Its been a rough patch holding GW Pharmaceuticals (GWPH), or any biotech company for the last 7 months. Back in July 2015, the iShares NASDAQ Biotechnology Index (IBB), an ETF that holds a basket of all publicly traded biotech companies in the NASDAQ reached a high of $400 and is now sitting at $255; over a 7 month stretch the IBB has declined 36.25%. While the IBB has dropped considerably, investors were even more skittish of small cap biotech stocks. Even with GWPH’s most promising drug in phase 3, investors decided to flee unprofitable biotech stocks by the boatload. This has put added pressure on not just GWPH but any junior biotech that doesn’t have positive earnings, resulting in an outstanding buying opportunity for patient investors with long time horizons.
While the last 7 months have been painful for shareholders of GWPH, there are some catalysts that could propel the stock higher in the near term. The company is expected to release the 1st of 4 clinical trial data on their potential blockbuster drug, Epidiolex. Epidiolex is a liquid formulation of pure plant-derived Cannabidiol (CBD) and is being used to treat patients with epilepsy (Dravet syndrome & Lennox-Gestaut syndrome). The company plans on announcing the results from the 2nd & 3rd clinical trials in Q2 and the 4th and final clinical trial data in the second half of the year with the hopes of filing a New Drug Application (NDA) sometime in Q4 of this year.
With the announcement of the 1st of the phase 3 trials on the way, there are reasons to be optimistic that the results should be positive. In December of 2015, a physician-led study of Epidiolex was published in The Lancet Neurology journal showing favorable signs for the safety and effectiveness of Epidiolex. Many of the patients enrolled into the study had minimal or no benefit from the existing medications on the market that treat epilepsy. The results from the 162 patient study showed:
– 47% of patients experienced a 50%+ reduction in seizures after 12 weeks of treatment
– The medium reduction of seizures for the study was 45%
While all eyes will be on GWPH’s Epidiolex data, GWPH has many other drugs in the pipeline that have shown encouraging results thus far. Back in September of 2015, GWPH released Phase 2a clinical trial data on their schizophrenia drug on 88 patients who failed to respond to the 1st line of anti-psychotic treatments. The study was a proof of concept trial, but it did show a statistically significant improvement in comparison to the placebo.
GWPH has more drugs in the pipeline that are targeting Type 2 Diabetes, Neonatal Hypoxic Ischemic Encephalopathy (NHIE), and Giloma. While those drugs are in early trial phases, there has been supporting literature to support the effectiveness of cannabis for those symptoms and a host of others.
In addition to the large pipeline of drugs GWPH is developing, their patent portfolio (http://www.faqs.org/patents/assignee/gw-pharma-limited/) is extensive and holds many significant patents that can be very valuable in the future. GWPH is the only cannabis drug company that has a pipeline of solely cannabis-derived medicines. With that being said, GWPH has been granted many patents on a plant that for many centuries has been known to have therapeutic benefits to patients for a host of ailments. With many large drug manufacturers unable to conduct studies on cannabis due to it being a Schedule I drug, GWPH is able to acquire numerous patents without the fear of extensive competition. With the medicinal benefits of cannabis backed by renowned scientist around the world, it is only a matter of time before GWPH has a monopoly on the medical cannabis market. With this moat that GWPH is building, it will be only a matter of time before large pharmaceutical companies look to acquire GWPH because of their 1st mover advantage in the space and because of their extensive pipeline and patent portfolio.
Phyto Partners remains bullish on GWPH and expects the upcoming Phase 3 Epidiolex results to act as a strong catalyst. Phyto Partners will continue to monitor and update readers of the upcoming data that will be released shortly.
