Goldman Sachs Suggests Potential GW Pharma Acquisition Price of $349

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Goldman Sachs initiated coverage on GW Pharma (NASDAQ: GWPH) (AIM: GWP) on October 7th, with a “Buy” rating and a target of $189.  The target was based on blend of its $161 discounted cash flow valuation (85%) and its $349 target based on acquisition (15%).

In determining its projections, Goldman Sachs incorporated a significant amount of off-label sales for Epidiolex, the company’s cannabis-based treatment for rarer forms of epilepsy.  The company intends to file a New Drug Application (NDA) with the FDA in the first half of 2017, and Goldman Sachs expects the drug, if approved, could reach peak sales of $1.6 billion in 2025, with off-label pediatric sales amounting to over 50%. The $349 potential acquisition price is based upon the company being worth a multiple of 11 times the expected 2020 revenue estimate of the firm, a multiple that it believes is warranted after reviewing mergers and acquisitions in the biotech space over the past decade.

Following the pre-market release of the initiation report, GWPH traded to a new all-time high of 137.88 before closing down 1.45% on the day at 131.17. During the trading session, the company disclosed that CEO Justin Gover has established a trading plan under Rule 10b5-1 to exercise options and sell up to 31,068 shares between December and April 2017. GWPH has gained 88.9% in 2016 and 1373.8% since its May 2013 NASDAQ IPO:

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Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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