biotech Archives - Green Market Report

Adam JacksonAugust 11, 2022

Akerna Corp. (Nasdaq: KERN) posted less than positive results as it missed expectations — showing that mixed demand and weaker sales are rippling through the sector. The cannabis tech firm released its second-quarter financial report card ending June 30, 2022.

Akerna missed expectations with total revenues of approximately $6.1 million during the period, a 24% gain from $4.9 million for the same quarter last year — missing Yahoo Finance Average analyst estimate for revenues of $7.1 million.

“We have continued to take important steps to grow revenue, reduce costs, and position ourselves for growth in the future,” said CEO Jessica Billingsley. “While client demand has been mixed thus far in 2022, and with softer sales and bookings in particular during the second quarter throughout the sector, we believe we are on pace for a year of solid growth in 2022, compared with last year.”

Software revenue was $5.9 million, up 33% from $4.5 million in the same time last year — with $600,000 worth of software bookings this quarter.

The company saw a gross profit of $4.2 million, or 69.8% of total revenues — up 42% versus $3.0 million in the prior year.

The company also reported a second-quarter 2022 GAAP net loss of $29.6 million — including a $24.1 million impairment of certain long-lived assets — versus a net loss of $22 million sequentially and a loss of $6.1 million last year. However, the company noted that reductions announced in June are expected to generate material cost savings in the second half of 2022.

Diluted loss per share in the fourth quarter was $0.83 cents versus diluted earnings per share of $0.12 cents in the same period last year.

“On the cost side, we’re pleased with our gross margin improvement over last year at 69%, and the expense reduction program across the board that we announced in Q2 should enable more material improvements going forward, beginning with our Q3 results,” Billingsley said.

Despite taking cost-reduction steps, the company said average new business deals decreased by 9% year-over-year.

Adjusted EBITDA was a loss of $2.1 million in the second quarter — down 22% from a loss of $2.3 in the previous quarter — versus a loss of $1.6 in the same period last year.

The company said it had $14.1 million in cash and restricted cash as of July 5, 2022 — following the closing of a $10 million financing via S-1 filed/effective on June 29, 2022. It said it would continue to “pursue strategic alternatives to optimize the capital structure and strengthen the balance sheet.”

Adam JacksonAugust 10, 2022

Zynerba Pharmaceuticals, Inc. (Nasdaq: ZYNE) posted positive results as the company continues to further its research and development goals — with signs of a FDA approval looming in the distance. The cannabis biotech company reported financial results for the second quarter ending June 30, 2021,

Research and development expenses were $5.4 million for the second quarter of 2022, the company said, including stock-based compensation of $0.5 million. General and administrative expenses were $3.7 million in the second quarter this year, including stock-based compensation expense of $0.6 million. As an emerging biotech company, Zynerba does not have revenue at this time as it develops drugs.

The company said that it has continued to focus resources toward developing treatment for two orphan neuropsychiatric disorders, Fragile X syndrome and 22q Deletion Syndrome.

“During the second quarter, we were pleased to announce positive top-line results from our Phase 2 trial of Zygel in patients with 22q,” said CEO Armando Anido. “In addition to further progressing 22q, we are focused on completing the Phase 3 RECONNECT trial for children and adolescents with Fragile X syndrome, with top-line results expected in the second half of 2023.”

With a cash runway extending past expected availability of top-line results from our RECONNECT trial, we remain well-positioned on achieving our goal of bringing the first pharmaceutical product indicated for the treatment of behavioral symptoms of Fragile X syndrome to market.”

This echoes Zynerba’s belief that the results from RECONNECT, if positive, will be sufficient to support the submission of a New Drug Application (NDA) for Zygel in patients with Fragile X syndrome.

The company also said it plans to meet with the U.S. Food and Drug Administration (FDA) to discuss the data and the regulatory path forward for its open label Phase 2 INSPIRE trial of Zygel in children and adolescents with 22q Deletion Syndrome — also called DiGeorge syndrome, a chromosomal disorder with no known cure that results in poor development of several body systems.

The company said it plans to move forward in 22q as an orphan indication and has previously received orphan drug designation from the FDA for cannabidiol, the active ingredient in Zygel, for the treatment of 22q.

While data from the company’s ASD clinical development program to date are compelling, given the difficult financing market, the company has deferred the start of the Phase 3 development program in ASD as it has prioritized its resources on FXS and 22q in the near term.

Net loss for the second quarter of 2022 was $9.9 million, with basic and diluted loss per share of $0.24 cents. Cash and cash equivalents were $62.5 million, versus $67.8 million as of December 31, 2021.

In May, the company entered into a Controlled Equity Offering Sales Agreement — with Cantor Fitzgerald & Co., Canaccord Genuity, LLC, H.C. Wainwright & Co. LLC and Ladenburg Thalmann & Co. Inc. as sales agents — in which the company may sell, from time to time, up to $75 million of its common stock.

Zynerba then sold and issued 488,892 shares of its common stock in the second quarter under the agreement in the open market — resulting in gross proceeds of $0.9 million and net proceeds of $0.8 million, after deducting commissions and offering expenses.

After that, from July 1, 2022 through August 8, 2022, the company sold and issued 1,469,714 shares of its common stock under the agreement in the open market resulting in gross proceeds of $1.8 million, and net proceeds of $1.6 after deducting commissions and offering expenses.

Zynerba also struck an equity purchase deal last month for up to $20 million with Chicago-based firm Lincoln Park Capital Fund (LPC).

