Is GW Pharma Now The Future Of Cannabis-Based Drugs?

GW Pharmaceuticals PLC-ADR GWPH shares initially jumped Monday after disappointing data from a leading drug candidate sent shares of Zynerba Pharmaceuticals Inc ZYNE plummeting more than 55 percent. However, while GW may now have less competition in the mix, investors soon realized the dangerous potential implications of the Zynerba news.

After dropping 2.1 percent Monday, GW shares opened Tuesday’s session down another 6.5 percent. Maxim Group analyst Gabrielle Zhou says investors have a right to be concerned about Zynerba’s ZYN002 failing to achieve both primary and secondary endpoints in a phase II epilepsy study.

“GW initially rallied (one less competitor), however, it closed down 2-3% as the reality of a CBD epilepsy failure now worries investors that GW’s botanically derived CBD’s benefit may be moderate at best,” Zhou wrote Tuesday.

Given the fact that GW’s stock has rallied 86 percent since the beginning of 2016, Zhou said investors have a right to be concerned about the stock’s steep valuation.

Related Link: Zynerba's Clinical-Trial Miss Devastates Stock Price

But while Zhou saw the Zynerba news as meaningful enough to downgrade GW Pharmaceuticals stock from Buy to Hold and remove her price target, other GW bulls were unfazed.

Cantor Fitzgerald analyst Elemer Piros said the updates GW provided on its recent investor call related to Epidiolex regulatory submissions and pre-commercialization initiatives suggest the drug is on-track for its rolling NDA submission to be completed by the end of October.

“Given the greater visibility into a potential approval we have adjusted our model to account for a potential approval in the U.S. in F3Q18 and model meaningful revenues beginning in F2019,” Piors wrote Tuesday.

Cantor Fitzgerald maintains its Overweight rating and $208 price target.

At time of publication, shares of Zynerba were down 6.62 percent at $6.23; shares of GW Pharmaceuticals were down 7.03 percent at $107.01.