Why Did GW Pharmaceuticals (GWPH) Drop 18% This Week?


GW Pharmaceuticals (GWPH) reported earnings at the close of trading on Tuesday. The company posted fourth quarter and year-end 2019 financial results with revenues of $109.1 million for the fourth quarter and $311.3 million for the full year.

Their total Epidiolex net product sales came in at $104.5 million for the fourth quarter and $296.4 million for the first full year of sales. 

The average analyst expectations for GW Pharmaceuticals was for the company to report a net loss of $0.75 per share in the fourth quarter. GWPH posted much better earnings than expected, with a net loss of just $24.9 million, or $0.07 per share. 

GWPH also substantially improved its bottom from the prior-year quarter.  The company posted a net loss of $71.9 million which equates to $0.20 per share, because of increased Epidiolex sales in Q4 of 2019.

However, the market did not reward the company for this performance. The stock fell over 8% during the Wednesday trading session to close at $107. Although much of their report was positive, the market continues to look for short term growth catalysts. 

The reason the market sold GWPH today was that they didn’t make progress this quarter towards profitability. In the past quarter, the company reported a net loss of $13.8 million, or $0.04 per share. 

GWPH said that they plan to focus heavily on lining up even more prescribers and securing greater payer coverage for Epidiolex in the U.S. in 2020. They wish to enter the long-term care (LTC) market this year as well which should provide another stable stream of revenue. On the international front, GWPH expects to launch Epidiolex in the United Kingdom in Q1. After the UK we should see France, Spain, and Italy come on board later this year.

Justin Gover, GWPH’s CEO had some positive remarks regarding their recent update, “2019 was an exceptional and transformative year for GW, led by the successful launch of Epidiolex in the US and approval in Europe. The positive impact this medicine has had on thousands of patients and their families provides a compelling foundation for continued growth in 2020.”

He also emphasized his excitement when it came to advancing their clinical programs, “We also expect 2020 to be an important year for our growing and developing product pipeline beyond Epidiolex as we build on our world leadership in cannabinoid science. We are focused on advancing nabiximols in the US in several indications and clinical programs with other potential products whilst continuing to bring Epidiolex to more patients in the US and Europe.”

In our opinion, over the long term we think GWPH has substantial upside once they expand into the European markets and advance their clinical trials. The pullback in GWPH could be a great entry point for a long term investor looking for a quality company in the medical marijuana space.

GWPH shares were trading at $106.53 per share on Thursday afternoon, down $0.47 (-0.44%). Year-to-date, GWPH has gained 1.88%, versus a -4.00% rise in the benchmark S&P 500 index during the same period.

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About the Author: Aaron Missere

Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More…

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