For Immediate Release
Chicago, IL – February 22, 2019 – Zacks Equity Research GW Pharmaceuticals GWPH as the Bull of the Day, Hasbro HAS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Salesforce CRM, American Express AXP and Intuit INTU.
Here is a synopsis of all six stocks:
Bull of the Day:
GW Pharmaceuticalsjust delivered initial-launch sales numbers for the first FDA-approved cannabis-derived drug, Epidiolex, which was created and tested starting four years ago for the treatment of two rare forms of epilepsy.
The company surprised investors and analysts with the launch which achieved $4.7 million in Epidiolex sales just for November and December, far surpassing the consensus of $2.5 million. Other key metrics in the press release on February 26...
· First plant-derived cannabinoid pharmaceutical ever approved by FDA and first ever approved medicine in the U.S. for Dravet syndrome
· Approximately 4,500 new patient enrollment forms in first two month selling period
· Over 500 physicians have generated dispensed prescriptions in first two month selling period
· Demand coming from major centers of excellence and local epilepsy clinics
· Pharmacy distribution network expanded from initial 5 specialty pharmacies to over 130 distribution points
· Approximately 900 expanded access program and open label extension patients expected to migrate to commercial product by end of Q2 2019
According to Piper Jaffray analyst Danielle Brill, GW Pharmaceutical metrics indicate a "hugely successful" Epidiolex launch. The analyst noted that Epidiolex revenues of $4.7 million for the first quarter of commercial launch even beat her optimistic call for $3.7 million.
In her post-earnings research note titled "Epidiolex Metrics Signify a Hugely Successful Launch," Brill noted that Q4 was obviously a shortened quarter with the early November sales launch and including two holiday weeks. Refill rates were likely very low due to protracted initial turnaround times.
The analyst expects to see "significant" revenue growth in the coming quarters and she reiterated her Overweight rating on shares as the stock traded 14% higher on 3X the normal volume on Feb 27.
A Cannabis Drug Success 20 Years in the Making
GW Pharma was founded in the UK in 1998 by two physicians, Geoffrey Guy and Brian Whittle. Their mission right from the start was to research and develop cannabinoid medicines, with particular emphasis on ailments of the central nervous system (CNS).
In 2010 they achieved approval in the UK for the first cannabinoid treatment for Multiple Sclerosis. This long track record of success gave US regulators confidence in the science and R&D of GW.
When the FDA approved Epidiolex in June of 2018 for Dravet syndrome, they called it an "important scientific advance." And this paved the way for the US Drug Enforcement Agency (DEA) to move the drug to the safest level in the controlled substance classification system.
This is important because marijuana itself remains a Schedule I drug which means it is classified as having little medicinal value and could be dangerous and/or addictive.
Now, the first approved cannabinoid medicine is seeing sales estimates rise rapidly as other CNS health indications could be served by the GW pipeline. Some investment bank analysts see sales as high as $500 million for the company in 2020.
That would represent a 3300% revenue ramp in just 2 years from 2018's $15 million and means the GW pipeline could be poised for "blockbuster" status, or potentially worth at least $1 billion in sales.
The CBD Free-for-All
There are over 100 cannabinoid compounds in the marijuana plant that could be used for medicinal research. In a sense, GW Pharma could be seen as an important trail blazer with its successful approval and launch of Epidiolex.
In two investor presentations I did for Zacks followers before the GW earnings report, I emphasized this "trail blazer" role and also the significance of insurance companies as key partners in the patient-physician-payer alliance.
While there are over 20 FDA-approved epilepsy drugs on the market, even the ones for orphan conditions like Dravet and Lennox-Gastaut syndromes, the two that Epidiolex can treat, don't work for every family.
So for patients and physicians to have the flexibility from payers to try the new cannabinoid treatments is a tremendous opportunity for all, including GW.
The other larger issue I've raised is that these stakeholders don't want to look for medical solutions in the wild west of CBD products now available on the internet without a prescription. For young children with specific diseases, there is "no supplement" for the tested and regulated efficacy, safety, and quality of a doctor-prescribed dosage.
To wit, when Justin Gover, the CEO of GW Pharmaceuticals, was on CNBC's Mad Money after the company report he explained to host Jim Cramer that "Epidiolex is different from other CBD options."
