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Why This Huge Marijuana Stock Is Soaring 10% Today

By Todd Campbell – Apr 17, 2018 at 1:08PM

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New data suggesting the FDA's OK with its marijuana drug has investors cheering.

What happened

After the Food and Drug Administration released a favorable background document for an upcoming advisory committee meeting that will discuss its lead drug, GW Pharmaceuticals (GWPH) shares were jumping 10.7% at 1:30 p.m. EDT today.

So what

GW Pharmaceuticals' Epidiolex is a marijuana medicine that's being reviewed by the FDA for use in patients with two rare forms of epilepsy: Dravet syndrome (DS) and Lennox-Gastaut syndrome (LGS).

A doctor fills out paperwork while holding marijuana buds in the other hand

IMAGE SOURCE: GETTY IMAGES.

On Tuesday, the FDA released a background document for use by a key advisory committee that's slated to meet later this week to discuss Epidiolex's pros and cons. While the document acknowledges that Epidiolex isn't without risks, it appears to conclude that the FDA supports an eventual OK.

Specifically, the document highlights GW Pharmaceuticals' study results showing an approximately a 40% reduction in seizures from baseline in both patient populations. But it also lists dose-responsive, adverse events in the liver that occurred in 14% of Epidiolex patients, compared to 3% of patients taking a placebo.

Overall, the FDA document appears to conclude that the liver toxicity concerns are outweighed by the efficacy data, stating:

Although the risk of liver injury has the potential to be serious, the observed risk can be appropriately managed with inclusion of relevant language in labeling, education of prescribers regarding the risk of transaminase elevation and need for monitoring of liver enzyme levels, and further characterization of the risk in the post-market setting. ...

Although the review is still ongoing, the risk-benefit profile established by the data in the application appears to support approval of cannabidiol for the treatment of seizures associated with LGS and DS.

Now what

The FDA doesn't have to follow the advice of its advisory committee, but it usually does. Therefore, it will be important to keep tabs on how the meeting goes on Thursday, April 19.

If the FDA approves Epidiolex, it would mark a significant advance for epilepsy patients. LGS and DS are highly resistant forms of epilepsy and as a result, existing treatment options are inadequate.

It would also mark an important milestone for medical marijuana's use in epilepsy. While Charlotte's Web and other high-cannabidiol marijuana strains have been used to treat epilepsy for years, this would represent the first regulatory acknowledgment of marijuana's ability to help these patients.

The stakes are high for GW Pharmaceuticals, too. It's been researching marijuana as medicine since the 1990s, but currently only generates a little revenue from one infrequently used marijuana drug, the multiple sclerosis drug Sativex. Epilepsy treatment is a multibillion-dollar market, so an approval could significantly reward GW Pharmaceuticals and its investors. An official FDA decision on Epidiolex is anticipated on June 27, 2018.

Todd Campbell has no position in any of the 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.

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