Harmony Biosciences Holdings – a pharmaceutical company dedicated to developing and commercializing innovative therapies for patients with rare neurological diseases – recently announced a definitive agreement to acquire Zynerba Pharmaceuticals (Nasdaq: ZYNE), a leader in innovative pharmaceutically produced transdermal cannabinoid therapies for orphan neuropsychiatric disorders, including Fragile X syndrome (FXS).
Under the terms of the definitive agreement, Harmony is going to commence a tender offer to acquire all outstanding shares of Zynerba for a purchase price of $1.1059 per share in cash, or $60 million in the aggregate, plus one non-tradeable contingent value right (CVR) per share, representing the right to receive potential additional payments of up to $140 million in the aggregate, subject to the achievement of certain clinical, regulatory and sales milestones.
Zynerba’s lead asset Zygel is the first and only pharmaceutically manufactured synthetic cannabidiol, a non-euphoric cannabinoid, formulated as a patent-protected permeation-enhanced gel for transdermal delivery through the skin and into the circulatory system. And Zygel is manufactured through a synthetic process in a cGMP facility and is not extracted from the cannabis plant. So it is devoid of THC, which is what causes the euphoric effect of cannabis and has the potential to be a nonscheduled product if approved.
Zygel is now being evaluated in a pivotal Phase 3 clinical trial for patients living with FXS, known as the RECONNECT Trial. And Zygel showed positive signals in an open-label Phase 2 trial in patients living with 22q11.2 deletion syndrome (22q), called the INSPIRE Trial.
Cannabidiol, the active ingredient in Zygel, has been granted orphan drug designation by the United States Food and Drug Administration (FDA) and the European Medicines Agency (EMA) for the treatment of FXS and for the treatment of 22q. And Zygel has received FDA Fast Track designation for the treatment of behavioral symptoms in patients with FXS.
FXS is a rare genetic disorder that affects approximately 80,000 people in the U.S., causing intellectual disabilities and behavioral challenges. Despite considerable progress in medical science, a significant unmet medical need remains in treating patients with this debilitating disorder. There are currently no FDA-approved therapies to treat FXS.
It is estimated that approximately 80,000 people are living with 22q in the U.S. Patients with 22q are affected by symptoms related to many organ systems, including neuropsychiatric symptoms such as anxiety and behavioral difficulties. There are currently no FDA-approved therapies to treat 22q.
Under the terms of the deal, which was unanimously approved by the boards of directors of Harmony and Zynerba, Harmony will commence a tender offer to acquire all outstanding shares of Zynerba for a purchase price of $1.1059 in cash per share, or $60 million in the aggregate payable at closing of the transaction plus one non-tradeable CVR representing the right to receive potential additional payments of up to $140 million or approximately $2.5444 in additional cash per share, for a total potential consideration of up to $200 million in cash. The CVR is payable subject to certain terms and conditions upon achievement of the following milestones:
Clinical Milestones
— Completion of FXS Phase 3 clinical trial: $15 million in the aggregate or approximately $0.2747 per share
Positive data readout from FXS Phase 3 clinical trial:
— $30 million in the aggregate or approximately $ 0.5494 per share if completed on or before December 31, 2024
— $20 million in the aggregate or approximately $ 0.3663 per share if completed on or before June 30, 2025
— $10 million in the aggregate or approximately $ 0.1831 per share if completed after June 30, 2025
Regulatory Milestones
— FDA approval in FXS: $35 million in the aggregate or approximately $0.6389 per share
— FDA approval in Second Indication: $15 million in the aggregate or approximately $0.2707 per share
Net Sales Milestones
— Achievement of $250 million in aggregate Net Sales: $15 million in the aggregate or approximately $0.2702 per share
— Achievement of $500 million in aggregate Net Sales: $30 million in the aggregate or approximately $0.5405 per share
— Each CVR is subject to the achievement of the milestone conditions described above, and there can be no assurance whether any such milestones will be achieved or when any payments will be made with respect to any CVR.
Harmony will fund the transaction from its existing cash on hand. As of June 30, 2023, Harmony had cash, cash equivalents, and investment securities of $429.6 million. And Zynerba’s existing cash and cash equivalent balance was approximately $36.0 million as of June 30, 2023.
The deal is expected to close by the fourth quarter of 2023, subject to customary closing conditions, including that the holders of at least a majority of the outstanding shares of Zynerba’s common stock tender such shares to Harmony in connection with the tender offer. Following the successful closing of the tender offer, Harmony is going to acquire any shares of Zynerba it does not already own through a second-step merger at the same per share offer price as paid in the tender offer. Zynerba’s board of directors unanimously recommends that Zynerba’s stockholders tender their shares in the tender offer.
KEY QUOTES:
“This is an important step in Harmony’s strategy to build a diversified portfolio of innovative assets to address unmet medical needs and drive our long-term growth. This acquisition affords us the opportunity to advance the development and delivery of a potentially transformative treatment for the symptoms of Fragile X syndrome and other rare neuropsychiatric disorders. In addition to the strength of our core business in narcolepsy and our current life cycle management programs, led by idiopathic hypersomnia, we are excited to continue to diversify our portfolio beyond sleep/wake by adding Zynerba’s clinical development programs to our pipeline. The team at Zynerba has been dedicated to these programs and we are confident that our combined efforts could have a profound impact on individuals living with rare neuropsychiatric disorders and their families.”
— Jeffrey M. Dayno, M.D., President and Chief Executive Officer at Harmony Biosciences
“Harmony’s development and commercial expertise, technologies, people and focus on rare neurological diseases are an excellent strategic fit with Zynerba. I am very proud of Zynerba’s accomplishments with Zygel to date. With Harmony’s scale, resources and proven commercial excellence, they are well positioned to potentially bring to market the first pharmaceutical product indicated for the treatment of behavioral symptoms of Fragile X syndrome and to maximize the value of Zygel.”
— Armando Anido, Chairman and Chief Executive Officer of Zynerba
