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GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) Remains A Strong 2017 Buy

GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) Remains A Strong 2017 Buy
Written by
Chris Sandburg
Published on
May 10, 2017
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We've covered GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) twice during the last eight months. The first was back in October, when the company was trading at $117 a share. The second was at the end of February, at which point GW Pharmaceuticals went for $129 a share. On both occasions, we concluded with the suggestion that the then current prices were under representative of the company's inherent (and likely forward) value, and that – as a result – said prices were attractive entry points. We are now closing in on mid-May, and GW Pharmaceuticals closed out the last session at $109.13 a share. That's a 7% and a 15% discount to the October and February prices at which we highlighted the company respectively.When this sort of thing happens, it's natural to ask, what's next? Is the bull thesis still valid, or should we pack up and move on?Our answer very much favors the former.GW Pharmaceuticals just put out its latest financials (first quarter 2017) and markets have sold off a little bit on the company yet again. The selloff (as far as we can tell) comes on the back of a slightly wider than expected net loss and some not particularly impressive topline figures. Here's what we think about that, however: it just doesn't matter.The real value driver with this company, at least for the next 36 months, is its lead development asset – Epidiolex. The drug is under investigation as a potential therapy for some pretty rare types of epilepsy, specifically, Dravet's syndrome and Lennox-Gastaut syndrome, and GW Pharmaceuticals expects to submit an NDA for both indications at some point during mid-2017. Before we get into the potential impact of these submissions on the company's market capitalization, let's quickly look at the conditions themselves.Dravet's is a rare genetic epileptic dysfunction of the brain that begins in the first year of life in an otherwise healthy infant. It's characterized by violent and unpredictable, and often frequent, seizures, and there's essentially no cure (or really, any decent treatment) available on the market right now. These are children who suffer from a debilitating condition, and parents tasked with looking after said children in the absence of anything that can ease the affliction of the symptoms. Those treatments that do exist, generally only work for a short period of time, and are ineffective in a large portion of the patient population.LGS is not dissimilar. It's also a form of severe epilepsy that begins in childhood. Just as with Dravet's, it is characterized by multiple types of seizures and (and this one relates more to LGS than Dravet's) intellectual disability. Kids with Lennox-Gastaut syndrome begin having frequent seizures in early childhood, and again, there's very little a parent or a physician can do outside of standard of care epilepsy treatments which, again, just don't work very well.GW Pharmaceuticals has developed Epidiolex as a cannabis-based therapy, designed not to be particularly psychoactive and has proven that it can reduce the severity and frequency of seizures in both target indications dramatically while maintaining a relatively clean safety profile. In the phase 3 studies that support this statement, and an interest of balance, the drug did translate to a higher rate of adverse events when compared to placebo (and the same trend was seen against a higher and lower dose) but in a toss up between some mild side effects and the symptoms of the condition, there's no decision to be made.So, as mentioned, the drug will go in front of the FDA for both of these target populations within a few months at most. That paints the potential for an early 2018 approval (both are Orphan indications) and – on the back of a rare pediatric designation which the company will find out if it has received on NDA submission – could result in a priority review voucher for the next asset or target indication in its pipeline.If the agency green lights this drug, it's going to be a game changer for both the target population and the company and the shareholders.This has been something of a darling of the cannabis base for the last half decade, and not without good reason. At last count, there was more than $300 million cash on hand; plenty to carry through to commercialization (and execute on a sales strategy that is already well underway), meaning we should start to see revenues flowing in before dilution becomes necessary; if it does at all.We will be updating our subscribers as soon as we know more. For the latest updates on GWPH, sign up below!Disclosure: We have no position in GWPH and have not been compensated for this article.

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