Why This Marijuana Stock Sky-Rocketed 79% in March

IMAGE SOURCE: GW PHARMACEUTICALS

What:Following news that its marijuana derived medicine reduced the number of seizures in patients with a rare form of epilepsy, shares of GW Pharmaceuticals plcsoared 79.5% last month, according to data from S&P Global Market Intelligence.

So what: The researcher of marijuana-based medicine has been studying the use of chemical cannabinoids in various medical indications since the 1990s and although research into THC based medicine for use in cancer pain and schizophrenia has recently fallen short, management reported last month that a CBD derived therapy may provide significant benefits for patients suffering from Dravet syndrome.

Specifically,GW Pharmaceuticals reported data from a Dravet syndrome study last month showing that Epidiolex, the company's purified CBD formulation, reduced the number of monthly seizures by 39%. Overall, 120 Dravet syndrome patients were randomized to receive either Epidiolex or placebo, and patients who received placebo only saw their number of seizures improve by 11%.

Now what:The positive results could be the biggest win for medical marijuana supporters to date. Historically, marijuana's anecdotal benefits have been difficult to prove in large, scientifically controlled studies.

GW Pharmaceuticals management plans to release results from a second Dravet syndrome trial later this year and they also expect to have results available soon from two studies that are evaluating Epidiolex in Lennox-Gastaut syndrome, another rare form of epilepsy.

If these three trials offer up similarly strong results for Epidiolex, then GW Pharmaceuticals could file for FDA approval by year's end. A FDA decision could come roughly six months after a filing for approval, because Epidiolex has fast-track designation for its use in Dravet syndrome.

Epidiolex's success is great news for patients, but investors might still want to approach GW Pharmaceuticals cautiously. The rally in its stock price could be pricing in most of the upside associated with Epidiolex, especially since the patient population in these indications is relative small. Additionally, GW Pharmaceuticals may not be able to charge premium pricing for Epidiolex because it could conceivably have to compete against high CBD strains of marijuana that are sold through medical marijuana dispensaries. Until we get more insight into the company's commercial plans for Epidiolex, it may be best to take a wait-and-see approach to this stock and focus instead on other opportunities.

The article Why This Marijuana Stock Sky-Rocketed 79% in March originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.