Why Marijuana Stock GW Pharmaceuticals Dropped 10.5% in November
What happened
GW Pharmaceuticals (NASDAQ: GWPH) stock declined 10.5% in November, according to data from S&P Global Market Intelligence. It's flat so far in December, and is 6.8% in the red in 2018, through Tuesday, Dec. 11.
The British biopharmaceutical company develops prescription drugs derived from cannabinoids, chemical substances found in marijuana.
For some context, the S&P 500 index returned 2% last month, is down 4.4% so far this month, and has returned 0.5% so far this year, through Dec. 11.
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So what
We can probably attribute GW Pharmaceuticals stock's weak November performance more to the downturn in the cannabis sector, rather than to company-specific news. Most stocks in the sector declined last month, with many suffering double-digit losses, as outlined by fellow Fool.com contributor Sean Williams.
On Nov. 27, GW Pharmaceuticals reported its fiscal fourth-quarter and full-year 2018 results (for the period ended Sept. 30). Shares closed roughly flat -- down 0.2% to be exact -- on the following day, suggesting the market wasn't disappointed with the results. So it seems safe to assume that neither the quarter's results nor management's comments on the conference call with analysts contributed to the stock's tepid performance last month. And, in fact, shares actually gained more than 1% from when earnings were released until the end of the month.
For the quarter, GW Pharmaceuticals' revenue edged down 1.3% year over year to $2.4 million and its net loss widened to $79.9 million, or $0.23 per share, from $53.9 million, or $0.18 per share. The increased loss is due to the company's "continued investment in [its] commercial operations and pre-launch activities" for Epidiolex, CFO Scott Giacobello said on the earnings call. This drug, which was approved by the U.S. Food and Drug Administration in June to treat patients with two rare forms of epilepsy, came to market in the U.S. on Nov. 1. Notably, it's the first drug derived from the marijuana plant approved for use in this country.
Julian Gangolli, president of the company's North American business, said on the earnings call that the company wasn't providing any "specific launch metrics," given the drug had only been on the market for less than one month at that time.
Now what
GW stock's direction for the next couple years will likely highly depend upon how well Epidiolex is selling, so this is the key thing investors should focus on in fiscal 2019. Pipeline progress is also important.
Another factor to monitor is potential competition. As Sean Williams recently wrote, "there's potential competition looming from Zogenix" in treating patients with Dravet syndrome, which is one of the two forms of epilepsy that Epidiolex is approved to treat in the U.S.
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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
