Why Marijuana Stock GW Pharmaceuticals Skyrocketed 11% Today

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What happened

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After the company released updated clinical trial data showing efficacy of its marijuana drug as a monotherapy and improvement from baseline over long-term use, shares of GW Pharmaceuticals (NASDAQ: GWPH) jumped 11.1% today.

So what

GW Pharmaceuticals recently completed filing for Food and Drug Administration approval of Epidiolex, a cannabidiol medicine that's being evaluated for use in patients with two rare forms of epilepsy: Dravet syndrome and Lennox-Gastaut syndrome.

Today, the company's management unveiled updated trial data ahead of an industry conference next month. The data shows that 35% of Lennox-Gastaut syndrome patients responded to Epidiolex monotherapy, but only 13% of patients responded to a placebo. The news is important because it helps address how much of the treatment benefit observed previously was due to Epidiolex's use alongside clobazom, a common epilepsy medicine. 

Data was also provided from a long-term extension from a single-arm study showing a significant improvement from baseline in patients. In Dravet syndrome patients, there was a 57% to 59% reduction in total monthly seizures at week 60. In Lennox-Gastaut syndrome patients, there was a 62% to 70% drop in seizures from baseline at week 60. In both cases, the data suggests that Epidiolex efficacy remains positive over time. 

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Now what

The FDA filing for Epidiolex's approval was prompted by the drug reducing monthly seizures by about 40% from baseline and this data adds conviction that doctors will prescribe it if it wins FDA approval next year.

An approval in Dravet syndrome and Lennox-Gastaut syndrome patients would be important for GW Pharmaceuticals because it doesn't generate much in the way of revenue from its THC-based drug Sativex, which is approved in Europe for use in MS spasticity patients.

The big prize, however, would be winning widespread use in other more common epilepsy indications. The Dravet syndrome patient population is tiny and there are only about 30,000 Lennox-Gastaut patients in the U.S. At first, the commercial opportunity for Epidiolex is a bit limited. However, trials are ongoing that could expand its use someday.

Overall, we won't know for a few more months whether the FDA will green-light marijuana as medicine. If they do, then GW Pharmaceuticals will have to wait for DEA scheduling, too, which could take a few months or more. Nevertheless, this is an important advance in patient treatment, so investors are right to be excited by Epidiolex's potential to disrupt the epilepsy drug marketplace.

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Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.