GW takes traders back to 2015

GW Pharmaceuticals’ doubling in valuation today is a remarkable result given that the UK-based company was trading at a level close to what consensus tells traders it is worth.

Epidiolex’s success in the rare epilepsy Dravet syndrome reversed eight months of losses as it boosted confidence that the cannabis-derived spray would achieve success in other movement disorders. Regulatory submissions are expected by year end, and the data plus its orphan drug designation make Epidiolex look like a good candidate for approval.

Back in time

GW's 120-patient Dravet trial succeeded in reducing the monthly frequency of convulsive seizures during the 14-week treatment period by 39% compared with the four-week baseline observation period. For patients taking a placebo, the reduction was 13%. GW has reserved secondary endpoints for release at upcoming medical meetings.

US-traded shares rose 123% to $85.68 in mid-morning trading, taking them back to levels last seen in December. GW’s valuation peaked in July 2015, when its US shares hit $125.98; it suffered losses with the rest of the biopharma sector in the second half of 2015, and shares had lost two-thirds of their value from peak as of last week.

EvaluatePharma’s consensus forecasts sales of $721m in 2020, and this taken together with $51m in alliance revenue from GW’s marketed product Sativex yields a net present value of $1bn. On Friday, the group had an $852m market capitalisation.

The results had Leerink Research analyst Paul Matteis, for one, increasing his price target to $130 from $100 based on increased confidence that Epidiolex will win regulatory approval. Forecasts are likely to rise in coming weeks as analysts grow confident of regulatory success and commercial launch.

Confidence

In an interview with EP Vantage, chief executive Justin Gover said GW will be seeking a pre-NDA meeting with the FDA as soon as possible. In the interim, data from a trial in a second seizure disorder called Lennox Gastaut syndrome are also due, and how well Epidiolex performs in that trial will affect the group’s regulatory strategy. “The ideal is to file both together,” he said.

Dravet affects 6,000 people in the US and Lennox Gastaut 25,000.

He said the Dravet results give the company confidence that its Lennox Gastaut trials will also be successful, since in an expanded access programme both had a similar effect on seizure rates. Moreover, there are 171 patients in the Lennox Gastaut trial to 120 in the Dravet test, so statistical significance can be achieved with a smaller treatment effect, Mr Gover said.

Nonetheless, today’s doubling seems excessive. It may be that traders are betting on an acquisition as a result of clinical success. But given how big pharma chief executives continue to complain that valuations are not realistic, the time to have struck was last week, not today.

To contact the writer of this story email Jonathan Gardner in London at [email protected] or follow @ByJonGardner on Twitter