Lincoln Park Capital is expected to provide financial flexibility and is aligned with Zynerba’s long-term strategy for value creation, the company said.

Zynerba said it plans to use any net proceeds from the sale of its common stock to LPC for working capital and general corporate purposes, including research and development expenses and capital expenditures.

Management believes that the Company’s cash and cash equivalents are sufficient to fund operations and capital requirements through the end of 2023 or into early 2024, after the expected availability of top-line results from its confirmatory pivotal Phase 3 RECONNECT trial of Zygel in patients with FXS.

Dave HodesMay 26, 2022

Investment in a biotech company is a tricky move for any seasoned investor. It’s always challenging, with great potential wealth tied up for years while the results of clinical trials get published and the approval process of the Food and Drug Administration (FDA) slogs on.

To really understand it, there is complicated medical jargon to figure out amidst starry-eyed promises being promoted of treating a human illness or disease for the first time with a new life-changing drug.

The process of investing in the biotech business—which is now experiencing a sort of market rout after witnessing the end of a promising surge in pandemic-driven investing—is really the only model for investing in psychedelics.

But investing in psychedelics offers a whole slew of additional challenges for a biotech investor. Can any drug developed by a psychedelics company live up to the truly breath-taking predictions about what a psychedelic-substance can do for humans—treat alcohol and nicotine and drug addictions, handling or overcoming pain, managing or even eliminating depression, or post-traumatic stress disorder, or autism, or Alzheimer’s or, well, who knows what other human mental health conditions psychedelics could successfully treat?

But even without all of that extra investor worry that comes with psychedelic substances, many investors in the business have to overcome issues about the stigma of their use. And most psychedelics companies in the U.S. are still caught up dealing with the Drug Enforcement Administration (DEA) restrictions about psychedelics that on some level that affect their business development.

Biotech investors already know there are enough bigtime risks that can bring down any biotech business almost overnight no matter how many clinical trials are conducted or how much deep research was involved.

They have to find a careful balance of managing their or their client’s money; belief in the veracity of claims by psychedelic companies about the results of trials; and hopes that the FDA not only understands the medical value of a particular psychedelic as a mental health drug, sorting out all its complicated medical-ese, but can quickly approve it for treating humans.

In short, it’s a messy hands-on watch-the-headlines type of investment that even established biotech companies backed by experienced biotech investors can get burned on.

One example: On July 15, 2021, Food and Drug Administration’s (FDA) Cardiovascular and Renal Drugs Advisory Committee (CRDAC) voted 13 to 1 that the “benefit-risk profile..does not support approval for the treatment” of FibroGen’s (NASDAQ:FGEN) drug roxadustat. The drug is an oral medicine that could be the first in a new class of treatments called oral HIF-PH inhibitors designed for the treatment of anemia (insufficient red blood cells) due to chronic kidney disease (CKD) in adult patients.

Approximately 15 percent of U.S. adults—37 million people—are estimated to have CKD, and most (9 in 10) adults with CKD do not know they have it. From an investor point of view, it looked like a good and potentially profitable drug to bring to market.

In asking for FDA approval, FibroGen, working in a global partnership with AstraZeneca and Astellas Pharma, presented clinical development results for roxadustat in patients with CKD anemia that included 9 phase 2 studies, 8 U.S. and global phase 3 studies, and 8 additional phase 3 studies in Japan (with 1,028 patients) and China (456). Results of those studies were submitted to the FDA for consideration.

Roxadustat had been approved in China since 2018, and in Japan since 2019. It’s also been approved in Chile and South Korea, and is under regulatory review in the European Union. Available post-marketing safety data from studies did not show any new unexpected risks. But all that seemingly deep due diligence and positive news on a drug for an unmet need to treat chronic kidney disease was not enough to gain FDA approval.

As a result, FibroGen’s stock price crashed from $27.67 a share on June 21, 2021 to around $8.46 a share today—a five year low.

Then there is the controversy with Biogen’s (NASDAQ: BIIB) Alzheimer’s drug aducanumab, approved by the FDA on June 7, 2021 but hounded by claims that Biogen people allegedly met with members of the FDA outside of the regulatory process, and that 10 of the 11 members of an advisory committee of independent experts that the FDA convened for guidance voted that there was not enough evidence to justify approval. “The data included in the applicant’s submission were highly complex and left residual uncertainties regarding clinical benefit,” Dr. Patrizia Cavazzoni, director of the FDA Center for Drug Evaluation and Research, writing on the FDA website announcing the approval of the drug. “As is often the case when it comes to interpreting scientific data, the expert community has offered differing perspectives,” she wrote, adding that “the FDA concluded that the benefits of aducanumab for patients with Alzheimer’s disease outweighed the risks of the therapy.”

Nevertheless, Biogen took a serious hit on its hoped-for big money-maker (the drug would reportedly cost $56,000 a year for patients). The company’s stock price is down nearly 20 percent from five years ago, now at its lowest level over that same period, with its steepest decline beginning June 11, 2021.

BioGen is huge, reporting $11 billion in revenue in 2021, so it can weather this particular storm. That’s the good news of investing in an established biotech business. But there are no psychedelics company that come even close to that revenue amount (most show no revenue at all for now), or that safety net for drug development gone wrong when they have just one drug development in the pipeline. One clinical trial with bad results, one denied FDA approval, and all bets are off for a psychedelic drug company as a profitable, good investment.