GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) Is A Cannabis Top Pick With A Solid Downside Limit

Marijuana stocks are topping the market movers lists this week, as the sector continues to advance ahead of the California ballot vote, and its implications for recreational (and medical) marijuana legalization and consumption in the US going forward. Pretty much any company with a tie to the sector has gained strength, but just as it happens every time the pot sector soars, we will no doubt see a number of the gainers come crashing down when the dust settles – Californian recreational legalization or not.There's still plenty of run room in the sector ahead of the ballot, and beyond, but we're on the lookout for companies that look set to register further gains, but have some degree of downside protection when the sector corrects.One company that meets our criteria is GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH).This one's a London company that – interestingly – just severed ties with its London exchange in favor of a NASDAQ listing. Prior to the last month or so, GW listed on both the London Stock Exchange's Alternative Investment Market (AIM) and the NASDAQ, by way of ADRs. With the shift, only the latter remains available. It's a cost cutting exercise, according to management, but read in to this what you will.Anyway, looking at operations, GW isn’t your everyday pot stock – it's an established biotechnology company with some very promising late stage assets. Lead is a cannabinoid therapy called Epidiolex, which the company is trying to get approved for the treatment of a couple of very rare forms of epilepsy in children – Dravet's and Lennox-Gastaut Syndrome.There are no current options for children with these conditions, other than what essentially amounts to a cocktail of ineffective pills. Severe seizures are a part of everyday life, and can be severely debilitating.Data to date in both has been great.Back in March, the company reported data for the Dravet's indication showing a 39% decline in seizure frequency (the primary endpoint of the study) in the pediatric patient population.In June, the company reported data from an Epidiolex trial in LGS that showed a reduction of 44% in seizure frequency. Again, this metric was the primary for the trial. Fast forward to September, and in a separate study (but in the same indication) the company showed a 42% drop.These aren’t early data – they are from phase III trials that are going to form the basis of registration when the company decided the time is right to submit.Which brings us to the crux of our thesis:With two NDA submissions (or one, combined for both indications, which is unlikely but possible) on the horizon, and great data supporting both, sentiment is going to provide a very strong floor to any potential correction. As the company gains strength, we see this floor rising with price.These are unmet needs under an Orphan framework, and GW has not only demonstrated that its drug can improve the symptoms associated with the condition, but that it can improve them dramatically. A close to halving of the seizure rate is massive – the FDA would probably count a stat-sig efficacy (or in other words, class the impact as a positive clinical benefit) if the drug only reduced seizures by 20%.NDA submission should come at some point late first quarter, or early second quarter 2017, and we expect some immediate upside on the agency's accepting of the submission. Beyond that we are looking to a PDUFA somewhere in the region of first quarter 2018 as the green light for a considerable upside revaluation.That, of course, is if the company doesn’t get bought out between now and then; but that’s a discussion for another day.Subscribe to our newsletter below and we will keep you updated with the progress of GWPH and other cannabis sector winners completely free!Disclosure: We have no position in GWPH and have not been compensated for this article.