including Type 2 patients, who otherwise would not have evaluated the technology. Longer term, we view this as a positive tailwind for CGM adoption broadly as it will drive continued market expansion, allow more patients to realize the utility of better glucose management, and position industry players to compete on product strengths/weakness to further segment the market.”

“With more questions than answers – including commercial payer dynamics for Libre, and how CMS will interpret Libre’s eligibility in the Medicare population – it is difficult to handicap the near-term impact to Dexcom’s growth profile. That said, we’ve brought down our forward estimates by 10% in 2018, 13% in 2019, and 14% in 2020, to reflect what we believe will be a more competitive market given Libre’s favorable labeling and what will presumably be an aggressive commercial strategy from Abbott,” the analyst continued.

In response, Rose reiterated a Buy rating on Dexcom shares, while slashing the price target to $69 (from $90), which implies an upside of 51% from current levels. (To watch Rose’s track record, click here)

Out of the 14 analysts polled in the past 3 months, 9 rate Dexcom stock a Buy, while 5 rate the stock a Hold. With a return potential of 71%, the stock’s consensus target price stands at $77.00.