Many investors have serious reservations about dipping their toes in the cannabis industry. After all, pot companies have generally delivered mediocre financial results over the past few quarters, and many have seen their shares drop significantly. The ongoing COVID-19 pandemic didn't help the situation either, but amid this chaos, some cannabis companies are gaining momentum.

One such company is GW Pharmaceuticals (NASDAQ:GWPH). Here's why this cannabis stock is worth buying today.

GW stock

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Epidiolex is a major success

GW Pharma markets the only cannabis-derived drug approved by the U.S. Food and Drug Administration (FDA). The drug is called Epidiolex and treats seizures associated with Lennox-Gastaut Syndrome (LGS) or Dravet Syndrome, both of which are rare forms of epilepsy.

GW Pharma has seen its revenue rise significantly since Epidiolex was first approved in 2018. During the first quarter, the company's revenue of $120.6 million soared by more than 200% year over year. Furthermore, GW Pharma's net loss per share shrank to $0.02, compared to the net loss per share of $0.14 recorded during the first quarter of 2019.

Are there better days ahead for GW Pharma? I believe so, and here's why. First, the company is still in the process of launching its crown jewel in Europe. After launching Epidiolex in the U.K. and Germany earlier this year, the company said other countries such as France, Spain, and Italy are next in line. 

Cannabis leaves on top of a hundred dollar bill.

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Second, Epidiolex could earn a new indication soon. GW Pharma is looking to gain approval for Epidiolex as a treatment for seizures associated with a rare tumor called tuberous sclerosis complex (TSC). According to the company, between 40,000 and 50,000 people have TSC in the U.S., and worldwide, that number is between 1 million and 2 million. GW Pharma submitted applications for Epidiolex as a potential treatment for seizures associated with TSC to regulatory authorities in both the U.S. and Europe earlier this year.

Third, GW Pharma is running a phase 3 clinical trial for another product called Nabiximols as a treatment for muscle pain and spasm caused by multiple sclerosis (MS). GW Pharma estimates that the market opportunity for this indication in the U.S. is greater than $400 million. With these additional opportunities, GW Pharma's revenue and earnings -- along with its stock price -- could increase significantly in the near future. 

One challenge to consider

It is worth noting that GW Pharma could soon encounter some competition. Zogenix (NASDAQ:ZGNX) is a biotech that developed a product called Fintepla, which is a potential treatment for seizures associated with Dravet Syndrome. The company has already submitted a New Drug Application (NDA) for Fintepla in the U.S. and Europe, and Zogenix should receive an answer from the FDA in late June. If approved, Fintepla will eat up some of Epidiolex's market share.

Fintepla is also being investigated as a treatment for seizures associated with LGS. In a phase 3 clinical trial, Fintepla successfully reduced the number of monthly seizures in patients with LGS, but it did so by only 26.5%, compared to a 7.8% reduction in the number of monthly seizures for patients taking a placebo. These positive results weren't quite positive enough, which means Fintepla may not pose a particularly strong challenge to Epidiolex as a treatment for seizures associated with LGS, even if it is approved. 

Should you buy GW?

Epidiolex will continue to be a major growth driver for GW Pharma moving forward. I also think Nabiximols, which is already marketed outside of the U.S., has a good chance of earning FDA approval, which would provide another boost to the company. The challenge from Zogenix is certainly worth keeping in mind, and so is the fact that GW Pharma is still not consistently profitable. But even with these caveats, I think GW Pharma is worth serious consideration, although I wouldn't go as far as to say that it is a strong buy. Still, investors interested in cannabis stocks can hardly do better than GW Pharma.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.