Markets

Here’s Why GW Pharmaceuticals Dropped 12% in August

What happened

Shares of GW Pharmaceuticals (NASDAQ: GWPH) dropped 12.2% in August, according to data provided by S&P Global Market Intelligence, after the company posted fairly solid second-quarter results.

So what

Sales of Epidiolex, a cannabidiol (CBD) drug derived from marijuana, more than doubled from the first quarter to the second quarter with over 12,000 patients having received the drug and a "vast majority" remaining on the therapy, according to the company.

On the bottom line, GW Pharmaceuticals posted a profit of $0.21 per share, although that was entirely due to selling a Rare Pediatric Priority Review Voucher. If a company doesn't need the voucher, which can be turned in for a faster FDA review, it can be sold -- as GW Pharmaceuticals did for a little over $104 million.

The company's operating loss improved to $29.3 million from $81.4 million in the year-ago quarter.

Overall, this seems to be a sell-the-news issue for the cannabis-focused biotech. It took about a week to erase the post-earnings gains, and then it was downhill from there. The fact that GW Pharmaceuticals was one of the best-performing cannabis stocks on the market so far in 2019 probably contributed to the decline. Even after the rough month, it's still up over 45% for the year.

Marijuana growing in a greenhouse

Image source: Getty Images.

Now what

With growth likely to continue, this move could be a good opportunity for investors to buy GW Pharmaceuticals on the cheap(er).

In July, the company gained a positive opinion from the European Medicines Agency's Committee for Medicinal Products for Human Use for Epidiolex as a treatment for Lennox-Gastaut syndrome and Dravet syndrome. In the EU, the drug will go by the brand name Epidyolex.

The European Commission should give the rubber-stamp final approval in the next few weeks. GW Pharmaceuticals will be able to launch in some European countries quickly, but many countries will require negotiations with national healthcare organizations before the company can start benefiting from the additional approval.

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Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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