GW Pharmaceuticals BUY Target $41

GWPH : NASDAQ : US$34.42
GWP : AIM
BUY 
Target: US$41.00

COMPANY DESCRIPTION:
GW Pharmaceuticals is focused on discovering, developing and commercializing cannabinoid pharmaceutical-grade drugs. Lead product Sativex is an oromucosal spray to treat MS symptoms, cancer pain, and neuropathic pain, now approved in the EU and other ex-US territories, and in Ph3 program for cancer pain. It has two product candidates in Ph2 trials in diabetes and inflammation, and earlier stage programs for epilepsy and psychiatric illness.
All amounts in US$ unless otherwise noted.

Life Sciences — Biotechnology
Q4/13: DATA RICH 12MO TO COME – KICK STARTING EPILEPSY PROGRAM, PH3 CANCER PAIN DATA NOW IN H2/14
Investment recommendation
Reiterate BUY, raising PT to $41 on increased liquidity and investor interest in pipeline. We think Sativex could be a key add-on Tx for moderate/severe cancer pain and expect Ph3 data due mid-2014 to be positive, support US approval and drive market uptake. We estimate peak sales in the US and EU of $2+B. We also think Sativex has potential in MS spasticity, for which it is already approved in the EU. Our new $41 price target is based on a lower discount rate applied to our sum-ofthe- parts analysis of a pipeline pNPV and EU Sativex DCF.
Investment highlights
 GWPH Q4 earnings per ADS: $(0.29) compared with consensus of $(0.12) and our estimate of $(0.29). $11.5M in revenue is in line with $10.7M consensus and our $10.5M estimate.
 Epilepsy program takes shape: KOLs leading the charge as GW preps its IND, first Ph2 trials. We think new investigator-sponsored trials in intractable childhood epilepsy (e.g. Dravet, Lennox-Gastaut) enrolling 125+ pts will yield meaningful safety and efficacy data starting mid-2014. Of the 125 children, GW expects ~40 may have
Dravet and Lennox-Gastaut each. GW believes they are wellprepared for a requested pre-IND meeting, having already
completed extensive preclinical tox work for CBD and Sativex. We think GW is in good shape to start Ph2 dose-finding trials in H2/14.
 Up next: data from Ph2a ulcerative colitis in H1/14, Ph3 Sativex cancer pain trials in H2/14. We note there has been a slight delay in the cancer pain trial as GWPH increased the target proportion of US patients to over 30% of total subjects to head-off any FDA concerns.

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