GWPH Reports Poor Top-line Data for Stage 3 Clinical Trails

10/27/2015 9:41 am EST

Focus: HEALTHCARE

Michael Berger

President & Founder, Technical420.com

While this development is disappointing, Michael Berger, of Technical420.com, expects to see the market overreact to this news and views this weakness as a buying opportunity because most of the company's upside is related to its Epidiolex product.

Although it looks like shares of GW Pharmaceuticals plc (GWPH) recently found a bottom in the high $70s, we expect to see further weakness after the company reported poor top-line results from its Phase 3 trials for its Sativex product.

Tuesday, GWPH and Otsuka Pharmaceutical Development & Commercialization, Inc. reported top-line results from the remaining two Phase 3 trials for Sativex in the treatment of pain in patients with advanced cancer. Consistent with the previously announced results from the initial Phase 3 trial, remaining trials failed to show superiority over placebo.

A pre-specified pooled analysis of patients across the two Phase 3 trials did show a statistically significant improvement for Sativex compared with placebo. GWPH and Otsuka have submitted a request to meet with the FDA to discuss the clinical relevance of this data and to determine potential paths forward.

CEO Justin Gover said the results were not a surprise and the company is encouraged by data across the trials which consistently show positive outcomes for United States patients when analyzed as a separate group of subjects. Gover thinks that this finding may provide important guidance in determining the optimal target patient population for Sativex.

Signs Agreement with Government of New South Wales in Australia

Concurrent with this announcement, GWPH announced that they signed a Memorandum of Understanding (MOU) with the Government of New South Wales in Australia to progress a research program for Epidiolex and CBDV in children with severe, drug resistant childhood epilepsy. The MOU will facilitate:

  • A Phase 2 clinical trial for GW's cannabidivarin (CBDV) product
  • A compassionate access program for Epidiolex, which is in Phase 3 clinical trials with the FDA for Dravet syndrome and Lennox-Gastaut syndrome
  • Provision for New South Wales to host additional Phase 3 clinical trials of Epidiolex
  • A Phase 4 clinical trial of Epidiolex based on Phase 3 studies

As part of the agreement, New South Wales Government is providing $3.5 million to the Sydney Children's Hospitals Network to lead the Phase 2 clinical trial of CBDV which is expected to commence in 2016.

Sell-off Creates Opportunity

While this development is disappointing, we expect to see the market overreact to this news. We view this weakness as a buying opportunity because most of GWPH’s upside is related to its Epidiolex product.

Bank of America (BAC) recently raised their price target on GWPH from $115 to $155. BAC raised its price target because of the positive response patients had from the company’s Epidiolex product. The $155 price target includes: $133 for Epidiolex, $7 for CBDV, $4 for Sativex royalties, and $12 for cash.

Michael Berger, Founder and President, Technical420.com

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