Goldman Sachs Sees 40% Upside In GW Pharmaceuticals

Shares of cannabinoid-focused biotech company GW Pharmaceuticals PLC- ADR GWPH are "on a path to new highs," according to Goldman Sachs.

The Analyst

Goldman Sachs analyst Salveen Richter upgraded GW Pharma from Neutral to Buy and lifted her price target to $174, suggesting roughly 40 percent upside from current levels.

The Thesis

Richter premised the upgrade on five factors, namely clobazam drug-drug interaction data presented at the American Epilepsy Society meeting, positive KOL feedback, compelling Phase 3 efficacy data for Epidiolex in Dravet Syndrome, and Lennox-Gaustaut Syndrome, significant demand for off-label use and multiple 2018 pipeline catalysts.

Clobazam drug-drug interaction data from Phase 3 studies in DS/LGS presented at the AES meeting held Dec. 1-5 indicated that Epidiolex's effect is independent and synergistic with clobazam co-therapy, Goldman said.

Key opinion leaders are positive on Epidiolex adoption and launch trajectory, Richter said. Apart from being impressed with the compelling efficacy relayed by the Phase 3 studies, physicians view Epidiolex as a novel and differentiated AED, she added.

"KOLs also noted high pre-existing interest and awareness of Epidiolex among patients and carers will likely translate into strong launch demand," Richter said.

Goldman expects a June 2018 PDUFA date, and up to 90 days for DEA rescheduling, which suggests a third quarter or fourth quarter launch. This follows the company rolling the NDA in October. Goldman estimates 2025 worldwide peak sales of $2.2 billion, of which 56 percent is expected to be derived from off-label use.

Goldman also sees pipeline optionality from additional studies. Some of the studies underway include:

• Phase 2/3 data in infantile spasms due in the first quarter of 2018
• Phase 3 dose-ranging data in DS in the second-half of 2018
• Phase 3 data in tuberculosis sclerosis complex due in the second-half of 2018
• CBDV Phase 2 data in adult-onset partial epilepsy due in the first quarter of 2018
• Phase 2 initiation in autism spectrum disorders, expected in the first-half of 2018

"We also look to patent application decisions for Epidiolex which may extend protection beyond the 7.5/12-year exclusivity in the US/EU," Goldman said.

Price Action

The shares of GW Pharma are up over 15 percent in the year-to-date period. At time of writing, the stock was up 4.7 percent to $129.89.

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