Bull of the Day: GW Pharmaceuticals (GWPH)

Kevin Cook - finance.yahoo.com Posted 5 years ago
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Bull of the Day: GW Pharmaceuticals (GWPH)
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GW Pharmaceuticals (GWPH) just delivered initial-launch sales numbers for the first FDA-approved cannabis-derived drug, Epidiolex, which was created and tested starting four years ago for the treatment of two rare forms of epilepsy.

 

The company surprised investors and analysts with the launch which achieved $4.7 million in Epidiolex sales just for November and December, far surpassing the consensus of $2.5 million. Other key metrics in the press release on February 26...

 

  • First plant-derived cannabinoid pharmaceutical ever approved by FDA and first ever approved medicine in the U.S. for Dravet syndrome
  • Approximately 4,500 new patient enrollment forms in first two month selling period
  • Over 500 physicians have generated dispensed prescriptions in first two month selling period
  • Demand coming from major centers of excellence and local epilepsy clinics
  • Pharmacy distribution network expanded from initial 5 specialty pharmacies to over 130 distribution points
  • Approximately 900 expanded access program and open label extension patients expected to migrate to commercial product by end of Q2 2019

 

According to Piper Jaffray analyst Danielle Brill, GW Pharmaceutical metrics indicate a "hugely successful" Epidiolex launch. The analyst noted that Epidiolex revenues of $4.7 million for the first quarter of commercial launch even beat her optimistic call for $3.7 million.

 

In her post-earnings research note titled "Epidiolex Metrics Signify a Hugely Successful Launch," Brill noted that Q4 was obviously a shortened quarter with the early November sales launch and including two holiday weeks. Refill rates were likely very low due to protracted initial turnaround times.

 

The analyst expects to see "significant" revenue growth in the coming quarters and she reiterated her Overweight rating on shares as the stock traded 14% higher on 3X the normal volume on Feb 27.

 

A Cannabis Drug Success 20 Years in the Making

 

GW Pharma was founded in the UK in 1998 by two physicians, Geoffrey Guy and Brian Whittle. Their mission right from the start was to research and develop cannabinoid medicines, with particular emphasis on ailments of the central nervous system (CNS).

 

In 2010 they achieved approval in the UK for the first cannabinoid treatment for Multiple Sclerosis. This long track record of success gave US regulators confidence in the science and R&D of GW.

 

When the FDA approved Epidiolex in June of 2018 for Dravet syndrome, they called it an "important scientific advance." And this paved the way for the US Drug Enforcement Agency (DEA) to move the drug to the safest level in the controlled substance classification system.

 

This is important because marijuana itself remains a Schedule I drug which means it is classified as having little medicinal value and could be dangerous and/or addictive.

 

Now, the first approved cannabinoid medicine is seeing sales estimates rise rapidly as other CNS health indications could be served by the GW pipeline. Some investment bank analysts see sales as high as $500 million for the company in 2020.

 

That would represent a 3300% revenue ramp in just 2 years from 2018's $15 million and means the GW pipeline could be poised for "blockbuster" status, or potentially worth at least $1 billion in sales.

 

The CBD Free-for-All

 

There are over 100 cannabinoid compounds in the marijuana plant that could be used for medicinal research. In a sense, GW Pharma could be seen as an important trail blazer with its successful approval and launch of Epidiolex. 

 

In two investor presentations I did for Zacks followers before the GW earnings report, I emphasized this "trail blazer" role and also the significance of insurance companies as key partners in the patient-physician-payer alliance.

 

While there are over 20 FDA-approved epilepsy drugs on the market, even the ones for orphan conditions like Dravet and Lennox-Gastaut syndromes, the two that Epidiolex can treat, don't work for every family.

 

So for patients and physicians to have the flexibility from payers to try the new cannabinoid treatments is a tremendous opportunity for all, including GW.

 

The other larger issue I've raised is that these stakeholders don't want to look for medical solutions in the wild west of CBD products now available on the internet without a prescription. For young children with specific diseases, there is "no supplement" for the tested and regulated efficacy, safety, and quality of a doctor-prescribed dosage.

 

To wit, when Justin Gover, the CEO of GW Pharmaceuticals, was on CNBC's Mad Money after the company report he explained to host Jim Cramer that "Epidiolex is different from other CBD options."

 

"We do real science and produce medicines with safety and efficacy... Epidiolex is not marijuana, it is CBD approved by the FDA. We're only reporting two months of sales, so some caution is warranted... we're at the beginning of the journey with Epidiolex and looking at other uses for it."

Story continues

 

After the report, i-bank Stifel Nicolaus raised their sales estimate for this year from $122 million to $136.5 million. And they raised their PT from $179 to $191.

 

I was telling long-term healthcare investors 2 weeks ago to consider nibbling on some shares under $150. I wish I had myself. This will be one to accumulate on pullbacks as the science and the sales have proven worthy of a blockbuster trajectory.

 

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