Investors were hoping for continued momentum when GW reported its third-quarter results after the market closed on Tuesday. And that's what they got, although maybe not as much they really wanted. Here are the highlights from the company's Q3 update.
Beating expectations yet again
GW Pharmaceuticals reported third-quarter revenue of $91 million, a huge jump from the $2.4 million in revenue generated in the prior-year period. Of course, a year ago the company hadn't launched Epidiolex yet. The CBD drug raked in $86.1 million in Q3.
The consensus among Wall Street analysts was that GW would post revenue of $85.3 million. GW beat expectations once again, although by a narrower margin than in previous quarters.
While GW Pharmaceuticals still isn't profitable, it's certainly getting closer to achieving the goal. The company announced a net loss in the third quarter of $13.8 million, or $0.04 per share. That reflected a huge improvement from GW's net loss of $79.9 million, or $0.23 per share, in the prior-year period. And it also trounced the average analysts' estimate of a Q3 net loss of $0.85.
Epidiolex's fantastic performance in the quarter made the biggest difference for GW's bottom line. The company also benefited from higher interest income than it earned in the third quarter of 2018 and a gain from foreign exchange instead of a loss as it did in the prior-year period.
What's coming up
GW Pharmaceuticals didn't just focus on its solid Q3 results. CEO Justin Gover pointed to the company's future prospects as well:
We see significant opportunity for the short, medium, and long term and believe that all the fundamentals are in place to make Epidiolex a very successful brand. We can expect to see additional momentum from Europe as well as the launch of the Tuberous Sclerosis indication during 2020. On top of this, GW is ideally placed to consolidate its leadership in cannabinoid science through advancing several mid and late-stage pipeline programs in the months ahead.
There are several things to note from Gover's comments that could bode well for GW down the road. He mentioned the European launch of Epidyolex (there's a slightly different spelling in the European brand name for the drug) that's already under way in France and Germany. GW will launch its CBD drug in the United Kingdom this quarter, followed by launches in Spain and Italy in 2020.
GW expects to submit for U.S. approval of Epidiolex in treating tuberous sclerosis complex (TSC) early next year. The U.S. Food and Drug Administration should make an approval decision by midyear, with a potential launch in the second half of 2020. A regulatory filing for the TSC indication in Europe will probably be made in the first quarter of 2020.
The pipeline programs Gover alluded to include a phase 3 clinical study evaluating Epidiolex in Rett syndrome for which patients are currently being recruited. GW also hopes to begin a pivotal U.S. study of Sativex in treating multiple sclerosis spasticity in early 2020.
A surprising reaction
With better-than-expected top and bottom lines, you'd think that GW Pharmaceutics stock would have at least enjoyed a modest gain after the company's Q3 update. Nope. Shares dropped by more than 13% in after-hours trading on Tuesday. What gives?
Investing in stocks isn't always as straightforward as it might seem. Good news that seems like it's really good news sometimes isn't as good as what Wall Street professionals really expected. It's possible that GW's strong performance still wasn't enough to meet the "whisper numbers" -- revenue and earnings estimates that analysts anticipate but don't officially announce. After-hours trading can also involve more extreme moves than trading during normal stock market hours because the volume of shares bought and sold is much lower after the market close.
The most important takeaway from GW Pharmaceuticals' Q3 update is that Epidiolex is still on a roll with more markets opening up and more indications potentially on the way. That's more important than the immediate temporary reaction from investors.