Why GW Pharmaceuticals PLC Shares Soared

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of GW Pharmaceuticals (NASDAQ: GWPH  ) , a biopharmaceutical company focused on discovering cannabinoids and utilizing them to alter biologic pathways via the cannabinoid receptor system, jumped as much as 11% after announcing that epidiolex has received fast track designation from the Food and Drug Administration for the treatment of Dravet Syndrome, a rare and treatment-resistant form of childhood epilepsy.

So what: According to its very early morning press release, and CEO Justin Gover, "With GW having already opened an Investigational New Drug (IND) for Epidiolex, we are on track to commence a phase 2/3 clinical trial in Dravet Syndrome in the second half of this year." Fast track designation affords GW Pharmaceuticals some intriguing benefits, which include more frequent written correspondence with the FDA to facilitate drug development, as well as the potential for a priority or rolling review which may get epidiolex to market sooner if it performs well in clinical trials. In addition, GW Pharmaceutical announced that it would be conducting a clinical study involving epidiolex as a treatment for Lennox-Gastaut syndrome, another difficult-to-treat type of childhood epilepsy. GW anticipates holding a pre-IND meeting with the FDA with the next few months and then running two phase 3 studies next year.

Now what: This is certainly good news for GW Pharmaceuticals' optimists who are looking for the company to expand its global portfolio beyond just Sativex. However, I'd be truly foolish if I also didn't point out that Sativex, which has been on the market in the EU for years as a treatment for multiple sclerosis-based spasticity, brought in only $3.7 million in revenue last year – a 14% drop from the previous year. It's one thing to make pharmaceutical products derived from cannabis plants, but it's an entirely different ballgame when you try to sell it to physicians and the public apparently. One problem for GW Pharma, at least overseas, is that generic versions of Zanaflex can be prescribed for a cheaper cost than Sativex, making sales growth difficult in the EU. GW also has to overcome wide-ranging perceptions of physicians and the public as to the benefits or risks associated with marijuana plant-based cannabinoids. Even with the company running multiple phase 3 studies with Sativex in the U.S. as a treatment for cancer pain, profitability looks to be a long way off. As such, I would suggest investors consider taking their profits here and head for the exit as quickly and orderly as possible.

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  • Report this Comment On June 06, 2014, at 6:02 PM, jbs111982 wrote:

    "Total revenue for the six months to 31 March 2014 was £15.0 million, compared to £12.9 million for the six months ended 31 March 2013."

    So your $3.7 mill revenue figure for all of last year, seems a bit off. Plus you quoted yourself on that "mistake", although I doubt it was unintentional.

    Not to forget that most countries just made their deals with GWPH in 2013, so no, this product hasn't "been out for years".

    This is the most disingenuous article I've ever read on the fool. Shame you on.

  • Report this Comment On June 06, 2014, at 6:09 PM, jbs111982 wrote:

    Shame on you.*

  • Report this Comment On June 06, 2014, at 6:27 PM, how8818 wrote:

    The Motley Fool is pushing their own Medical Marijuana stock. So, of course, they trash GWPH. Jim Cramer states GWPH will double, and Morgan Stanley about one month ago set a target price of $103. Maybe the Fool ia aptly named. According to 24/7 Wall St. June 3, GWPH is a favorite on the buy side, and many Wall Street biotech boutique firms list is as a to name to BUY. The consensus target price is posted at $92.40. If you own, HOLD. If you do not, strongly consider buying. The Fool is biased on this one. Howard Holder, Biotech Analyst, A&H Capital,Inc.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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9/3/2015 4:00 PM
GWPH $103.62 Down -1.89 -1.79%
GW Pharmaceuticals… CAPS Rating: **