"We do real science and produce medicines with safety and efficacy... Epidiolex is not marijuana, it is CBD approved by the FDA. We're only reporting two months of sales, so some caution is warranted... we're at the beginning of the journey with Epidiolex and looking at other uses for it."
After the report, i-bank Stifel Nicolaus raised their sales estimate for this year from $122 million to $136.5 million. And they raised their PT from $179 to $191.
I was telling long-term healthcare investors 2 weeks ago to consider nibbling on some shares under $150. I wish I had myself. This will be one to accumulate on pullbacks as the science and the sales have proven worthy of a blockbuster trajectory.
Bear of the Day:
Hasbrois a Zacks Rank #5 (Strong Sell) and in this Bear of the Day article we will take a look at why that is the case. The first thing I do when looking at a Bear is to review who they are and what they do.
Hasbro, Inc. is a global play and entertainment company committed to creating the World's Best Play Experiences. From toys and games to television, movies, digital gaming and consumer products, Hasbro offers a variety of ways for audiences to experience its iconic brands, including NERF, MY LITTLE PONY, TRANSFORMERS, PLAY-DOH, MONOPOLY, LITTLEST PET SHOP and MAGIC: THE GATHERING, as well as premier partner brands. Through Hasbro Studios and its film labels, Allspark Pictures and Allspark Animation, the Company is building its brands globally through great storytelling and content on all screens. Hasbro is committed to making the world a better place for children and their families through corporate social responsibility and philanthropy.
I see a poor earnings history with the company missing the Zacks Consensus Estimate in three of the last four reports. The most recent miss was a 20% negative earnings surprise and before that, there was a 13.8% negative earnings surprise.
This is the main reason a stock falls to the lowest Zacks Rank. I see the current quarter moving from a gain of 18 cents 30 days ago to a loss of two cents. That is a huge shift lower.
The 2019 number has also slid, from $5.14 to $4.49.
When estimates fall, the Zacks Rank tends to follow.
Salesforce (CRM) Looks Like a Buy Ahead of Earnings
Salesforce stock hit a new high in morning trading Friday. Now, with the software-as-a-service firm set to report its Q4 financial results after the closing bell Monday, let’s see why Salesforce stock looks like a strong buy heading into earnings.
Salesforce offers its business clients a wide range of cloud-based platforms to help them run sales, marketing, e-commerce, analytics, and much more. The San Francisco-based firm looks poised to grow for years to come because its customer relationship management offerings have become essential to many companies and would otherwise require a large amount of in-house talent, infrastructure, and maintenance. Salesforce’s clients include American Express, Intuit, the U.S. Department of Agriculture, and more than 150,000 other firms and agencies.
Marc Benioff’s company also has introduced new wrinkles to its Einstein artificial intelligence platform, such the ability to conversationally update tasks. And Salesforce completed a $6.5 billion acquisition of MuleSoft—which helps link disparate applications—last year.
Overall, Salesforce offers software and web-based services that allow companies to operate in today’s connected age, which is hardly cyclical or trendy. “Companies across every industry, in every geography have a mandate to digitally transform their businesses and are turning to Salesforce as a strategic partner,” co-CEO Keith Block said in prepared statements last quarter.
Salesforce’s Q4 fiscal 2019 revenues are projected to climb 24.9% to reach $3.56 billion, based on our current Zacks Consensus Estimate. This would fall just short of Q3’s 26% top-line surge, but beat the year-ago period’s 24% expansion. Meanwhile, CRM’s full-year revenues are projected to climb over 26% to hit $13.24 billion, which would top fiscal 2018’s 25% climb.
More specifically, our NFM estimate calls for the firm’s quarterly subscription and support revenue to climb over 25% from $2.66 billion in the year-ago quarter to touch $3.33 billion. CRM’s much smaller, professional services and other unit is expected to jump roughly 19.3% and hit $233.9 million.
At the bottom end of the income statement, Salesforce’s adjusted fourth-quarter EPS figure is projected to soar 60% to come in at $0.56 per share. In Q3, the company’s adjusted earnings of $0.61 a share beat our $0.50 EPS estimate that would have marked a 28% jump.
Salesforce’s adjusted full-year earnings are expected to skyrocket by over 93%. Plus, CRM’s fiscal 2019 earnings estimate has come up by $0.07 over the last 90 days. The company’s fiscal 2020 EPS picture has also turned more positive during this stretch.
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