People vouching for marijuana legalization have been celebrating the recent green flag by the Food & Drug Administration (FDA) for the cannabis-based drug, Epidiolex. GW Pharmaceuticals (NASDAQ:GWPH), a London headquartered company is producing a drug for the treatment of epilepsy that uses cannabidiol, specifically for people suffering from Lennox-Gastaut and Dravet syndromes. Here we use TipRanks data to take a closer look at what Wall Street's top analysts see in store for this volatile stock.
The FDA approval came as a recent phase 3 study showed a significant reduction in seizures among patients (children above the age of 2) tested. Post the study it was concluded that children with Dravet who were treated with Epidiolex witnessed a 44% reduction in seizures compared with a mere 22% reduction among patients treated with placebo. On the other hand, children with Lennox treated with Epidiolex witnessed a 50% reduction in seizures compared with a mere 15% reduction among patients treated with placebo.
Although the strong results from the study definitely call for the strong case for the stock, GW still has multiple other hurdles to pass before it can start marketing the drug. For example, while Epidiolex is the first CBD drug to be ever approved by the FDA, the challenge GW faces is that marijuana is considered a schedule 1 drug in the U.S., which keeps it in the same segment as other drugs such as heroin & LSD. However, the company expects the Drug Enforcement Agency (DEA) to change that ruling within 90 days, post which it can start marketing the drug. Regardless, it is a step in the right direction for people bullish on marijuana-based medication.
Moreover, despite the stock tumbling in the days following the announcement, the long-term outlook remains quite bullish. "In addition to another important treatment option for Lennox-Gastaut patients, this first-ever approval of a drug specifically for Dravet patients will provide a significant and needed improvement in the therapeutic approach to caring for people with this condition," said Billy Dunn, M.D., Division of Neurology Products, FDA.
If all goes well, the drug is expected to hit the stores by fall this year. Moreover, the company is expected to generate about $1.2 billion in sales by 2022 from Epidiolex alone; while this approval opens up an opportunity for other drugs in GW's pipeline too.
Following the bullish case forecast, Cantor Fitzgerald analyst Elemer Piros increased his 12-month price target on the stock to $235 from $205 previously. "While Epidiolex is derived from cannabidiol (CBD), the FDA noted it does not cause intoxication or euphoria that is seen in tetrahydrocannabinol (THC). Additionally, Epidiolex is the first FDA approval for the treatment of patients with Dravet syndrome, and the first in a new category of anti-epileptic drugs (AEDs)," the analyst stated.
Per the TipRanks analyst consensus, the stock currently floats a very bullish Strong Buy rating, with all four analysts surveyed in the past 3 months having a buy rating on the stock. It currently has a $197 price target, indicating a 41.2% upside from current levels. All in all, the recent happenings prepare a bullish case for the stock. As mentioned above, this piece of news might open multiple streams of revenue for GW in the future. Although risks remain, the potential for upside is great, considering the strong favor medical marijuana is generating.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.