What happened

Following comments from a competitor's CEO that suggest competition for the company's epilepsy drug is in the works, shares in GW Pharmaceuticals (NASDAQ:GWPH) tumbled by 17.2% in May, according to S&P Global Market Intelligence.

So what

GW Pharmaceuticals has made a name for itself by pioneering research into the use of marijuana-derived cannabinoids as medicine. The company already markets Sativex, a THC-based drug for muscle spasms in multiple sclerosis patients, and last year, it put up impressive trial results for Epidiolex, a cannabidiol drug being evaluated for use in childhood epilepsy patients.

A GW Pharmaceuticals' marijuana-growing facility.

IMAGE SOURCE: GW PHARMACEUTICALS.

Epidiolex reduced seizure rates by 40% from baseline in patients with Dravet syndrome and Lennox-Gastaut syndrome, two rare forms of childhood-onset epilepsy. There's a big need for new treatment options in tough-to-treat epilepsy indications, so unsurprisingly, Epidiolex's performance sparked significant excitement from investors that sent GW Pharmacueticals' share price soaring.

Recently, however, GW Pharmaceuticals shares have lost some of their luster. Industry watchers have begun to wonder if Epidiolex's peak sales opportunity could be crimped by the availability of high-cannabidiol strains at marijuana dispensaries and future competition. Last month, Insys Therapeutics' (NASDAQ:INSY) new CEO, Saeed Motahari, assured investors that the company's own research into the use of cannabidiol for pediatric epilepsy will continue.

Motahari summarized Insys Therapeutics' plans (emphasis mine):

This year, we believe we are poised to grow our commercial portfolio from one to two products, file an NDA [New Drug Application] for buprenorphine, and significantly advance our pipeline of products across both our sublingual spray and cannabinoid platforms.

Now what

GW Pharmaceuticals' management plans to file for approval of Epidiolex with the Food and Drug Administration soon, and if the process goes well, Epidiolex could be commercially available next year. That puts the company miles ahead of competitors like Insys Therapeutics. 

Nevertheless, there's still a lot of uncertainty associated with marijuana stocks right now, and the threat of competition from dispensaries in states that have passed medical marijuana laws and news on progress at competitors like Insys Therapeutics could cause GW Pharmaceuticals shares to be very volatile, at least until the FDA weighs in with an official go/no-go decision on Epidiolex. 

Todd Campbell has no position in any stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.