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GW Pharmaceuticals PLC- ADR (GWPH): A Beacon of Light in an Otherwise Grim Market

Noncyclical ideas just became much more worthy trading ideas

Believe it or not, not every single stock out there is being hit hard for a second trading day in a row following the surprise Brexit vote of “leave.” Drug company GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) shareholders enjoyed an 8% advance from GWPH stock on Monday following news that one of its ballyhooed therapies has indeed shown strong efficacy in a late-stage trial.

GW Pharmaceuticals PLC- ADR (GWPH): A Beacon of Light in an Otherwise Grim Market

While it’s nothing unusual for a drug stock to jump following an encouraging update on a drug’s development, not even the best of the best biopharma names can always escape the dark clouds of a market wide bearish tide.

Is GWPH going to be that proverbial needle in the haystack?

In light of yesterday’s gain along with a couple more key milestones scheduled to be met during the third quarter, yes, GW Pharmaceuticals may ironically be one of the market’s safer bets at this time.

GW Pharmaceuticals: Epidiolex Looks Good

The drug in question is Epidiolex, being tried as a therapy for Lennox-Gastaut syndrome (or LGS) — a form of epilepsy. The cannabinoid treatment was linked to a significant decrease in epileptic seizures in children. Specifically, Epidiolex resulted in a 44% reduction in seizures versus only a 22% decrease compared to a placebo.

In March, the drug showed similar reductions in seizures related to Dravet Syndrome. Epidiolex has an orphan drug designation as a therapy for both indications.

Linda Laux, MD, Director of the Comprehensive Epilepsy Center commented:

“These data show that Epidiolex has the potential to provide a robust and clinically meaningful reduction in seizures in this highly treatment-resistant population together with an acceptable safety and tolerability profile, which is consistent with my previous clinical experience with Epidiolex. I am excited about the prospect of Epidiolex being made available on prescription in the future and believe it has the potential to make an important difference to the lives of many patients.”

What GWPH Has in the Queue

While Epidiolex is compelling thus far, despite being a cannabinoid-based drug (the Federal Drug Administration remains unclear about its stance on marijuana-derived therapies, despite the orphan drug designation for Epidiolex), it’s not the only item on the upcoming schedule of potentially bullish events for GW Pharmaceuticals. It has not one, but two more catalysts on the way within the next few weeks.

The first one should materialize sometime in July. Although a firm date hasn’t been offered, the company has said in the recent past that an update on the phase 2 trial of GWP42004 as a therapy for type 2 diabetes will be posted in late-Q2 or early-Q3. It has not been posted yet, so it should be out sooner than later.

GWP42004 has been surprisingly effective at controlling glucose levels as well as improving the activity of beta cells, offering hope on a front that doesn’t offer a great number of compelling solutions despite being a crowded field.

The other piece of big news on the radar should come no later than September … an update on the phase 3 trial of the aforementioned Epidiolex as a therapy for Lennox-Gastaut syndrome. Though the phase 3 results should more or less mirror the phase 2 efficacy posted on Monday morning, similar phase 3 numbers will bolster the strength of the numbers thus far and enhance the odds of an approval.

Bottom Line for GWPH Stock

Although the bullish case for GWPH isn’t a bad one, the core of the argument right now is an unusual one. That is, biopharma stocks, of all things, may be viewed as a safe haven relative to most other stocks.

For better or worse, biotech and biopharma names aren’t terribly subject to economic cycles. While economic weakness can make it a little tough to secure funding, by and large good drug prospects get the funding they need. That’s because scientific breakthroughs can materialize in any environment.

And right now, there aren’t too many other stocks that are compelling, as the Brexit threatens to kick-start economic malaise and throw most companies into the down stroke of an economic cycle.

The better bets right now may be perceived as breakthrough drugs and their corresponding companies. GW Pharmaceuticals and GWPH stock certainly fit the bill, with more — and more near-term — upsides than most of its peers.

Yes, the FDA may still be less than keen about approving a drug derived from a cannabinoid. It’s coming around on the idea though, possibly because GW Pharmaceuticals and other players in the arena are largely taking the psychoactive aspects of marijuana out if the equation. Epidiolex and GWP42004 wouldn’t have earned an orphan drug designation if the FDA wasn’t at least somewhat interested.

In the meantime, don’t overlook that fact GW Pharmaceuticals has plenty of opportunities in countries other than the United States.

Add that to the list of reasons to like GWPH when most other stocks continue to fend off the Brexit and cyclical headwinds.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/06/gwph-stock-beacon-light-otherwise-grim-market/.

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