Preliminary results from GW Pharmaceuticals (AIM: GWP) helped the share price recover some of the losses from a disappointing 2006 share performance. GW develops and manufactures cannabinoid medicines, including Sativex which is currently available in Canada on prescription and in restricted use in Spain. If you hadn?t already guessed, GW makes pain-relief drugs based on cannabis. And it is this use of cannabis as a medicinal form of pain relief that has slowed the commercialisation of the product. One can only imagine the additional scrutiny a new drug must undergo when the primary source of the medicine is a plant that falls foul of most western laws.
Despite the hurdles, GW has made considerable progress in developing the drug pipeline. Sativex was approved in Canada in 2005 as a treatment for symptomatic relief of neuropathic pain in adults. The market may be relatively small in Canada, but the approval gained the company much needed revenues and breathing space to continue working on approval processes for Sativex in other territories. Since the initial approval in Canada, the company has applied for additional approval to use the product in the treatment of pain in patients with advanced cancer that cannot be relieved by opioid medications.
The company?s strategy for Sativex is to seek approval for its use in four particular areas; MS spasticity, MS neuropathic pain, peripheral neuropathic pain and cancer pain. GW is targeting multiple applications across various territories including Europe, United States, Canada and the United Kingdom. Success in seeking approval for the product is patchy, but the company does have regulatory applications and Phase III trials ongoing in a number of target markets, so this is certainly not an early stage drug development company. It should be noted that GW is caring out Phase III trials for each of its four core areas of pain relief. Therefore regulatory approval for one type of pain relief does not guarantee approval for use in other types of pain relief. This also means that GW has to carry out multiple Phase III trials in different territories until it has built up enough data to submit directly to regulatory bodies without having to duplicate the work. The key to GW?s success in 2007 will be gaining regulatory approval beyond Canada and limited use in Spain. Clearly the big market the crack is the United States, but Europe and the United Kingdom are important markets too.
Perhaps unusually, Canada approved the drug before the United States. The two countries health agencies tend to work in parallel to one another and drug approvals tend to occur in the United States first with Canada shortly following. It may just be that GW?s acceptance in Canada and relative success to date may help boost its chances of approval in the United States. Preliminary results for the period ending 30th September, 2006 were in line with market expectations. The company had revenues of £1.98 million of which £1.25 million came directly from Sativex sales. The company also booked a one off £12 million European licence signature fee from Almirall which will be recognised over 15 years. Cash in the bank surged to £19.9 million and the net loss was £11.9 million.
GW isn?t valued on revenues however; instead it is valued on the potential revenue strength of Sativex and other drugs the company is researching. The most important milestone in 2007 will likely be the signing of a licensing partner for the United States and regulatory approval in four European countries to market Sativex for MS Spasticity.