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The cannabis sector has been under pressure as the result of several factors.
From an overextended industry wide rally to highly questionable cabinet nominations by president elect Donald Trump, concerns among cannabis investors have increased despite favorable state-wide election results.
Although we think that some of this weakness is overdone, we expect this trend continue in the near-term as market sentiment for cannabis stocks is weaker on average.
The recent pullback has been associated with weaker-than-average trading volume and we are monitoring this trend on an industry-wide and on a company-by-company basis. The lighter trading volume has had a significant effect on cannabis stocks as the average stock spread has expanded (difference between a stock’s buy and sell price) and we continue to monitor this trend closely.
From biotech firms to licensed medical cannabis producers, publicly traded North American cannabis companies have moved significantly lower over the last few weeks and we want to highlight some of these opportunities.
GW Reports Less Robust Epidiolex Data in Dravets When Compared to LGS
Last week, the Nasdaq-traded biotech firm GW Pharmaceuticals (GWPH) reported its fourth quarter earnings and announced additional positive Epidiolex Phase 3 data in poster presentations at the 70thAnnual Meeting of the American Epilepsy Society. The studies were the first randomized, double-blind, placebo-controlled investigation of the efficacy and safety of CBD in Dravet syndrome and Lennox Gastaut Syndrome (LGS).
Although GW reported slightly less than robust Phase 3 Clinical data from its Epidiolex study in Dravet Syndrome when compared to Lennox Gastaut Syndrome, we remain confident that since the trial met its primary endpoint and hit multiple other secondary endpoints that is likely to be supportive of its approval in the United States and Europe.
CEO Justin Gover said, “In 2016 GW has completed three positive Phase 3 trials for Epidiolex in patients with two different rare treatment resistant forms of childhood-onset epilepsy and we are making good progress towards an NDA submission. Our sights are now focused on Epidiolex approval and accelerating our preparations for a highly successful launch. Our goal is to provide the children and their families suffering from these highly treatment-resistant forms of childhood-onset epilepsy with a much needed new prescription option as quickly as possible.”
Zynerba Rallies More Than 10% on Positive Data and Higher Price Target
One of the top performers last week was Zynerba Pharmaceuticals (ZYNE), which is trading above the $15 level after a more than 10% rally last week. This rally was supported by improved Wall Street coverage after Jefferies raised its price target on ZYNE to $32, which provides more than 100% upside to current levels.
We continue to remain favorable on Zynerba and we see further upside to current levels on account of the company’s pipeline of products in various stages of FDA clinical and pre-clinical trials that should create catalysts for quarters to come.
Insys Plunges More than 15% After Six Former Executives Were Arrested
On Thursday, six former executives and managers at Insys Therapeutics (INSY) were arrested and charged with conspiring to defraud health insurers and bribe doctors in exchange for prescribing the company’s fentanyl painkiller, Subsys. So far this year, eleven former Insys employees have been charged with breaking federal law.
Subsys, a rapid-acting and highly addictive opioid, is approved by the Food and Drug Administration to treat extreme cancer pain. Messrs. Babich, Burlakoff and Simon, however, targeted their sales efforts at doctors who prescribed fast-acting fentanyl for all types of pain, the indictment alleges.
Insys’ previous CEO Michael Babich was arrested and charged with conspiracy to commit racketeering, conspiracy to commit wire and mail fraud, and conspiracy to violate the anti-kickback law.
Before resigning in late 2015, Babich played a key role in the company’s early success. Regulatory filings indicate that Babich sold more than $30 million worth of INSY stock as CEO and was paid more than $10 million in accelerated stock options and cash as part of his severance package.
Also charged were Alec Burlakoff, Insys’ former vice president of sales, Richard Simon, Insys’ former national sales director, Michael Gurry, Insys’ former vice president of managed markets, and Sunrise Lee and Joseph Rowan, former regional sales directors at Insys.
Important Investor Disclosures
Disclosure. Compensated Affiliate. This report was authored by and is property of StoneBridge Partners LLC. All information and data relied upon in drafting this report is publicly available. The author believes and considers its sources to be reliable, but does not guarantee the accuracy or completeness of any information contained in this report. Any and all information, data, analyses and opinions are provided for informational purposes only and is not intended, in any manner, as investment advice. Any projections or other information generated by StoneBridge Partners LLC regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. None of the material contained in this report is intended as a solution or offer to sell or purchase a specific stock or any other investment. This report is not directed to, or intended for distribution or use by, any person or entity that is a citizen, resident or located in any municipality, state, country or other jurisdiction where the distribution, publication, availability, or use of this report is contrary to any governing law or regulation. The securities discussed in this report may not be eligible for purchase and/or sale in certain jurisdictions or by particular individuals. It is important that you check any and all governing laws and/or regulations that may be applicable in your jurisdiction. Investing in securities of issuers organized outside of the United States, including ADRs, entail certain risks. The securities of non-United States issuers may not be registered with, nor be subject to the reporting requirements of the United States Securities and Exchange Commission. Please contact a Financial Advisor for professional advice regarding any and all securities investments. This report is intended for informational purposes only. StoneBridge Partners LLC’s officers, directors, employees, affiliates, or subsidiaries may have positions in securities covered by StoneBridge Partners LLC. StoneBridge Partners LLC receives compensation from the company and/or has a position in the securities mentioned in this report
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