With Epidiolex Awaiting FDA and EMA, GW Pharma Focuses on Pipeline

After the close, GW Pharma (NASDAQ: GWPH) issued two press releases and hosted a conference call to review its FY18-Q1 ending 12/31/17. The company reported that the European Medicines Agency (EMA) had accepted its Epidiolex Marketing Authorization Application (MAA) for review following submission in December. It expects to learn the outcome in the first quarter of 2019, which will follow the hopeful approval by the FDA by mid-2018.

FY18-Q1 Financials

As planned, GW Pharma reported its financial results and operational progress, which showed a big jump in revenue as well as the operating loss. The company reports its financials in British pounds but translates them to U.S. dollars as well (at a rate of $1.3482 to £1).

  • Sales of £5.732 million ($7.728 million) grew 179% from the same quarter in FY17
  • Operating loss of £45.37 million ($61.167 million) rose 146%
  • Cash used to fund operations rose from £23.99 million to £39.544 million ($53.313 million)
  • Cash balance of £414.8 million ($559.2 million), up from £241.2 million at 9/30 due to the sale of shares during the quarter

In addition to the press release, the company issued a 6-K filing with the SEC that provided greater detail about its financials. The jump in revenue was due to one-time factors related to its partner, Otsuka Pharma, and the company mutually terminating a research and collaboration agreement for the continued development of Sativex. Product sales, which are exclusively Sativex, grew 13.8%, with the vast majority of the revenue growth due to the Otsuka Pharma termination, which is non-recurring.

Growth in operating expenses was driven primarily by substantially higher SG&A ahead of Epidiolex commercialization as well as a large swing in net foreign exchange gains and losses, with a £14.4 swing due to a small loss in this quarter compared to a big gain in the same quarter a year ago.

Pipeline Update

The company’s conference call focused on the commercialization of Epidiolex as well as other drugs under development, which the company believes could generate initial revenue in September, which accounts for a decision by the FDA by the June 27th PDUFA date and an allowance for the DEA to use the full 90 days to reschedule Epidiolex. A transcript of the call is available from Seeking Alpha.

With full control over Sativex now, the company plans to to commence a U.S. pivotal trial for MS spasticity. Previously the GW Pharma and Otsuka Pharma had tried to prove the efficacy of the drug for advanced cancer pain.

GW Pharma sees promise in the cannabinoid Cannabidivarin (CBDV) and expects to report data from a Phase 2 partial epilepsy study in 162 adults this quarter.  It also plans several studies in the area of autism spectrum disorders (ASD), including an 100-patient placebo-controlled trial in Q2 and an open label study in Rett syndrome in Q2. The company also expects to start a Phase 2 placebo-controlled trial for Rett syndrome in Q3.

The company continues to study Epidiolex for other indications beyond Lennox Gastault (LGS) and Dravet syndrome, including tuberous sclerosis (Phase 3 results expected in Q4) and infantile spasms. It also continues to study data from a  Phase 2 trial using CBD and THC to treat recurrent glioblastoma (brain cancer).

While some investors may be concerned about the operating loss or pleasantly surprised by the jump in revenue, the real story remains Epidiolex, which faces a FDA decision in June, with European regulators deciding in early 2019. With a lot of the heavy lifting now done, the company continues to prepare for its commercialization, having now hired a head of Sales and begun the process of hiring 70 sales reps. Additionally, GW Pharma is focusing its attention on CBDV and has a renewed interest in Sativex for treating MS spasticity.

Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online community 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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