GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) (LON:GWP), which was an inconspicuous small-cap pharma company until the end of 2013, has now expanded to market cap of over a billion and counting. GW’s stock gained a whopping 600% over a twelve month period. Being the classic representation of a momentum stock, GW has drawn the interest of shortsellers as well. Bearish interest rose in the pharma company at the end of April, and is now up to 5.2% of outstanding shares.
GW Pharmaceuticals conducting clinical trials for several drugs
GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) (LON:GWP)’s flagship drug, Sativex, is used as an oral spray for treatment of Multiple Sclerosis (MS) symptoms, cancer pain and neuropathic pain. The phase III clinical trials of Sativex in cancer pain are on a fast-track status from FDA, and results are expected to come in the second half of 2014. Additionally Sativex is also being tested as treatment of ulcerative colitis; phase II trial data is also due in 2H2014. The drug is already approved in 25 countries worldwide for treating spasms in multiple sclerosis patients.
GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) (LON:GWP)’s Epidiolex is under trial in two different types of childhood epilepsy patients, Dravet Syndrome and Lennox Gastaut Syndrome. The FDA has allowed the testing of the drug in 12 different sites, moreover, several U.S. states have invited GW Pharmaceuticals to conduct pilot Epidiolex test programs.
Buy ratings all-around for GW despite of missed earnings
Based on these rosy developments, analysts have high price targets on the U.K-based pharma company. Canaccord Genuity has a PT of $102 whereas Morgan Stanley has a target of $103.
The company’s recent earnings release was not too exciting. The company produced 7.53 million pounds in revenue for 2Q2014, starkly below analyst estimates. Earnings fell to a loss of -0.025 pounds per share.
In FY2013, ending on Sep 30, GW Pharmaceuticals’s revenues fell 17.6% from 33.12 million pounds to 27.30 million pounds as net income showed a loss of 4.5 million. Its cash reserves increased 29.7%, or 8.73 million on a y-o-y basis.
D.E. Shaw and others short GW Pharmaceuticals
Currently the largest short positions are disclosed by HealthCor Management and D.E.Shaw, each is shorting 2.2% and 1.2% of outstanding shares respectively. Other shortsellers include Barclays Capital, Point72 Asset Management and TGS Management Company.
The market is focused on results of multiple clinical trials that are due at the end of this year, and GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) (LON:GWP)’s shortsellers are positioned to cash in on the mispricing. Despite the multiple drugs in the pipeline, GW Pharmaceuticals is not expected to show a profit for at least the next couple of years.