The FDA has started looking into how it might legalize CBD-laced food products, and this is good news for Zynerba (ZYNE) investors.
This week, the agency announced it will hold its first public hearings on CBD, as it weighs rules allowing companies to add the popular cannabis-based compound to food. The hearing will be taking place on May 31. In reaction, Zynerba stock skyrocketed nearly 20% in Tuesday’s trading session.
Ladenburg analyst Michael Higgins believes “the FDA will be taking further steps in 2019 to remove any non-prescription products being sold that include THC and CBD, while allowing the “…production and marketing of hemp, defined as the plant Cannabis sativa L.” This would support the market adoption of Zynerba’s Zygel, a CBD gel treatment for children and adolescents with Fragile X syndrome, the most common form of inherited learning disability and attention deficit disorder.
As a result, Higgin reiterates a Buy rating on ZYNE stock, along with a price target of $26.
Higgin commented, “We believe the removal of current CBD-containing foods, lotions, snacks, oils and other embodiments containing CBD favors the market adoption of Zynerba’s Zygel (CBD gel via a sachet). We have long expected the availability of OTC CBD products during Zygel’s marketing (assuming positive pivotal data in Fragile X patients in 2H’19 and approval in 2H’20), but the stance of the agency suggests less availability of CBD-containing products for which consumers to choose from. From our research, today’s CBDinfused products deliver substantially lower levels of CBD with some containing other active ingredients from the marijuana plant, including THC. We believe this morning’s publication reflects the agency’s loss of patience with these products as the number of and marketing of these products have become more ubiquitous and aggressive. While 33 states allow “medical” marijuana the FDA lists marijuana as, “…Schedule I of the CSA (Controlled Substances Act) due to its high potential for abuse, which is attributable in large part to the psychoactive effects of THC, and the absence of a currently accepted medical use for marijuana in the United States” (today’s Fed Reg). In our view, the agency is not relenting, rather, it is leaning on the regulatory statutes several times in this morning’s publication.”
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