GW Pharmaceuticals PLC Price Target Raised at AltaCorp Capital


Following GW Pharmaceuticals PLC (NASDAQ:GWPH) record closing price attained after stellar earnings and positive Phase III trials yesterday—as predicted—the price target increases have already begun.

In a research note disseminated this morning, AltaCorp Capital (ACC) upped their “outperform” rating from USD$185 to $221, reflecting the firm’s view that Epidiolex will become a blockbuster drug sooner than anticipated. This is significant since AltaCorp provides Canada’s only targeted investment bank coverage on the stock; in fact, GW Pharmaceuticals is the firm’s top pick in the sector.

Like Paradigm Capital the day before, AltaCorp highlights three similar areas for investors to get excited about.

ACC note that total revenues for the quarter came in at US$39.2M—up +400% sequentially above ACC of US$10.8M (11 analyst consensus of US$11.6M). Total revenue increase was attributed to Epidiolex US net sales of US$33.5M as the Company processed a large portion of the 4,500 Epidiolex new patient enrollments received in late 2018.

ACC notes GWPH’s positive results on Phase III clinical trial in Tuberous Sclerosis Complex (TSC). The results were pivotal for Epidiolex in the treatment of TSC, which marks the fifth consecutive positive Phase III trial for Epidiolex. Management intends to submit a supplemental New Drug Application (sNDA) in the fourth quarter of 2019, with commercialization expected for approval in H2/2020.

Finally, the investment bank noted that GW Pharmaceuticals management reiterated CAPEX and OPEX guidance for 2019. It expects operating expenses to be in the range of US$395.0-425.0M in 2019, reflecting the ramp-up of the Epidiolex launch in the US, product launch expenditures, and continued investment in research & development. CAPEX expected to be in the range of US$30.0-$40.0M in 2019, primarily directed to expansion of their manufacturing facilities as previously guided by the Company.

The sum of all this analysis led AltaCorp Capital to elevate their price target to $221/share—only finalizing the call once the necessary operating model adjustments were made.

Change in estimates: ACC has updated their estimates to reflect new 2019, 2020 and 2021 net revenue estimates. They have been increased to US$191.1M, US$472.8M and US$895.2M respectively; from US$105.7M, US$346.8M and US$546.6M. EPS estimates were moved up to (US$0.61)/sh, (US$0.20)/sh and US$0.66/sh, respectively from (US$0.85)/sh, (US$0.53)/sh and (US$0.06)/sh in the same periods.

In response to ACC’s note, and continued robust buying momentum, GWPH is having another stellar day. As of this publishing, GWPH has tacked-on another $2.09/share (+1.14%), forging a little deeper into possible record close territory.

Midas Letter will have additional coverage as events warrant.

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