Don't call GW Pharmaceuticals (GWPH) and Corbus Pharmaceuticals (CRBP 1.18%) "pot stocks." These legitimate drug developers seek to harness the body's endocannibinoid pathways to treat serious diseases.   

GW made headlines in 2018 when the Food and Drug Administration (FDA) approved Epidiolex, the first cannabis-derived drug. European regulators gave their stamp of approval for the drug, a treatment for rare pediatric seizures, last September. The market confirmed the patient need for Epidiolex, and GW sold nearly $300 million worth of the drug.

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Image source: Getty Images.

The future of Corbus, meanwhile, hangs on the success of lenabasum, a synthetic cannabinoid drug in phase 3 clinical testing as a treatment for systemic sclerosis. This summer, the medical community -- and biotech investors -- should learn the outcome. Synthetically derived lenabsum (not extracted from a marijuana plant) has successfully advanced through early clinical testing.

Corbus's high hopes for lenabasum span beyond systemic sclerosis. The drug is in a parallel phase 3 trial for the autoimmune disease dermatomyositis, as well as phase 2 trials for systemic lupus erythematosus and cystic fibrosis. Collectively, lenabasum could achieve blockbuster potential.

Will COVID-19 affect GW and Corbus?

Drug developers, including GW and Corbus, will inevitably face delays in ongoing clinical trials because of the coronavirus and COVID-19, the disease it causes. This can be attributed to slowdowns in enrollment, missed or disrupted treatment and monitoring visits, and delays in collecting data from hospitals and clinics in order to run the final analyses.

Delays will likely have a greater negative effect for Corbus, given that lenabasum's phase 3 data this summer is such a critical milestone. Biotech investors will be looking to see how this binary event pans out. The company also needs additional capital, so positive results would be tremendously helpful for negotiating better terms.

GW should be able to weather trial delays more readily because investors can focus on revenue numbers; 2020 represents the second full year for Epidiolex on the market, including its recent introduction to certain countries in Europe. 

GW may see a silver lining in an FDA slowdown, because that could delay a potential competitor from reaching the market. Zogenix (ZGNX) filed a New Drug Application with the FDA in November for Fintepla, a drug to treat seizures associated with Dravet syndrome, one of the two indications currently approved for GW's Epidiolex. In positive news for Zogenix, the FDA told the company that it had been granted priority review status, meaning the agency did not intend to convene an advisory panel to review, discuss, and make recommendations regarding Fintepla's risk-benefit profile. 

At the end of February, the FDA pushed back its decision deadline from March 25 to June 25, citing the need for more time to review the information. Now it's unclear whether the approval decision will take place in the second quarter. This gives more time for GW to increase use of Epidiolex among patients and prescribers, adding to its first-mover advantage.

Uncertain times for all

While Corbus's returns could potentially be exponential, an investment here is still quite risky. It's fortunate that Corbus raised money in February, when it was priced at a much higher valuation; that $46 million will help get it through these tumultuous times. That said, the company needed more.

Corbus's management reiterated on March 12 that it remains on track to announce results from its pivotal phase 3 clinical trial of lenabasum in systemic sclerosis this summer. If the COVID-19 pandemic delays or impedes those results, then Corbus may be faced with the need to raise capital at even lower prices than it's trading for today. While it looks like the stock is on sale, investors must be aware of the risks.

The better buy is GW. Its stock price currently trades in the $70 range per share, down from highs in February near $130 per share. Last year, the stock traded at $175. Sales continue to ramp up, and children with the rare forms of epilepsy its drugs treat will continue to be treated, despite economic conditions. In these times of heightened uncertainty, I find it prudent to revisit biotechs with revenue-producing, high-value products, such as GW.