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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