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If Only the Caps System let me Post a Pitch

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September 30, 2016 – Comments (1) | RELATED TICKERS: ZYNE , HEAR , MBVX

For whatever wonky reason, Caps is not letting me post a pitch this morning for ZYNE. Here is my write up. As soon as they get the system fixed, I will post it to the ticker. Enjoy!

 

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If you think all marijuana companies are the same, you might be right. I am starting to be convinced of the same. When I first started researching here, I was pretty sure this was a legitimate attempt to start a new drug company. The more I read, the more questions I have about their direction and business plan. 

 

This company's history goes all the way back to 2007. 

 

"Zynerba Pharmaceuticals, Inc. (the "Company", "we") is a specialty pharmaceutical company focused on developing and commercializing proprietary next-generation synthetic cannabinoid therapeutics formulated for transdermal delivery. The Company was incorporated on January 31, 2007 under the laws of the State of Delaware as AllTranz, Inc. and changed its name to Zynerba Pharmaceuticals, Inc. in August 2014. The Company operated in Lexington, Kentucky until October 2014 when it moved its operations to Pennsylvania."

 

Further research into AllTranz reveals that the company was attempting to do multiple bio-tech trials  back in 2007 when they incorporated. It looks like they received several grants from various organizations back in 2009 and 2012 to develop a cannabinoid product that helped prevent addiction. From a 2012 article: 

 

"The company is also working on an alcohol-treatment medication that would use a microneedle and patch, and a gel to relieve arthritis pain. Both products are expected to begin animal testing soon. Stinchcomb wants to raise $6 million next year to get through clinical trials and will look for a CEO to lead that process, she said. The CEO would work in the company's Baltimore offices, which include a corporate headquarters and laboratory in the University of Maryland School of Pharmacy. AllTranz has raised $450,000 toward a $1.5 million fundraising round that closes at the end of the year. The company is expected to be profitable in 2015."

 

Obviously, the company never reached profitability in 2015. Instead, they filed a brand new S-1 registration statement and "rebranded" themselves. Here is what I could find on the new business plan:

 

"Zynerba Pharmaceuticals, Inc., a specialty pharmaceutical company, focuses on developing and commercializing proprietary synthetic cannabinoid therapeutics formulated for transdermal delivery. Its products candidates include ZYN002, which is in Phase I clinical trial for the treatment of refractory epilepsy, Fragile X syndrome, and osteoarthritis; and ZYN001 that is in preclinical stage for the treatment of fibromyalgia and peripheral neuropathic pain. The company was formerly known as AllTranz, Inc. and changed its name to Zynerba Pharmaceuticals, Inc. in August 2014. The company was founded in 2007 and is headquartered in Devon, Pennsylvania."

 

It looks like this is the second time this company has gone through a reverse takeover merger. The first one was in 2007, and here is the second one. 

 

On May 6, 2014, we entered into an agreement and plan of merger by and among us, BCM Holdings, BCM Partners IV, Corp., a subsidiary of BCM Holdings, or Merger Corp, Audra Stinchcomb, our former principal executive officer, and Steven Gailar, one of our directors, as stockholder representative. Pursuant to the merger agreement, Merger Corp was merged with and into us, with us surviving, which we refer to as the Merger. By virtue of the Merger, each outstanding share of our common stock was cancelled in exchange for the right to receive 0.57434 shares of our Series 1 convertible preferred stock, each issued and outstanding share of common stock of Merger Corp was converted into the right to receive one share of our common stock, and each issued and outstanding share of Series 1 convertible preferred stock of Merger Corp was converted into the right to receive one share of our Series 1 convertible preferred stock. Immediately following the Merger, BCM Holdings and Ms. Stinchcomb beneficially owned 60.0% and 40.0% of our common stock, respectively.

 

They have quite a bit of cash left (about $32MM on the latest quarterly report) from their 2015 cash raise so this is not a bankruptcy candidate anytime soon. But, wow. On the surface this looks like a normal company. But when you dig under the covers here, there is almost nothing I like about this firm or its business plan. This is a great example of making sure to do your research thoroughly first prior to buying shares in real life. 

 

1 Comments – Post Your Own

#1) On September 30, 2016 at 3:29 PM, jed71 (99.24) wrote:

The Fool staff was able to fix it. I have posted the pitch above out under the ZYNE ticker. 

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