Some call GW Pharmaceuticals (NASDAQ:GWPH) a cannabis company. Others, like GW Pharma CEO Justin Gover, believe it is a biotech company. Regardless of the industry in which the company operates, the important thing is that investors understand GW stock is an excellent long-term investment.
A Long Runway of Growth
Currently, GW has one cannabis-derived drug, Epidiolex, that’s available in the U.S. Another, Sativex, is in development, and there are several others in the pipeline that should make their way into the marketplace over the next several years.
In the second quarter, Epidiolex generated net sales of $68.4 million, 204% higher than the drug’s sales in the first quarter. Overall, GW’s Q2 revenues were $72.0 million, 2,080% higher than a year earlier.
GW began selling its cannabis-derived products in the U.S. in November 2018, and sales of its drugs in the largest European nations, France, Germany, and the U.K., are expected to begin later in 2019.
Investment bank Evercore ISI predicts that U.S. peak sales of Epidiolex could be as high as $1.3 billion.
Derived from a substance in cannabis called cannabidiol (CBD), Epidiolex is used to treat Dravet syndrome and Lennox-Gastaut syndrome, both of which are forms of childhood epilepsy. The fact that Epidiolex is the first FDA-approved medicine derived from cannabis has convinced many that GW is a marijuana stock.
GW Isn’t Profitable
Like many early-stage biotech companies, GW’s expenses are high and its revenues are low. But the fact that it’s generating meaningful revenue is certainly positive for GW stock.
In the first six months of 2019, GW had an operating loss of $80.7 million, 46% lower than in the same period a year earlier. Once Epidiolex becomes available in Europe, GW’s operating loss should drop much further.
“In Europe, we are pleased to have recently received the positive opinion from (regulators) which clears the way for an expected approval in October,” GW’s CEO, Gover, was quoted as saying in an Aug. 6 press release. “Our European commercial organization is in place and will be ready to launch in the first European markets upon approval,” he added.
JPMorgan analyst Cory Kasimov raised his price target on GW stock by $18 in late August to $232. versus the $141 price at which GW stock closed on Friday.
“A continued strong U.S. launch (of Epidiolex) and EU approval in October.” along with the likely use of the drug to start treating Tuberous Sclerosis Complex in 2020, should enable GW stock to climb further, Kasimov stated in a note to clients.
Tuberous Sclerosis Complex is a genetic disorder that results in noncancerous tumors spreading throughout the body. One of the side effects of the complex is epilepsy, which Epidiolex is intended to treat.
The company estimates that as many as 80,000 Americans and as many as 2 million people worldwide are affected by TSC.
The Bottom Line on GW Stock
Another InvestorPlace columnist, Josh Enomoto, wrote something about GW stock in April that highlights the company’s potential.
“In many ways, GWPH stock is the Amazon (NASDAQ:AMZN) of healthcare: their core ingredient, cannabis, is dirt cheap. Therefore, the underlying company has the ability to disrupt the drug-making industry like no one’s business,” Josh stated in an article published on April 30.
As I see it, GW Pharmaceuticals is the best cannabis stock that isn’t actually a cannabis stock.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
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