Harmony buys cannabidiol firm Zynerba in $200m deal

Neuroscience specialist Harmony Biosciences has agreed to acquire Zynerba, adding its cannabidiol (CBD) gel product Zygel for Fragile X syndrome and other rare neuropsychiatric disorders to its pipeline.

Harmony is paying $60 million in cash for Zynerba, with another $140 million on the table in the form of a contingent value right (CVR) if Zygel makes it through development and registration as predicted and meets various sales targets, including an aggregate of $500 million net revenues by mid-2025.

Fragile X is a neuropsychiatric disorder with no FDA-approved therapies and is a leading cause of inherited intellectual disability and autism spectrum disorder (ASD), associated with a mutation in the FMR1 gene. It affects around 80,000 people in the US and roughly twice that number in Europe.

In a conference call to explain the rationale for the acquisition, Harmony chief executive Jeffrey Dayno said Zygel offered the company a "portfolio in a product", with Fragile X at the head of a series of potential indications for the drug including 22q11.2 deletion syndrome (22q), another genetic disorder leading to development delays with no approved treatment.

It will sit alongside Harmony's Wakix (pitolisant), another drug with multi-indication potential that has been approved for narcolepsy and cataplexy and is in development for other sleep/wake disorders, including idiopathic hypersomnia and Prader-Willi syndrome, a development disorder that leads to excessive daytime sleepiness.

Analysts at Ladenburg said the terms of the deal are favourable for Zynerba shareholders and the continued development of Zygel. They see the drug as having $1 billion-plus sales potential if it can command a price of around $75,000 per year per Fragile X patient and is approved in both the US and Europe. They also noted that the 22q market size is almost double that of Fragile X.

Dayno told investors that Zygel is the first and only pharmaceutically manufactured synthetic CBD in the US and, as it contains no tetrahydrocannabinol (THC), has the potential to be a non-scheduled drug. As a topical gel, it also avoids the gastrointestinal side effects of oral CBD therapies, as well as first-pass metabolism in the liver, improving systemic absorption.

"In addition to the strength of our core business in narcolepsy and our current life-cycle management programmes, led by idiopathic hypersomnia, we are excited to continue to diversify our portfolio beyond sleep/wake by adding Zynerba's clinical development programmes to our pipeline," he added.

Zynerba's focus on development disorders with Zygel follows disappointing results for the product in epilepsy, another area where CBD drugs have been shown to have a role to play. In Fragile X, the next key data readout is the pivotal RECONNECT trial in the first half of next year.

The transaction, which will be funded by Harmony's existing cash reserves of around $430 million, is expected to close in the fourth quarter, subject to customary closing conditions. Zynerba's existing cash was approximately $36 million as of 30th June.