Is GW Pharmaceuticals (GWPH) a buy after reporting quarterly results?

GW Pharmaceuticals (NASDAQ:GWPH) has the distinction of being the only company to secure Food and Drug Administration (FDA) approval for a cannabidiol (CBD) marijuana therapy. The company’s Epidiolex won the FDA green light last summer after demonstrating it reduces seizures in epilepsy patients. GW Pharmaceuticals launched Epidiolex in November after it received the most favorable Drug Enforcement Agency scheduling possible. On Tuesday, management unveiled results, including Epidiolex’s initial commercial performance. Is this pot stock a buy…

What it does Epidiolex is a purified CBD that’s secured regulatory approval for use in patients with Dravet syndrome and Lennox-Gastaut syndrome (LGS), two tough-to-treat forms of epilepsy. Patients with Dravet syndrome or LGS often don’t respond to existing antiepileptic therapies, making new treatment options like Epidiolex particularly important.

In trials involving patients who had tried and failed on existing antiepileptic medications, using Epidiolex reduced seizure frequency from between 40% and 50%.

The commercial opportunity is big

The addressable market of Dravet and LGS patients is relatively small at about 35,000. However, Epidiolex costs $32,500, and many more patients suffering from resistant forms of epilepsy could someday benefit from its use.

There are about 3.4 million Americans with epilepsy, 470,000 of whom are children, and approximately one-third of those patients are inadequately treated by traditional antiepileptic medications.

The need for new treatment alternatives for patients has helped GW Pharmaceuticals overcome payer objections. In January, the company said 22 million people covered by Express Scripts drug formulary could access Epidiolex without prior authorization and that four of the five biggest commercial insurers have initiated coverage of Epidiolex after prior authorization.

How’d it do?

On Feb. 26, GW Pharmaceuticals unveiled results for the quarter ending Dec. 31. In the period, the focus was on educating doctors about Epidiolex’s risks and benefits, yet sales still clocked in at $4.7 million.

That’s not a lot, but sales could…

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