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Where Will GW Pharmaceuticals Be in 1 Year?

By Zhiyuan Sun - Updated Aug 7, 2020 at 4:30PM

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Here's why this shares of this cannabinoid drug company will keep soaring within the next year.

Almost two years ago, the U.S. Food and Drug Administration (FDA) approved the first-ever cannabinoid-derived drug, created by GW Pharmaceuticals (GWPH). The drug is called Epidiolex and is used to treat patients with severe drug-resistant seizures that begin during childhood.

Since its approval, sales of Epidiolex have been skyrocketing, and I think the momentum is far from over. Within the next year, Epidiolex has opportunities lined up for both label expansion and international expansion. Let's take a look at these opportunities.

Laboratory scientist extracting CBD oil from plant.

Image Source: Getty Images.

Track record of growth

In the first quarter of 2020, sales of Epidiolex in U.S. more than tripled to $106.1 million over the same period last year. Furthermore, sales growth was the strongest during March, amid the COVID-19 pandemic. The company's latest wave of healthcare providers consists of 1,000 new prescribers recommending the drug to patients. From this group, more than 90% of prescriptions were filled in Q1, and the company expects limited headwinds due to COVID-19 for its bottom line going forward.

All signs point to the fact that Epidiolex is an essential medicine. There are now 1,100-plus independent long-term pharmacies who are receiving virtual instruction on Epidiolex beginning this month. Sales have also been doing well in other parts of the world. Toward the end of 2019, Epidiolex was launched in the U.K. and Germany; sales outside the U.S. totaled $10 million in the first quarter of 2020.

New expansion opportunities

This year, GW Pharmaceuticals is working to bring Epidiolex to Italy and Sweden. In France, a program offering early access to the drug has been very successful, and patient count continues to grow.

Moreover, the company has filed a supplemental New Drug Application with the FDA to expand Epidiolex's label to include seizures with tuberous sclerosis complex (TSC), a disease affecting 45,000 patients in the U.S. and 1 million worldwide. Last year, the company reported phase 3 results with a near 50% reduction in the number of seizures for TSC patients taking Epidiolex. The result was highly statistically significant compared to placebo and is highly indicative of approval potential. On July 31, a panel of FDA panelists will decide whether or not to recommend Epidiolex for approval under the Prescription Drug User Fee Act.

With this in mind, GW Pharmaceuticals also has three label expansions for Epidiolex under review with the European Medicines Agency, with a decision likely by the end of 2020. Furthermore, the company is also investigating the active pharmaceutical ingredient in Epidiolex, called nabiximol (a balanced combination of THC and CBD), in various phase 2 trials treating spinal cord injury spasticity and post-traumatic stress disorder.

Takeaways for investors

Although GW Pharmaceuticals still has a way to go before breaking even, it has over $500 million in cash on its balance sheet to offset such losses. The company also has no long-term debt.

With a market cap of $44.8 billion and an annual revenue run rate of $480 million, GW Pharmaceuticals' price-to-sales valuation stands at more than 90, which may be prohibitively expensive for some investors. However, it is important to keep in mind that its revenue tripled in the first quarter of 2020 despite the COVID-19 pandemic. For cannabis investors who are not afraid of buying high and selling even higher, I think there is still much room for the stock to rally in light of the good chance for several upcoming label expansions for Epidiolex.

Zhiyuan Sun has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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