Despite the weakness within the cannabis sector recently, GW Pharmaceuticals has held up well, compared to other cannabis stocks within the industry. This month, the stock dropped as low as $108 but it has already started to show some signs of strength, currently trading at $132. We think investors should take a look at shares of GW Pharmaceuticals before it reports earnings on November 5th.
PRO
Since 2018, when the FDA approved GW Pharmaceuticals flagship drug Epidiolex, the company has really been able to capitalize on the opportunity within the market. Epidiolex serves as a treatment for rare and medication-resistant childhood epilepsy. This year was a transitional year for GW Pharmaceuticals as they pulled in over 70 million dollars in revenue in Q2 2019. The drug has been rapidly gaining traction and sales have doubled each quarter since its launch.
CON
A major concern was highlighted in a research report from Elliot Favus, who is the CEO of Favus Institutional Research. In the report, he notes that Epidiolex-related deaths had increased according to data from the FDA’s database. The data showed a dramatic increase in Epidiolex-related deaths during the past few months. In July for example, there were 16 Epidiolex U.S. deaths compared to 15 Epidiolex-related deaths between January and June. This is a very bearish report and Favus suggested that Epidiolex could be pulled from the market. The challenge with Epidiolex related deaths is the fact that most of the patients using Epidiolex have a long list of health problems and it’s hard to directly link the cause of death to Epidiolex. Now, this is just one person’s opinion but at the end of the day it did add to the negative sentiment surrounding this stock and as smart investors, we need to factor in the risks before investing in any specific company.
However, with earnings just around the corner, Wall Street looks like it has shrugged off the bad news from the report and the stock may be gearing up to have a big rally once again (as we’ve seen a 25% increase in its share price over the past few weeks).
In the earnings report, we will be looking for further increases in revenue and sales of their flagship drug Epidiolex and more confirmation on their international efforts in Europe, as we see that market being the next big source of revenues. Recently Aphria proved what’s possible from Europe bringing in over 90 million dollars for two consecutive quarters selling cannabis in Germany alone.
We are looking for GW Pharmaceuticals to overcome the negative sentiment within the cannabis sector, in addition to Favus’ report. GW Pharmaceuticals is looking to lead with revenue, as they have done in the past few quarters since launching Epidiolex. If this trend can continue, shares of GW Pharmaceuticals could see an impressive rally.
GWPH shares were trading at $132.33 per share on Friday morning, up $2.68 (+2.07%). Year-to-date, GWPH has gained 35.88%, versus a 22.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaron Missere
Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...
