GW Pharmaceuticals: Biotech Meets Cannabis

07/29/2020 5:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

GW Pharmaceuticals (GWPH) is one of a growing number of biotechs that after years of R&D have moved firmly into the commercial stage and, in this firm’s case, to the cusp of profitability, suggests Mike Cintolo, editor of Cabot Growth Investor.

The big driver today is Epidiolex, which was approved back in June 2018 for a couple of rare but serious forms of child-onset epilepsy and associated seizures, and results (first in trials, where most patients had tried other seizure medicines with poor results, and now in reality) have been terrific.

The drug is the first prescription drug made from a highly purified substance derived from cannabis, though we wouldn’t say the stock is a marijuana stock in any real sense.

Not surprisingly, as Epidiolex has taken hold, GW’s top line has soared from basically zero in 2018 to $311 million last year to an estimated $518 million in 2020. But there’s more coming!

First, Epidiolex was just approved in Europe in September of last year; it’s available in Germany and UK today with France, Spain and Italy launches coming up.

Second, the drug could also get a label expansion soon, with a July 31 decision date from the FDA to allow Epidiolex to be used for seizures associated with tuberous sclerosis complex (could increase addressable market by 80%).

And third, GW is starting Phase III trials for Nabiximols, which is used in 25 other countries to treat spasticity in MS patients (potential FDA submission early next year).

All told, Wall Street expects revenues to leap 56% next year with earnings reaching the black, too. As for the stock, it was in a long-term downtrend for years, but now it looks totally different.

After a strong, persistent rebound into late May, GWPH moved straight sideways for nearly two months and, after testing its 10-week line, has moved to new highs on good volume this week. It’s a bit thin ($50 million per day in volume), but it’s a small/mid cap name that could do well as the growth plan plays out.

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