GW Pharma's Epidiolex Label Expansion, EU Launch Key Growth Drivers In 2020

GW Pharmaceuticals PLC- ADR GWPH shares are retreating following the release of fourth-quarter results.

GW Pharmaceuticals reported quarterly losses of 7 cents per share, which beat the consensus estimate by 68 cents . This is a 65% increase over losses of 20 cents per share from the same period last year. The company reported quarterly sales of $109.076 million, which beat the analyst consensus estimate of $105.1 million by 3.78%.

The GW Pharma Analysts

Cantor Fitzgerald analyst Charles Duncan reiterated an Overweight rating and $174 price target for GW Pharma.

Needham analyst Serge Belanger maintained a Buy rating but trimmed the price target from $200 to $190.

The GW Pharma Theses

GW Pharma's fourth-quarter beat, representing 18% sequential growth, isn't likely to be repeated in the first quarter due to usual seasonal factors, Duncan said in a note. The analyst, however, expects continued robust growth in 2020, helped by three key drivers.

• Epidiolex is likely to benefit from payor expansion efforts in the U.S., where currently open access reimbursement is available for over 15% of covered lives, with no preauthorization required.
• The analyst sees potential for higher penetration into adult LGS and Dravet patients, possibly through entering the long-term care market.
• Continued launch in top five EU countries and possible traction with label expansion into TSC in the second half of 2020 will help.

Reflecting the drivers, Cantor increased its 2020 revenue estimate for the company from $403.5 million to $500 million.

Significantly Back-Loaded Sales Progression

The increase in operational expenditure guidance reflects GW Pharma's extensive pipeline activities and the investments behind Epidiolex's EU launch and TSC label expansion, Belanger said. The main value driver for the company in 2020 will Epidiolex's growth trajectory, given no significant readouts are scheduled for the year.

With expectations for a flat first quarter, the analyst sees a significantly back-end loaded sales progression, driven by TSC label expansion.

Belanger expects a slow launch ramp in EU, as lower pricing points and complicated reimbursement process temper strong demand. The main growth for 2020 is the TSC label expansion.

"Recall, TSC affects ~50,000 patients in the U.S., and thus could more than double Epidiolex's current DS/LGS target population," Belanger wrote in the note.

The approval for TSC label expansion could come through in early August.

GWPH Price Action

GW Pharma shares were slipping 7.2% to $108.57 at time of publication.

Photo courtesy of GW Pharma.