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When Will Big Pharma Come Knocking On GW Pharmaceuticals Door?

Nov 6, 2020 • 7:16 AM EST
2 MIN READ  •  By Michael Berger
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This week, GW Pharmaceuticals plc (GWPH) announced blowout third quarter earnings results and reported revenues that came in well above Wall Street’s expectations.

The market responded favorably to the numbers and the shares jumped more than 20% higher on the day of the announcement. We want to highlight GW’s quarterly performance so our readers can better understand where the business is today:

  • During the quarter, GW recorded a $12.2 million net loss on $137.1 million of revenue.
  • Epidiolex accounted for $132.6 million of revenue. This number beat Wall Street’s forecast (FactSet consensus for $127.4 million) and is substantially higher than the $91 million that was reported in the same period last year
  • The company reported a smaller net loss than expected
  • GW is well capitalized and has $480 million of cash as of September 30th
  • The company is advancing several clinical-stage pipeline candidates

Concurrent with the quarterly earnings report, GW reported to have initiated the first US Phase 3 clinical trial on nabiximols for multiple sclerosis (MS)-associated spasticity. Outside of the US, Nabiximols is known as Sativex and has been approved to treat MS spasticity in over 25 countries.

This represented an important development for GW and we will monitor how the team is able to execute on the clinical trial. The company has been selling Sativex in the European Union (EU) and other regions for more than 10 years and it was one of the first cannabis-based pharmaceutical products to hit the market.

GW reported positive results from three previously completed European Phase 3 clinical studies that show that nabiximols was well-tolerated. The treatment also showed continued reductions in patient-reported spasticity for individuals with MS and we are favorable on the amount of data that is associated with the product.

This Phase 3 trial is one of five studies that are planned for studying nabiximols in MS spasticity. The remaining studies are on track to commence either later this year or in 2021 and we will be monitoring this aspect of the story on a going forward basis. GW expects that a positive result in any one of these five studies will enable a new drug application (NDA) submission in 2021.

Although the biotech cannabis company posted a narrower-than-expected third-quarter loss and a revenue beat, several broker-dealers lowered their price targets on GW and this trend surprised us. The changes included the following:

  1. Cowen and Company lowered its price target to $175 from $180
  2. ATB Capital lowered its price target to $170 from $190
  3. Guggenheim lowered its price target to $126 from $155

Although these banks lowered their price targets on GW, the newly issued price targets is well above the current price per share. Going forward, we believe that GW has attractive growth prospects and expect the launching of new products to prove to be a catalyst over the long-term.

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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