Keenly awaited data from GW Pharmaceuticals’ early-access epilepsy programme contained encouraging enough signals to send shares in the British drug developer to a record high yesterday. Today investors were understandably less keen to see five of the company’s directors preparing to sell a chunk of their stock.
The sale comes in the wake of a ninefold surge in GW’s shares over the past 12 months, largely on hopes for the epilepsy project Epidiolex; the ADSs are currently at $89, valuing GW at $1.3bn. With the company’s market cap approaching some of the most bullish sellside valuations, it is not surprising that executives considered this a good time to take profits.
Insiders are offering to sell a 5.3% stake in the company – they are offloading a portion of their UK-listed shares as part of a public offering of ADSs. In total, 1.7 million ADSs are being sold, of which 500,000 derive from the directors’ holdings. Assuming the directors’ stake sells at the current market price, they will pocket in total $44.5m.
The biggest seller is Geoffrey Guy, who founded the company back in 1998 and has been chairman since then; he plans to cut his stake in the company from 8.6% to 7.2%. Chief executive Justin Gover will lower his stake from 2.2% to 1.4%; he assumed his position at GW in 1997. And R&D director Stephen Wright, who came on board in 2004, is selling a third of his holding, or 807,570 UK-listed shares.
GW confirmed to EP Vantage that this was the first time Mr Gover had sold any shares since 2003, while Mr Guy’s beneficial interest has reduced slightly over that time. Not that there has been a strong incentive for them to sell before now – the company’s lengthy struggles to get its lead drug Sativex to market kept the stock price suppressed, falling as low as 29p in 2008.
Early access
With the UK shares now at 421p and the ADS programme creating substantial demand from US investors, a sellout after all this time is perhaps not surprising.
The placing will also benefit from the 14% jump in the company’s share price yesterday, in the wake of the first data to be released on Epidiolex. These were collected from an early-access programme that is running in the US in children with various forms of intractable epilepsy (Interview – GW Pharma eyes breakthrough therapy as epilepsy data approach, May 9, 2014).
Results from 27 patients were detailed, 9 of which have Dravet’s syndrome, the specific indication in which GW plans to start a controlled phase II/III programme later this year.
Data from all 27 showed that 48% obtained at least a 50% reduction in seizure frequency compared with baseline. At the end of 12 weeks 15% were seizure free.
Of the nine Dravet patients, 56% obtained at least at 50% reduction in seizure frequency, and at the end of 12 weeks 33% were seizure free.
Side effects were as expected with a cannabis-based medicine – somnolence and fatigue were most commonly seen – and there were no withdrawals due to adverse events.
The results were in line with what equity analysts have previously indicated would be considered encouraging, and prompted some enthusiastic sellside comments yesterday. Leerink analysts wrote that the data confirmed the drug effect, and raised their price target on the ADSs from $90 to $110.
Good going
GW Pharma, while stressing that the uncontrolled data might not be replicated in more rigorous studies, was also upbeat.
“Notwithstanding the caveats, it would be very hard to conclude there is not some signal of efficacy here as a result of the response rates we’ve seen,” Mr Gover told EP Vantage yesterday. The data “gives us that extra level of confidence for the development programme".
It is undoubtedly encouraging to see signs of efficacy in these children, who are typically poorly controlled despite being on two or three other anti-epileptic drugs and having failed on many more. But the risk of bias and a potential lack of objectivity in the people collecting the results make these signs unreliable. Cowen analysts also recently pointed out that the waxing and waning nature of seizures and the likelihood of a placebo effect or honeymoon period could also artificially flatter these results.
Much more evidence is needed to confirm this project's potential, and there is every chance that the signals could weaken. Data from more early-access patients are due later this year – 62 have now started treatment and are being tracked for the 12-week duration.
With the valuation of the company now based in large part on anecdotal evidence, who can blame long-serving insiders for selling while the going is good?
To contact the writer of this story email Amy Brown in London at [email protected] or follow @AmyEPVantage on Twitter
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