420 Investor: GW Pharma Investors May Have To Wait Out Short-Term Volatility

Investors in GW Pharmaceuticals PLC GWPH may need to sit through some short-term volatility as sales of the company's newly approved drug ramp up slowly because of insurance coverage issues, says the author of The 420 Investor.

Alan Brochstein, who is a founding partner of New Cannabis Ventures, joined Benzinga's PreMarket Prep trading show on Monday morning to discuss the latest in cannabis stocks, and said it's not clear how much the market is aware of the issue with GW Pharma's new cannabidiol oral seizure drug Epidiolex.

"Unfortunately, in the short term you kind of have to live through some volatility," Brochstein said. "They've done a good job of warning people that the initial uptake of Epidiolex...is not going be that great. There’s a little bit of a burden in getting insurance companies to pay - until they actually agree to pay then there’s no sale. So it’s going to be a slow ramp.

"I think the company’s put it out there, but you never know ... it could put a little volatility on the short run," Brochstein said.

Epidiolex last year won U.S. FDA approval for doctors to prescribe the medication for two rare forms of epilepsy, making it the first plant-derived CBD drug approved by the U.S. government.

See Also: Wall Street's Favorite Cannabis Stock

More Ancillary Debuts To Come?

Brochstein also said he foresees more ancillary cannabis industry companies -- those that don't actually grow cannabis, but provide services or related products to the industry -- going public in the coming year or so. He said there are only a handful of ancillary public companies as the stock markets warm to the idea of listings in the industry -- in part because the cannabis industry companies that most need to raise cash are those looking to ramp up expensive grow operations.

But he said if the markets are now opening to the idea of industry players being traded, more ancillary companies will likely go public. Brochstein pointed to one, software company MJ Freeway, which is in the process of merging with special purpose acquisition company MTech Acquisition Corp. MTEC to create a public company called Akerna, as a harbinger of some of the ancillary companies going public in the coming year. 

Listen to the full interview with Brochstein on PreMarket Prep beginning at 34:40 below.

PreMarket Prep is a daily trading show hosted by prop trader Dennis Dick and former floor trader Joel Elconin. You can watch PreMarket Prep live every day from 8-9 a.m. ET here. The replay can be found on Benzinga's YouTube channel, and the podcast is on iTunes, Google Play, Soundcloud, Stitcher and Tunein.