Why GWPH Stock Is in a Downtrend
With all the hype surrounding recreational marijuana legalization around the world, one aspect of the industry that tends to get left by the wayside is medical marijuana. While there are a great many companies making good money off of the medical side of pot—and attracting big investment dollars—they simply fail to catch the headlines the way recreational marijuana does.
GW Pharmaceuticals PLC (NASDAQ:GWPH)—the biggest cannabis-focused biotech company in the world—on the other hand, rarely fails to catch headlines due to its size and prominence in the industry. With that said, however, the most recent news regarding GW Pharmaceuticals stock has not been positive.
The GWPH stock price has been in retreat of late, following the company’s recent press release detailing the less-than-stellar results of a Phase 2a test of cannabidivarin (CBDV). CBDV is a cannabis-based molecule that the company is currently evaluating for treatment of people with focal seizures. The price of the poor showing was a steep decline in the GW Pharmaceuticals stock value, with a roughly 10% decline in a single day last week. (Source: “GW Pharmaceuticals Announces Preliminary Results of Phase 2a Study for its Pipeline Compound GWP42006,” GW Pharmaceuticals, February 20, 2018.)
The CBDV test failure in Phase 2a found that there was little difference between the effects of the placebo given to the control group in the experiment and the drug itself during the trial conducted in Eastern Europe.
The company is now pivoting to apply CBDV toward autism treatment, something its R&D team had been working on.
Chart courtesy of StockCharts.com
“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 Justin Gover, GW chief executive officer, said in a statement. (Source: “GW Pharmaceuticals Announces Preliminary Results of Phase 2a Study for its Pipeline Compound GWP42006,” GW Pharmaceuticals, February 21, 2018.)
In an attempt to mitigate some of the damage done to GW Pharmaceuticals stock as a result of the poor Phase 2a showing, the company also tried to shift focus onto its prominent drug, “Epidiolex,” a cannabis-based drug used in epilepsy treatment.
“The company’s top priority in 2018 remains Epidiolex,” the statement continued, “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. 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.”
Even before the GWPH stock price plummeted due to the CBDV test failure, the company has had a tough 2018. Even before the dramatic fall last week, GW Pharmaceuticals stock had already lost about five percent through January and February.
Right now, the company sits at about 15% down since the beginning of the year.
Part of this has to do with the industry as a whole dropping in February. And then, of course, the GWPH stock price took a hit following the Phase 2a failure.
But as I said at the outset of this piece, one of the challenges facing the best medical marijuana stocks in 2018 is that they have to fight to remain relevant when all the excitement, hype, and attention—and the accompanying investment dollars drawn in as a consequence—is going to recreational marijuana.
That doesn’t mean there isn’t enough room in the industry for both. Medical marijuana is expanding across the globe, with European countries not only opening up their laws to the drug, but marijuana stocks in North America playing an increasingly prominent role in the continent’s marijuana market. Not to mention that the U.S. is legalizing pot on a rolling state-by-state basis.
But for GW Pharmaceuticals stock, the timing simply couldn’t be much worse. With so much attention being drained due to recreational pot, the best medical marijuana stocks in 2018 have to make sure that what attention they do receive is positive. This is easier said than done.
But the news regarding the drug failure is going to set the GWPH stock price back for a while, in my view, barring any sort of corrective, positive news coming out of GW Pharmaceuticals.
The stock did have a rebound on Monday, gaining four percent by early afternoon trading. But I don’t think that will stick for too long. Rather, I see GW Pharmaceuticals stock to be static for the next little while.
The pharmaceutical industry lives and dies by test results. Positive news surrounding a drug trial can be fantastic for a company, while negative results can deal devastating blows to stock values. That principle is no different in the marijuana market.
The GWPH stock price is down and I believe will continue to be down for several weeks, barring any new revelations coming out of the company—positive or negative.
GW Pharmaceuticals stock will need something to help it bounce back in value, which its drug Epidiolex may be able to provide if future trial results meet expectations.
Otherwise, investors are right now more focused on recreational marijuana stocks, as well as pot stocks that are looking to expand internationally.
This interest is reflected in the success of those stocks in 2018 even with a crummy February, whereas the GWPH stock price has faltered.