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Will Epidolex Drive GW Pharmaceuticals' (GWPH) Q2 Earnings?

Zacks Equity Research
·4 min read

GW Pharmaceuticals plc GWPH is slated to release second-quarter 2020 results on Aug 6.

In the last-reported quarter, the company delivered a negative earnings surprise of 72.7%. The company reported better-than-expected earnings in three of the trailing four quarters and missed in one. The average four-quarter surprise is 30.24%.

Let's discuss the factors that are likely to have influenced the company's performance in the second quarter.

Key Catalysts

Amid the pandemic situation, GW Pharmaceuticals, which controls its own manufacture and supply chain, is expected to have faced minimum supply related disruption unlike others. In fact, the company earlier noted that, it has not only ensured manufacturing continuity but this sole reliance has allowed the company to increase Epidiolex production in the recent months. Further, in this period, the company noticed growing Epidiolex brand awareness among both patients and physicians. All these should get reflected in the company’s second-quarter results.

GW Pharmaceuticals PLC Price and EPS Surprise

GW Pharmaceuticals PLC Price and EPS Surprise
GW Pharmaceuticals PLC Price and EPS Surprise

GW Pharmaceuticals PLC price-eps-surprise | GW Pharmaceuticals PLC Quote

Meanwhile, in April, as a major breakthrough for GW Pharmaceuticals, Epidolex was descheduled in the United States. In other words, the Drug Enforcement Administration (DEA) established that EPIDIOLEX, the only CBD medicine approved by FDA, is no longer a controlled substance under the federal Controlled Substances Act. This non-controlled status is expected to have eased patient access to Epidolex for patients living with Lennox-Gastaut Syndrome and Dravet syndrome, two of the most debilitating forms of epilepsy. This is expected to havesimplified the company’s supply chain further, enhancing the company’s ability to ensure U.S. patient supply continuity. This is likely to have aided second-quarter Epidolex sales.

Over the past three quarters, GW Pharmaceuticals has been witnessing rise in demand and market acceptance for Epidiolex in the United States, as a growing number of physicians have been recommending the drug in their prescriptions. This high level of market penetration is likely to have aided the company’s performance in the second quarter as well.

Notably, Epidiolex, the first cannabis-derived drug for patients with Lennox-Gastaut syndrome (LGS) and Dravet syndrome, has been fast capturing the market in the United States.

Internationally,in the U.K., toward the end of 2019, the company received endorsement from NICE, and central funding for Epidiolex from the NHS in England was introduced in January 2020. In Germany, where Epidiolex enjoys orphan medicine status within the pricing and reimbursement process, recently, the company received a positive GBA benefit rating. The company is currently enjoying early success in its second wave of European countries as it has been granted early temporary reimbursement in Sweden. All these developments are anticipated to have aided the company’s second-quarter international revenues.

In February 2020, the company regained exclusive commercialization rights for its other popular drug Sativex or nabiximols (delta-9-tetrahydrocannabinol [THC] and cannabidiol [CBD]) in the United Kingdom from life science company Bayer. Sativex is indicated for the treatment of spasticity due to multiple sclerosis. Its quarterly performance is likely to have benefited from this development.

Q2 Estimates

The Zacks Consensus Estimate for total revenues of $118.6 million suggests significant growth of 64.7% from the year-ago quarter. The consensus mark for the bottom line is pegged at a loss of 58 cents, which indicates 122.8% decline from the year-earlier period.

What Our Quantitative Model Predicts

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver an earnings beat. This is the case here as you will see below.

Earnings ESP: GW Pharmaceuticals has an Earnings ESP of +17.38%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: GW Pharmaceuticals currently carries a Zacks Rank #3.

Other Stocks Worth a Look

Here are a few medical stocks worth considering, as these also have the right combination of elements to post an earnings beat this time around.

Integra LifeSciences Holdings Corporation IART has an Earnings ESP of +20.69% and a Zacks Rank #2.

Exact Sciences Corporation EXAS has an Earnings ESP of +6.69% and a Zacks Rank #2.

IDEXX Laboratories, Inc. IDXX has an Earnings ESP of +18.14% and a Zacks Rank #2.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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Integra LifeSciences Holdings Corporation (IART) : Free Stock Analysis Report
IDEXX Laboratories, Inc. (IDXX) : Free Stock Analysis Report
Exact Sciences Corporation (EXAS) : Free Stock Analysis Report
GW Pharmaceuticals PLC (GWPH) : Free Stock Analysis Report
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