Technical look at GWPH
GW Pharmaceuticals (GWPH) is a best in breed pharma play in the niche marijuana market. It is up by 92% year-to-date and has advanced nearly 1,400% since going public in May 2013. Stocks in this sector are not as sensitive to earnings data as they are to regulatory approval or positive clinical trial data, but GWPH does report earnings on Dec. 6 before the open. Recent earnings announcements have been relative non-events. While GWPH has been rumored to be an acquisition target, that alone is not a sound investment strategy. The price action is excellent as well as the volume trends. Accumulation weeks ending March 18, July 1, Sept. 9 and Sept. 30 all advanced by 89.1%, 12.6%, 20.7% and 23.4% respectively. It currently sports a cup with handle pattern and a break above the $137.98 pivot point would achieve an all-time high.
In July of this year, a piece in Forbes under my byline theorized that cannabis-based Biotech acquisitions would become a reality. One of the principal companies listed was GW Pharmaceuticals (GWPH), a company that has a pipeline of cannabis-based drugs which are not synthetic knockoffs of the endocannabinoid molecular structure. GWPH has three drugs in clinical Phase 3 trials and five drugs in Phase 2 at the moment. Of these drugs Epidiolex, a drug used for seizures shows the greatest promise thus far.
The reason to be bullish on GWPH, besides the obvious drug therapy revenues, is simplistic in nature. GWPH, unlike many of its counterparts, is basing its drugs off of the actual plant and not creating synthetics. They are leaders in the field of study as it relates to the cannabis plant and the many uses and quite frankly, they have no peer. Currently the market cap is $3.19 billion and was roughly $2 billion back in July, but even at $3 billion it’s still relatively cheap given their drugs and their intellectual property. In September, we estimated a buyout target of $6 billion, which at the time equated to roughly $190 a share, and for what it’s worth Goldman Sachs (GS) a month later, put a $189 price target on GWPH (see “Compelling target” below).
It’s important to note that the marijuana stocks from the Nasdaq to the over-the-counter markers are event-driven equities. We are witnessing a paradigm shift culturally as it relates to cannabis with eight of nine states adopting some form of legislature this year signaling that the idea of prohibition is untenable. As Main Street notices this, so does Wall Street and with that other massive Biotech companies that could spare $6 billion for an industry leader like GWPH.