The deep dive into the marijuana sector takes us to a re-examination of GW Pharmaceuticals plc. (GWPH Nasdaq). The company is focused on the development and commercialization of cannabinoid therapeutics. They have a product for the treatment of Multiple Sclerosis spasticity called Sativex which is approved for use in the United Kingdom and is under review for sale in the United States.
Sativex has been in the market since 2010 and has not been a bell ringer in terms of sales.
The cost of developing and commercializing a new drug can reach close to $1.5 billion which would be fine if the success rate was better than it is. The risk associated with the development of a compound is astounding. Ninety percent of all drugs undergoing human clinical trials fail to make it into the market.
The last time that I analyzed GWPH was on August 13, 2014 when the shares were trading for $86.26. Jeff asked for input on his portfolio as he was planning for retirement and didn’t want to be a burden on his son and daughter. He had bought shares in GWPH at $60.98 and again at $88.05 and he wanted my opinion.
The research indicated that the shares had pulled back from a 52-week high of $111.26 and that they were building a base near $80.00. It was observed that the shares would have to break above resistance at $90.00 if the stock was going to start a new leg up. The research also failed to get any guidance from momentum indicators as to how GWPH might progress in the short term.
An audit of the charts will help identify how GWPH is trending.
The three-year chart highlights the retreat that started in July of 2015 as the stock hit a 52-week of $131.25. The shares then broke below the 50-day moving average in that same month followed by a breach of the 200-day moving average in September. October saw the formation of a death cross that signalled that investors could expect the selling pressure to continue.
The declined continued into March of 2016 where GWPH hit a 52-week low of $35.83. From there it gapped up on the release of Phase III trials results for Epidiolex which treats a rare form of epilepsy in children.
Epidiolex uses CDB or cannabidiol -which is one of at least 113 active cannabinoids identified in cannabis. It is a major phytocannabinoid, accounting for up to 40% of the plant’s extract. The excitement about the results took the shares up and through the 50-day moving average in a day followed by a break above the 200-day moving average in May.
A golden cross surfaced in May as well pointing to more buying to follow.
The six-month chart pulls into focus the one day move that saw the shares pop nearly $60.00. At the moment the stock is holding support along the 50-day moving average. I have read that some are suggesting that the market for Epidiolex could generate $1 billion by 2021 if it can be approved for other forms of epilepsy. The company has other trials in progress which could add more to this advance. From the evidence at hand GWPH looks like it a case of buy high sell higher
Next time I will investigate the case for PharmaCyte Biotech Inc. (PMCB OTCQB).
Make it a profitable day and happy capitalism!