GWPH Stock Forecast: FDA Can Change the Fate for GW Pharma—and Marijuana Stocks?

gwph stock forecast 2018
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GWPH Stock Forecast

GW Pharmaceuticals PLC (NASDAQ:GWPH) got a dose of exactly the right kind of medicine when its “Epidiolex” drug received a positive internal briefing note from the U.S. Food and Drug Administration (FDA). Epidiolex is one of the company’s biggest plays and really the only one in its repertoire with a connection to marijuana (the drug uses cannabidiol or CBD). While the document definitely helped boost the company’s value in the near-term, what does it say for the GWPH predictions for 2018?

When I wrote about GWPH stock not too long ago, I explained why this type of development is exactly what the company needed.

After the less-than-stellar results of a Phase 2a test of cannabidivarin (CBDV), the company’s stock was in a weak position for much of 2018. CBDV is a cannabis-based molecule that GW Pharmaceuticals is currently evaluating for the treatment of people with focal seizures.

The CBDV test failure in Phase 2a showed little difference between the effects of the placebo given to the control group and the actual drug given to other participants in the experiment. (Source: “GW Pharmaceuticals Announces Preliminary Results of Phase 2a Study for its Pipeline Compound GWP42006,” GW Pharmaceuticals, February 21, 2018.)

What followed was a 10% decline in the GWPH stock value in a single day.

“Whilst the results of this adult focal seizure study for GWP42006 are disappointing, we remain committed to advancing this pipeline compound to address unmet needs in the field of autism spectrum disorders, in which a promising body of pre-clinical data has already been generated, as well as continuing to explore the product’s potential within the field of epilepsy,” said GW CEO Justin Gover. (Source: Ibid.)

Chart courtesy of StockCharts.com

Gover then pivoted toward the most promising drug in development for the company, Epidiolex.

“The company’s top priority in 2018 remains Epidiolex, for which we have generated compelling positive data in three Phase 3 trials, and which is currently under regulatory review in the U.S. and Europe,” he continued.

“We are very excited at the prospect of launching this potential breakthrough treatment later this year in the U.S., whilst continuing to progress our broad and innovative cannabinoid pipeline.” (Source: Ibid.)

While the drug still has a ways to go before being approved, this internal document coming out of the FDA is a positive first step.

Epidiolex FDA Approval

While the drug’s approval is still not a sure thing, the FDA staff review that came out is a huge move in the right direction and a definite boon to the GWPH stock forecast.

The upswing in GWPH stock has seen the company make gains of about eight percent over the past few days, and bring it into the black for 2018, showing a very modest hop of one percent since the beginning of the year.

Still, considering so many companies in the marijuana industry are still down year-to-date, investors will take that one percent.

“Although the review is still ongoing,” the document from the FDA read, “the risk-benefit profile established by the data in the application appears to support approval of cannabidiol for the treatment of seizures associated with [Lennox-Gastaut syndrome] and [Dravet syndrome].” (Source: “GW Pharma shares surge on FDA briefing document that hints at approval of cannabis-derived drug,” MarketWatch, April 17, 2018.)

The drug is currently undergoing review by a panel at the FDA, but with such a positive first showing, there’s a solid chance that Epidiolex will be approved. This, as I mentioned in my earlier article, is the best-case scenario for the GWPH stock forecast in 2018; a speedy approval of its flagship drug.

But what does the drug’s approval mean for U.S. laws regarding cannabis? Remember that federal law still prohibits marijuana and classifies it as a Schedule I drug, alongside far more damaging drugs like heroin.

Should Epidiolex receive an FDA approval date, would that change anything legally for cannabis-based drugs in the U.S.?

Yes and no.

The reason that the FDA is more likely to approve Epidiolex despite the current federal laws on marijuana has to do with the drug’s composition.

The main ingredient that was extracted from cannabis was CBD oil and not THC. THC is the substance associated with the euphoric effect of marijuana. CBD oil, therefore, is considered less prone to abuse.

This opens the door for marijuana pharmaceutical stocks to begin using more CBD oil in medicines. Not only would this benefit the medical industry (there is a lot of literature on the restorative effects of CBD oil) but it will also potentially lead to bigger plays in the marijuana pharmaceutical market. After all, companies will be less afraid to pursue CBD oil-based drugs should Epidiolex FDA approval proceed without a hitch.

And CDB oil could be big business moving forward.

A market analysis reported by Forbes projects a market increase of 700% by 2020Another study on CBD market growth, by Hemp Business Journal, estimates that the sector will reach $2.1 billion by 2020, which would be an enormous rise from the $202.0 million in 2016. (Source: “Pot Stocks Gearing Up for Strong 2018 as Cannabis CBD Frenzy Intensifies,” Cision, December 12, 2017.)

Those numbers will only go up if pharmaceutical companies begin making drugs more liberally using CBD oil.

Analyst Take

So where does that leave our GWPH stock forecast for 2018?

The next big step for GWPH stock is gaining FDA approval (naturally). Should that come to pass, we’re looking at a far stronger stock than when I last wrote about it.

With the way things are going, I’d definitely say that the picture is rosier than before, with an opportunity for a strong marijuana pharmaceutical stock play here.

I generally advise against marijuana pharmaceutical stocks if only because they often carry with them increased risk for smaller rewards. The approval process is long and often fraught, making them harder to justify compared to companies that have a far more straightforward path to gains.

But GWPH stock bulls definitely have reasons to be excited going forward.