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GW Pharmaceuticals Stock Rises on Higher Epidiolex Sales

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On Monday, GW Pharmaceuticals (NASDAQ:GWPH) reported its first-quarter earnings, which ended on March 31. For the quarter, the company beat analysts’ revenue, EBITDA, and EPS expectations. The company posted revenues of $120.6 million, which beat analysts’ expectations by 11.3%. The adjusted EBITDA was negative $4.5 million, which was better than analysts’ expectation of negative $26.3 million. The company’s net losses were at $8.0 million compared to analysts’ expectation of a net loss of $26.9 million. GW Pharmaceuticals’ stock price rose due to its impressive first-quarter performance. Today, the company was trading 5.5% higher at 10:07 AM ET.

GW Pharmaceuticals’s Q1 performance

Compared to the first quarter of 2019, GW Pharmaceuticals’s revenue has more than tripled. During the quarter, the company’s revenue grew by 207.4% from $39.2 million in the first quarter of 2019. The growth in global Epidiolex sales drove the company’s sales. The Epidiolex sales across the world stood at $116.1 million. For the quarter, the company’s total deductions came in at $31.1 million compared to 7.5 million in the first quarter of 2019. Sequentially, the company’s revenue grew by 10.6% from $109.1 million in the fourth quarter of 2019.

GW Pharmaceutical’s cost of sales increased from $5.1 million last year to $10.8 million. However, as a percentage of net sales, the company declined from 13.0% to 9.0%. Meanwhile, the R&D (research and development) expenses rose by 33.8% to $45.9 million. The company’s R&D expenses increased due to the investment in its Epidiolex development program, clinical trials of Nabiximols, and its other programs still in the pipeline. Also, the company’s SG&A expenses rose by $16.1 million to $71.2 million. The company’s SG&A expenses increased due to the launch of Epidiolex in the US and the expansion of its commercial operations in Europe. Despite increased expenses, GW Pharmaceuticals’ net losses fell from $50.1 million to $8 million due to strong sales growth.

Liquidity

During the quarter, GW Pharmaceuticals utilized $18.6 million of cash in its operating activities—a decline from $58.4 million in the first quarter of 2019. The capital expenditure also declined from $12.3 million to $6.9 million. Notably, the company reacquired the commercialization rights for Sativex in the United Kingdom from Bayer for approximately $6.4 million. So, all of these activities lowered the company’s cash by $36 million. The company ended the quarter with cash and cash equivalents of $500.9 million.

GW Pharmaceuticals’ outlook

Amid the uncertainty surrounding COVID-19, GW Pharmaceuticals reiterated its guidance. The company’s management expects its R&D and SG&A expenses to $530 million–$560 million in 2020. Meanwhile, they expect the company’s capital expenditure to be $30 million–$40 million.

For 2020, analysts expect the company to report revenues of $528.9 million, which represents a YoY growth of 69.9% from $311.3 million in 2019. They also forecast the company’s adjusted EBITDA loss to decline from $109.2 million to $25.6 million.

Stock performance

So far this year, GW Pharmaceuticals has returned 4.4% as of May 11. The strong first-quarter performance could drive the company’s stock price. GW Pharmaceuticals is one of the few cannabis companies with positive returns this year. The company has outperformed its peers and cannabis ETFs. During the same period, Aphria (NYSE:APHA), Aurora Cannabis (NYSE:ACB), and OrganiGram Holdings (NASDAQ:OGI) have fallen by 32.6%, 68.8%, and 38.9%, respectively. The ETFMG Alternative Harvest ETF (NYSE:MJ) has declined by 31.7% during the quarter.

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