Without a doubt, the biggest win for GW Pharmacueticals (NASDAQ:GWPH) in 2016 came from the clinical trial results for its marijuana-derived cannabidiol (CBD) drug candidate Epidiolex.

GW Pharmaceuitcals has a drug on the market, Sativex, but with the company only recording revenue of $13.3 million during the 2016 fiscal year that concluded at the end of September, it's hard to call Sativex a win -- let alone the biggest win.

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Treating epilepsy

In 2016, GW Pharmaceuticals released data from three clinical trials testing Epidolex in patients with two different rare pediatric epilepsies -- Lennox-Gastaut syndrome and Dravet syndrome. All three passed with flying colors.

Disease

Placebo (Reduction) in Seizure Frequency

Epidiolex (Reduction) in Monthly Seizure Frequency

Dravet Syndrome

(13%)

(39%)

Lennox-Gastaut Syndrome-Trial 1

(22%)

(44%)

Lennox-Gastaut Syndrome-Trial 2

(17%)

(42%)

Data source: GW Pharmaceutics.

In the second Lennox-Gastaut syndrome trial, a lower dose of Epidolex worked almost as well as the higher dose, with a 37% reduction in monthly seizure frequency.

Preparing for approval

With data showing that Epidolex clearly reduces seizure frequency, GW Pharmaceuitcals is on track to apply for FDA approval to treat both Lennox-Gastaut syndrome and Dravet syndrome before the end of June, and it plans to submit an application to EU regulators in the second half of the year.

Assuming the FDA gives Epidolex a priority review, the drug could be approved by the end of this year, or early next year. The EU has a similar program, called an accelerated assessment, which would likely get the drug approved in 2018.

Unfortunately, GW Pharmaceuticals won't be able to market Epidolex immediately after it's approved in the U.S. because the company will likely have to wait for the Drug Enforcement Agency to give Epidolex a Schedule since the drug is derived from marijuana.

And the wait could be long. Insys Therapeutics (NASDAQ:INSY) got its THC drug, Syndros, approved more than six months ago, and Insys Therapeutics is still waiting for DEA scheduling of its drug.

Scheduling is a big deal for patients and doctors since Schedule II, which is given for drugs with high potential for abuse, doesn't allow refills, so the pharmacy has to call the doctor each time a patient runs out of medication.

Fortunately, management has human abuse liability data that it thinks supports a Schedule IV designation. Unlike Insys' Syndros, which contains THC, the part of marijuana that gives the "high" effect, Epitolex contains CBD, which doesn't have psychoactive effects.

The difference between Schedule III and Schedule IV designations, which are given for drugs with moderate to low potential for abuse, isn't a major issue for marketing an epilepsy drug. And even if Epitolex is given a Schedule II designation, it's not likely to have a huge affect on sales since Epitolex treats epilepsy patients without any other options. If the medication is working for patients, doctors will put in the effort to make sure patients get their medication.

GW Pharmaceuticals will increase its expenditures as it prepares to launch Epitolex, expecting to burn $130 million to $150 million during its 2017 fiscal year, but with over $480 million in the bank at the end of September, the company is well situated to wait for FDA approval and DEA scheduling.

Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.