Why Marijuana Stock GW Pharmaceuticals Gained 21% in May

What

GW Pharmaceuticals (NASDAQ: GWPH) jumped 21.1% in May, according to data provided by S&P Global Market Intelligence. While there didn’t seem to be much news for the marijuana drug company last month, the increased valuation is likely tied to investors who jumped in ahead of a Food and Drug Administration (FDA) decision on GW Pharmaceuticals’ epilepsy drug Epidiolex, which is due later this month.

So what

The FDA is scheduled to make a decision on or before June 27 about Epidiolex as a treatment for two rare forms of epilepsy called Dravet syndrome and Lennox-Gastaut syndrome. That date is only a goal, so the decision could come earlier — or even later, although the FDA has been generally on time these days.

After a positive FDA advisory committee meeting, an approval seems likely. Technically, the agency isn’t required to follow the recommendation of its outside advisers, but given the ringing endorsement and the unmet medical need for patients with Dravet syndrome and Lennox-Gastaut syndrome, an approval seems likely.

Image source: Getty Images.

Now what

The one potential place where GW Pharmaceuticals could get tripped up is in the manufacturing of Epidiolex. Other FDA approved drugs that are based on compounds in marijuana are synthesized as pure chemicals, but GW Pharmaceuticals manufactures Epidiolex from the plant itself. There’s nothing inherently wrong with a plant-extract drug, but the FDA will want to be convinced that the manufacturing is consistent, so patients are getting the same dose every time.

Unfortunately, manufacturing is a bit of a black box for investors, as it’s proprietary and therefore not discussed publicly by the FDA. On the plus side, if the FDA does approve Epidiolex, GW Pharmaceuticals will have an upper hand against generic competition trying to take similar manufacturing processes after its patents run out.

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