Analyzing GW Pharmaceuticals’ Q4 Earnings and Outlook

On Tuesday, GW Pharmaceuticals (NASDAQ:GWPH) reported its fourth-quarter earnings after the market closed. For the quarter, the company reported revenue of $109.1 million, which beat analysts’ expectation of $105.1 million. However, the company’s adjusted EBITDA and net profits were lower than analysts’ expectation. The company reported a negative EBITDA of $17.96 million compared to analysts’ expectation of a negative EBITDA of $16.18 million. The net losses came in at $24.95 million compared to analysts’ expectation of $15.75 million. The higher-than-expected EBITDA and net losses disappointed investors. As a result, the stock fell 5.2% in after-market trading hours on Tuesday.

GW Pharmaceuticals’ Q4 performance

Compared to revenue of $6.65 million in the fourth quarter of 2018, GW Pharmaceuticals reported impressive revenue growth in the fourth quarter of 2019. Also, the company’s revenue grew 19.9% from $90.97 million in the third quarter. During the quarter, Epidiolex’s global sales contributed $104.5 million, which drove the company’s revenue growth. The company incurred total deductions of $22.6 million from its gross sales mainly due allowance associated with Epidiolex.

For the fourth quarter, GW Pharmaceuticals’ cost of sales was at $7.30 million, which is 6.7% of the company’s total revenues. Meanwhile, the company incurred a cost of sales of $1.83 million in the same quarter of the previous year, which translated to 27.5% of the total revenue. The R&D costs increased from $29.1 million to $43.5 million during the quarter. The company’s ongoing Epidiolex development program has increased the company’s R&D expenses. GW Pharmaceuticals’ SG&A expenses also increased from $49.1 million to $78.4 million. The costs associated with the introduction of Epidiolex in the US and the company’s buildout of its commercial operations in Europe have increased its SG&A expenses.

GW Pharmaceuticals has reported net losses of $24.9 million for the quarter. The amount is an improvement from a net loss of $71.9 million in the fourth quarter of 2018. However, in the third quarter, the company reported a net loss of $13.76 million.

Outlook

To drive its sales, GW Pharmaceuticals wants to broaden its prescriber base, expand payer coverage, and enter the long-term care segment. Also, the company expects to launch its TSC indication later this year. In September 2019, Europe approved Epidiolex. In the fourth quarter of 2019, the company launched Epidiolex in Germany. GW Pharmaceuticals formally launched the drug, which treats seizures, in the UK late in January 2020. The company also plans to launch the drug in France, Italy, and Spain later this year.

GW Pharmaceuticals is also working to get approval to treat seizures associated with TSC (tuberous sclerosis complex) in the US and Europe. Earlier in February, the company submitted a supplemental New Drug Application to the FDA for Epidiolex, which could treat seizures associated with TSC. The company also plans to file the European TSC data by the end of the first quarter of this year. The approval could expand the company’s target segment significantly. The company also announced that it will commence clinical programs to study the effectiveness of nabiximols in treating spasticity associated with multiple sclerosis from a spinal cord injury and posttraumatic stress disorder. The company continues to work to develop drugs to treat autism and schizophrenia.

For 2020, analysts expect GW Pharmaceuticals to report revenues of $538 million. The amount represents a rise of 72.8% from $311.3 million in 2019. They also expect the company to become profitable in 2020. Analysts expect that GW Pharmaceuticals will report an adjusted EBITDA of $39.4 million and a net income of $25.2 million this year.

Stock performance

Last year, when the entire cannabis sector was going through a tough period, GW Pharmaceuticals returned 7.4%. The company has continued its upward momentum this year. So far, the company has returned 11.9%. GW Pharmaceuticals stock could fall today after it reported higher-than-expected net losses in the fourth quarter. Meanwhile, the company has outperformed its peers this year. YTD, Cresco Labs (OTCMKTS:CRLBF), Curaleaf Holdings (OTCMKTS:CURLF), and Green Growth Brands (NYSE:GGB) have fallen by 28.2%, 14.1%, and 63.8%, respectively. Green Growth Brands reported its second-quarter earnings on Monday. To learn more about the company’s second-quarter performance, read Green Growth Brands Reported Mixed Q2 Performance.