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This Marijuana Stock Is on a Roll

By Todd Campbell - Sep 26, 2016 at 7:20PM

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GW Pharmaceuticals' Epidiolex outpaces placebo in a second trial in Lennox-Gastaut syndrome patients.

Image source: GW Pharmaceuticals, PLC.

Following today's announcement, GW Pharmaceuticals PLC's ( GWPH ) Epidiolex has reduced monthly seizure rates in three separate epilepsy trials, including two trials involving patients with Lennox-Gastaut syndrome, a rare form of epilepsy. Epidiolex's ability to lower seizure rates in epilepsy patients clears the way for the company to file for FDA approval of Epidiolex next year. If the FDA approves Epidiolex, it will become the first FDA-approved cannabis therapy on the market.

Cannabis as a cure

Epidiolex is a purified version of a non-psychoactive chemical cannabinoid found in marijuana known as cannabidiol, or CBD. 

In March, GW Pharmaceuticals reported that patients with Dravet syndrome, another rare form of epilepsy, saw a 39% decline in monthly seizures, and in June, results from the first of two Lennox-Gastaut syndrome studies showed a 44% decline in drop seizures. 

Today, results from a second Lennox-Gastaut trial showed that patients receiving the 20 mg/kg/day dose had a median 42% reduction in monthly drop seizures and that patients taking a 10 mg/kg/day dose achieved a median reduction in monthly drop seizures of 37%. In all of these trials, the results statistically and significantly beat the placebo.

Epidiolex's efficacy is especially intriguing because Dravet syndrome and Lennox-Gastaut syndrome are hard to treat. For example, in the second Lennox-Gastaut trial, patients participating in the study had previously tried and failed on an average of seven anti-epileptic medicines before taking Epidiolex.

Epidiolex also seems to be safe and well tolerated. Only eight of 61 patients discontinued treatment in the Dravet syndrome trial, and just 12 of 86 patients discontinued therapy in the first Lennox-Gastaut trial. In the second Lennox-Gastaut trial, one of 73 patients taking the 10mg/kg Epidiolex dose discontinued treatment because of an adverse event, and six of 76 patients discontinued treatment on the 20mg/kg dose. For comparison, one of 76 patients discontinued treatment in the placebo arm of the study.  

Looking ahead

GW Pharmaceuticals has been developing marijuana-based medicines since the 1990s, but it's had mixed results up until now. 

The company markets Sativex, a THC marijuana drug, in Europe for the treatment of muscle spasms in multiple sclerosis patients, but sales of that drug are only about $2 million per quarter. Studies evaluating marijuana-based medicine as treatments for cancer pain and schizophrenia failed to hit their mark in 2015, casting doubt on the company's approach. Epidiolex's wins, therefore, are welcome news.  

GW Pharmaceuticals plans to file for FDA approval of a 10mg-to-20mg dose range of Epidiolex in Dravet Syndrome and Lennox-Syndrome indications early next year, and if the company delivers on that timeline, then Epidiolex could become commercially available in the United States in late 2017 or early 2018, depending on the FDA.

The company hasn't said what Epidiolex may cost, but current anti-convulsants can cost hundreds of dollars per month. Management did say it's ramping up its Epidiolex production capacity and that it should have enough inventory available to treat up to "a few tens of thousands" of patients in year one post-approval. Ultimately, Epidiolex's commercial success depends a lot on pricing and on patients' embrace of it over CBD-heavy strains of marijuana, such as Charlotte's Web. However, if we estimate a $300 monthly price and 30,000 patients, then Epidiolex could have nine-figure sales potential in its first 12 months.

Overall, GW Pharmaceuticals' positive news has caused shares to spike significantly, and the company now boasts a market cap of $2.75 billion. That might be a bit rich based on year one's sales, but if Epidiolex use expands to other forms of epilepsy. it might not be too high of a price to pay. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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