Sector is attractive for its wide discounts, deal flow and dividends
The company, which develops drugs from cannabis plants to ease pain in multiple sclerosis sufferers, expects to launch its Sativex drug in 12 additional European countries during 2013. It could also be available in Australia where it is now in receipt of regulatory approval. Sativex’s sales are expected to peak at £64 million a year, according to analysts.
GW has a healthy pipeline and management looks primed to report data from drugs undergoing clinical trials, as well as announce new treatments which are entering the testing process.
Investors should move quickly to take advantage. Despite the potential for good news, the shares are trading near 12-
month lows.
The one but not the only
Sativex is GW’s only approved drug. It has been cleared for sale or recommended in 22 countries. Management is waiting for the nod from regulators in several other nations and has extended the commercial rights for Mexico to its Spanish partner Almirall (ALM:MC).
Next year’s expected boost follows strong sales in 2012, which were ahead of expectations. In the year to October, Sativex’s partner sales almost doubled to £10 million, up from £5.3 million, following launches in new countries.
During the period GW generated £33.1 million in total revenues, up from £29.6 million a year earlier, reflecting a 108% increase in volume sales and a £9.8 million milestone payment from Almirall.
Pre-tax profit fell from £2.5 million to £1.2 million. Earnings are expected to remain modest up to 2015 as a reflection of management’s European pricing negotiations and also higher research and development (R&D) expenditure.
That should not deter risk-tolerant investors. The Salisbury-headquartered concern has £29.3 million cash on its balance sheet so the R&D can be internally funded. As part of a strategy to diversify its portfolio, management is also undertaking a clinical programme to expand Sativex into markets beyond multiple sclerosis, such as treating cancer and neuropathic pain.
Things to come
GW Pharmaceuticals has this year reported positive preliminary results from a Phase IIa trial of its type 2 diabetes medicine GWP42004, which highlighted its effectiveness against the condition.
Results from its other projects could be expected in 20213, including ulcerative colitis medicine GWP42003, currently in Phase IIa trials.
GW is also running three Phase III cancer pain trials in the USA and Europe, which could lead to the company’s first commercial launch in North America. Results may come in 2014 but could arrive as early as the final quarter next year.
The company is also earmarking new products for the clinical trial process, including testing drugs to treat schizophrenia, epilepsy and glioma in 2013. The success of these trials could give the company access to $330 million in milestone payments (£204 million), way in excess of the £71 million market cap at the time of writing.
