GW Pharmaceuticals Financial Results
The medical marijuana industry is sometimes overlooked now that recreational marijuana has entered the scene in a big way. GW Pharmaceuticals PLC (NASDAQ:GWPH) is proving why that is a mistake.
This stock is up big following the release of GW Pharmaceuticals’ financial results, and it has the ability to double in value within a year. Before we get to my GWPH stock prediction, however, let’s take a look at the numbers.
Cash and cash equivalents were at $591.5 million this quarter, compared to $354.9 million in the previous one. (Source: “GW Pharmaceuticals plc Reports Financial Results and Operational Progress for the Quarter Ended December 31, 2018,” GW Pharmaceuticals PLC, February 26, 2019.)
Revenue also jumped to $6.7 million, up from $4.0 million a year ago. Revenue nearly doubled from the same quarter in the previous year, fueled by net product sales nearly tripling.
Net losses for the quarter jumped year-over-year, however, hitting $71.9 million compared to $61.8 million.
GWPH stock saw a double-digit rise the day after the release of the quarterly report.
Much of these gains were helped along by the company’s flagship drug, “Epidiolex.” The cannabidiol-based prescription drug for treating a rare form of epilepsy is a trailblazer in the medical marijuana market, with sales to match.
Epidiolex is the first plant-derived cannabinoid pharmaceutical drug approved by the U.S. Food and Drug Administration (FDA). Essentially, this makes it the only cannabis-related drug that is federally permitted to be prescribed in the U.S.
The drug yielded $4.7 million in sales in November and December 2018, its launch period.
Prescription growth has also been trending upward, with January 2019 showing around 150% growth from December 2018. (Source: Ibid.)
To makes things even better, GW is looking to sell Epidiolex in Europe as well. If the drug receives approval in several major European markets, then sales will increase in kind.
Epidiolex is driving the company’s success at this point, and for good reason. GW stands alone among the large pharma companies because it’s going all-in on cannabis medication.
While there are other drugs under development by GW Pharmaceuticals, the company is putting a lot of emphasis on Epidiolex. Another of its drugs is “Sativex,” a cannabis-derived spray.
This places the company in a unique position that garners it a lot of recognition from the investing world. Moreover, the strong numbers helped drive a rush of investors toward GWPH stock.
The mixture of solid fundamentals and a unique value proposition leads us to why I believe we could see GW Pharmaceuticals stock gain 100% within a year—but that belief comes with reservations.
GWPH Stock Prediction
The GW Pharmaceuticals financial results have been very positive, as has been the rollout of Epidiolex. As a result, there’s a lot of potential for GWPH stock to continue to rise rapidly.
One of the next key steps for the company is to expand into Europe and other international markets. If that happens, we’ll continue to see an increase in Epidiolex sales. That would result in more strong financial reports, driving further share growth.
But there’s a catch here: GW is more of a pharma company that focuses on medical marijuana than a pure play medical marijuana company; that’s an important distinction.
Many medical marijuana companies have developed ways to sell directly to consumers hassle-free (many of the companies have online sign-up options) and are also not developing medical marijuana to treat specific conditions and diseases.
GW Pharmaceuticals, on the other hand, is very much focused on developing medical treatments that are then sold via prescription, necessitating the presence of regulators and doctors at every turn.
Much like with other Big Pharma stocks, GW stock’s performance takes a much different path compared to the shares of traditional marijuana companies.
Federal legalization of recreational marijuana in the U.S., for instance, would likely not be a huge boon to GW, whereas many other pot stocks would be sent soaring.
Instead, the GWPH stock chart follows the traditional pharma process of drug development, trials, and approval by regulators.
This process presents many opportunities for stocks to rise, like when Epidiolex first received good results from its clinical trials and later when the drug was approved by the FDA. But it is a fundamentally different process from other marijuana stocks, which rely on buzzworthy political news to drive share prices.
To see what I mean, take a look at the chart below:
Chart courtesy of StockCharts.com
Compared to Canopy Growth Corp (NYSE:CGC) over the past year, you can see that, while the two stocks share similarities in terms of growth, they diverged in several key areas.
In August 2018, for instance, when Canopy Growth received another huge investment and marijuana stocks in general were soaring, GWPH stock received a much more modest boost.
As can be seen in the above chart, the younger and nimbler Canopy Growth stock saw higher growth over the past year. The same goes for many of the other top-performing marijuana stocks.
But that gap has since closed.
Chart courtesy of StockCharts.com
GW Pharmaceuticals stock has had a very good start to 2019, and has even overtaken CGC stock with its latest surge.
GW stock’s rapid growth in 2019, alongside the company’s increasing sales of Epidiolex, make me believe that we could see 100% growth within the next 12 months.
There is a catch, however. The pharma business is a fickle one that, unlike the marijuana business more broadly, I’m less certain of.
For instance, I know that marijuana sales will increase and legalization will spread as the industry matures. Those are certainties (or about as near to certainties as you can get).
Pharma, on the other hand, is fraught with uncertainties. Delays, regulations, an inability to follow up with another drug, direct competitors fighting over a very specific and small market, etc. can all have big impacts on the future of pharmaceutical stocks like GWPH stock.
That isn’t to say that recreational marijuana stocks are invulnerable, but that they are in a more stable position in the long term compared to GW.
But those problems are likely to occur years from now—if they occur at all.
For the next little while, there’s not a whole lot holding GW Pharmaceuticals back from being a worldwide leader in prescription marijuana medicine.
If the company can stake its claim to that title and enter more markets with its treatments, then I foresee GW Pharmaceuticals stock being one of the better picks in the coming years.
My GWPH stock prediction has the company up big by the end of 2019—with the ability to gain 100% within 12 months.
But I wouldn’t characterize GW as a guaranteed home run; there’s a lot of uncertainty around it. Like with all companies in the pharma space, there are a lot of variables that traditional marijuana stocks simply don’t need to contend with.
But with that risk comes the opportunity for great rewards. For those looking to make big gains quickly and who don’t mind a little bit of risk, GW Pharmaceuticals stock could be worth a look.