A equity research report on GW pharma. Focus its leader position in Cannabis research and development. Global trend of legalizing Cannabis give GW pharma great potential.

1. Project 10: GWPH
Liu, Yi and Zhou, Bo
08-30-2015
PSIC © http://pstrand.com

2. Legalization of Marijuana (Cannabis)
Marijuana, once a useful herb medicine in history, has been classified as a strictly controlled
psychoactive substance in the last century. Recently, the need for medical use and the desire for
recreational use have driven many legislations to loosen the control.
Nature Outlook Special Issue (09.2015):
www.nature.com/nature/outlook/cannabis
**Marijuana Research Supports Its Safety and Benefits (2015)
神农

3. Medical Potential
http://upliftingwellness.org/medical-cannabis/

4. Challenge and mismatch in use vs knowledge
1. Lack of research: Research has been undermined by a lingering assumption that all
cannabinoids share the properties of THC (responsible for psychoactivity) — and regulators
apply the same restrictions to all of them
2. How will rising use resulted from looser control affect public health?
http://www.nature.com/nature/journal/v525/n7570_supp/full/525S4a.html

5. Cannabis compounds: gold mine?
http://www.nature.com/nature/journal/v525/n7570_supp/full/525S2a.html

6. GWPH is world leader in Cannabinoid science
Company Web Lead Product Financial
InSys www.insysrx.com/
Cannabidiol Oral Solution
(CBD)
INSY (2.7B)
Cannabis Science http://www.cannabisscience.com/ Phase I
OTC:CBIS
($0.01/shr, 18M)
Inmed Pharma http://www.inmedpharma.com Pre-clinical
OTC:IMLFF
(MCap: 8M)
Phytecs http://www.phytecs.com/
Not focused. Also
covers food, cosmetics
Private

7. GW Pharma: Leader in Cannabis science

8. Controlled cultivation
● Concentrations of active substances vary a lot in marijuana products sold in stores.
● High levels of chemical consistency are important in applications made to medical regulatory
authorities.
● At GW Pharmaceuticals' growing facility, cannabis clones are grown to ensure chemical
consistency and to meet commercial supply capacity.

9. Pipeline
1. One “partnered” product
approved in EU.
2. One product in phase III
with two indications: two
types of childhood
epilepsy.

10. Epidiolex
Cannabidiol
a major phytocannabinoid
accounting for up to 40% of the plant's extract.[5]
have a wider scope of medical
applications than tetrahydrocannabinol (THC).
An orally-administered liquid containing CBD has received orphan drug status in the US, for
childhood epilepsy.

11. Childhood epilepsy: unmet medical needs

12. Dravet Syndrome
1. Syndromes are highly fragmented.
2. Dravet syndrome is a severe
infantile-onset, genetic, drug-
resistant epilepsy syndrome with a
distinctive but complex
electroclinical presentation.
3. 5,440 patients in US and 6,710
patients in EU under 20 [vii], [viii].
4. no FDA approved treatments[xii].
SOC usually involves a combination
of anticonvulsants: clobazam,
clonazepam, levetiracetam,

13. Lennox-Gastaut syndrome
LGS, is a rare disorder characterized by multiple types of seizures with slow spike wave complexes
on EEG, such seizures usually beginning before 4 years of age.
14,000 – 18,500 patients in US [vi] and 23,000 – 31,000 patients in EU under 18.
Drug resistance is one of the main features of LGS[vii]. Often requires broad spectrum anti-
epileptic drugs and/or polypharmacy[viii]. It will also depend on the seizure type as some
treatments that are effective for one type of seizure may worsen another. The treatments
already approved by the FDA for LGS and used as adjunctive therapy with existing medications
are: Onfi (clobazam); Banzel (rufinamide); - Topamax (topirimate)).
http://www.gwpharm.com/Lennox-Gastaut.aspx

14. Trial efficacy results
Only median, no distribution (stdev) results provided.
9% total pts, 16% Dravet patients were seizure free after treatment.

15. Epidiolex Trial Design: 2nd Darvet and LGS
Add placebo control and
randomized. previous trials
were either controlled
or randomized

16. Safety: lots of SAEs
SAEs that were deemed
possibly treatment related
occurred in 10% patients

17. Chance of approval
1. Neurology low first round rate 37%
2. lots of SAEs
3. Controversial Marijuana
4. First time NDA, small company
}=> First round CRL
Effective with some patients. FDA will eventually approve it.

18. GW Pharma:
peak sales of pipeline products
Edison's healthcare team forecasts peak sales for [link]:
Epidiolex in Dravet syndrome (DS) of $288m,
THC/CBD (GBM) of $246m
GWP42004 (type 2 diabetes) of $1,025m.
Sativex peak sales potential of $814m – MS Spasticity at $278m (US $176m,
ex-US $102m) and cancer pain at $536m (US $350m, ex-US $186m).

19. Financial
- Valuation:
- 12.2013 $48~59/share [link]
- 04.2015 $~80/share [link]
- Technical analysis:
- downtrend along with bear market
- a few price gaps to be filled (see pic)
- 财报: little debt (funded by equity); expense up big recently due to phase III trial
- public offering
- $8.9 5.01.2013 (cheap IPO; was an ignored gem)
- $86.83 6.18.2014 (We should buy at most half price of these guys)
- $112 4.28.2015

20. PSIC Recommendation
As of 9.27.2015:
1. GWPH, leader in cannabis science, is a good company.
1. Downtrend of GWPH and biotech sector in general is apparent. GWPH is
overvalued at this price ($99).
1. Bear market will probably bring down the price further. It will be more
attractive below $40, or even $20.
1. Let’s be patient and wait for the bear to do its job.