Image source: GW Pharmaceuticals PLC.
What happened
After reporting fiscal third-quarter financial results on Aug. 9 and updating investors on its progress on developing marijuana-derived medicines, shares in GW Pharmaceuticals PLC (GWPH) fell 13.4% in August, according to S&P Global Market Intelligence.
So what
GW Pharmaceuticals is conducting a flurry of research into medicine derived from the chemical cannabinoids found in marijuana plants. Sales of the company's only approved marijuana medicine, Sativex, which is used to treat multiple sclerosis spasticity, are tepid, and as a result, GW Pharmaceuticals continues to lose money.
Its fiscal third-quarter revenue was about $3.1 million, down from $11.55 million last year, at current exchange rates. The drop-off in revenue is due to lower collaboration revenue from Otsuka following the shuttering of a program evaluating Sativex's use as a cancer pain therapy last year. Slightly offsetting that decline in collaboration revenue was a $500,000 increase in Sativex sales to $2 million.
The company spent $34.4 million on research and development last quarter, up from $28 million least year. Most of the increase in R&D spending was due to phase 3 studies of Epidiolex, a purified formulation of the cannabinoid CBD that GW Pharmaceuticals is evaluating as a treatment for rare forms of epilepsy.
Overall, GW Pharmaceuticals lost $16.4 million last quarter.
Now what
Sativex's sales are clocking in at an annualized pace of only about $8 million, so GW Pharmaceuticals $1.9 billion market cap is tied less to Sativex's potential than it is to Epidiolex's potential.
The company reported results earlier this year from two trials studying Epidiolex, and in both instances, epilepsy patients saw a substantial drop in monthly seizure rates. GW Pharmaceuticals is still waiting for data from two more epilepsy trials (one in Dravet syndrome and the other in Lennox-Gastaut syndrome), and if those trials are also positive, then a Food and Drug Administration filing for Epidiolex's approval could occur 2017.
There's a big need for new alternatives because many patients with rare forms of epilepsy don't respond to current treatment options. However, investors should remember that the patient population Epidiolex is targeting is small. Investors should also remember that there's no guarantee that the remaining two trials will back up the data that's already been released. Data from the Lennox-Gastaut trial is expected before the end of this quarter and the company hasn't said precisely when the Dravet syndrome results will be available.
Overall, GW Pharmaceuticals has a healthy $254 million cash stockpile, but it's spending heavily and that means it's going to keep losing money for a while. Undeniably, Epidiolex is the company's best shot at a commercial success so far, but with question marks remaining, GW Pharmaceuticals is still a risky bet.
