Better Buy: GW Pharmaceuticals vs. Corbus Pharmaceuticals
The healthcare and the marijuana sectors are probably the only two sectors in the limelight right now. All eyes are on the healthcare sector to finally find a cure to put an end to the coronavirus crisis. Meanwhile, the cannabis industry is attracting consumers hoping for some relief with the help of marijuana. Medical marijuana is known to have helped with many health issues and has even worked better than conventional medicines in some cases.
Cannabidiol (CBD)-based products are in huge demand globally, and these two pharmaceutical-biotech companies are known for their CBD-based products. Both Cambridge, U.K.-based GW Pharmaceuticals (NASDAQ: GWPH) and Massachusetts, U.S.-based Corbus Pharmaceuticals Holdings' (NASDAQ: CRBP) stocks are up double-digits to 29.4% and 27.2% year to date, while the market is down by 0.66% as tracked by the SPDR S&P 500 ETF. Here's what's behind the surge and why one of these companies is the better bet.
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GW Pharmaceuticals: no stopping the growth of the maker of Epidiolex
GW Pharmaceuticals has been seeing staggering revenue growth this year, and it appears it could further surge thanks to the rising sales of Epidiolex. Epidiolex is a CBD-based prescription drug that is mainly used to treat epileptic seizures related to Lennox-Gastaut syndrome and Dravet syndrome, diseases which begin in early childhood.
The global sales from Epidiolex were $116.1 million in the first quarter. Of this amount, the U.S. contributed $106.1 million, reflecting the value and popularity of the brand. Total sales for the company increased to $120.6 million from $39.2 million in the year-ago period.
Further good news for Epidiolex is the recent reclassification by the U.S. Drug Enforcement Administration (DEA), which reclassified the drug from Schedule 1 (with more restrictions) to Schedule V (with fewer restrictions). Last month, under the Misuse of Drugs Regulations 2001 in the U.K., it was reclassified from Schedule 2 to Schedule 5. These reclassification changes allow the drug to be more accessible to patients in both countries.
Management expects "significant growth prospects for Epidiolex in the U.S. and Europe" that will allow GW Pharmaceuticals' revenue to soar. Epidiolex enjoys a growing market presence. It has already captured the U.S. markets despite CBD-based products facing hesitation from the Federal Drug Administration. In Europe, GW Pharmaceuticals launched the drug in Germany and the U.K. The company also plans to launch Epidiolex in other major European markets soon.
Having cleared regulatory hurdles and showing promising growth, the drug is attracting more interest from investors.
What's the view for Corbus Pharmaceuticals
Corbus Pharmaceuticals is a biotech company whose future now hangs on the success or failure of its endocannabinoid drug called lenabasum. Corbus conducts clinical-stage drug trials for medicines that target the endocannabinoid system. Lenabasum is a synthetic cannabinoid drug that triggers the endocannabinoid to resolve chronic inflammation and fibrotic processes. It is currently being evaluated under trials not only for systemic sclerosis but also for cystic fibrosis, dermatomyositis, and systemic lupus erythematosus.
Corbus plans to release top-line data from its Phase 3 clinical trial of lenabasum for systemic sclerosis by the summer of 2020 and the results of a Phase 2b study of lenabasum for treatment of cystic fibrosis by the third quarter of 2020.
Corbus reported a net loss of $29 million in its first quarter and revenue of $1.8 million, which fell by $0.1 million from the year-ago quarter. It also saw a rise in operating expenses to $31.6 million mainly because of clinical studies' costs and costs associated with the manufacture and supply of lenabasum for clinical trials.
Which choice makes more sense?
GW Pharmaceuticals looks more promising than Corbus, given the popularity of Epidiolex and the extent to which it has driven the company's revenue and stock price. It also has a strong balance sheet with cash and cash equivalents of $500.9 million as of the end of the first quarter. So far in July, shares of GW Pharmaceuticals are up 7.2%, while Corbus's shares are down 17.1%, with the market up 2.9%.
Corbus Pharmaceuticals' future hangs on the success of lenabasum clinical trials, which has the potential to boost the stock price. It ended its first quarter with $46.6 million in cash and cash equivalents.
I would wait for its first-quarter results to know more before making any investment plans into this stock. Meanwhile, the evident success of GW Pharmaceuticals makes this biotech-marijuana stock one you should consider.
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