Analysts offer commentary on cannabinoid pharmaceutical company GW Pharmaceuticals PLC-ADR (NASDAQ:GWPH) and biopharm firm Relypsa Inc (NASDAQ:RLYP) with differing opinions. One analyst sings GWPH’s praises after the company reached its primary endpoint for epileptic drug Epidiolex. Meanwhile, another analyst expresses concern over Relypsa’s Veltassa, citing various profitability challenges.
GW Pharmaceuticals PLC- ADR
Yesterday, GW Pharmaceuticals released positive Phase 3 study results of its drug Epidiolex in treating Davet syndrome, a childhood epileptic condition. The study met its primary endpoint, reducing monthly convulsive seizures by 39% compared to the placebo, which reduced the seizures by 13%. Following this news, the stock soared over 100% in pre-market trading.
Analyst Phil Nadeau of Cowen & Co. weighed in on the stock following the positive Phase 3 results. He believes the drug is on its way to FDA approval, stating, “We think this morning’s data make it very likely that Epidiolex will be able to secure an FDA approval.” As a result of the significant study results, the analyst believes “Epidiolex’s clinical development is now substantially de-risked.” Nadeu predicts that if approved, the drug will generate $700 million in revenue for the company in his 2021 estimates. GWPH plans to conduct a pre-NDA meeting with the FDA, and the analyst “[suspects] that GW will be able to begin rolling NDA submission following the meeting.”
Nadeau maintains an Outperform rating on the company with a $135 price target.
According to TipRanks, Phil Nadeau has a 36% success rate recommending stocks with an average return of 1.1% per recommendation. As of this writing, all 3 analysts polled by Tipranks who have rated the company in the past 3 months gave a Buy rating. The average 12-month price target for the stock is $142, marking a 68% upside from where shares last closed.
Morgan Stanley analyst Andrew Berens weighed in on Relypsa, maintaining his bearish stance on the stock due to hurdles surrounding Veltassa, the company’s lead product to treat hyperkalemia. The analyst describes the profitability challenges for the company, limited commercial opportunity for the drug, and reimbursement difficulties.
The analyst adds that based on the company’s guidance, it will not become profitable until it achieves 1.3 million Veltassa scripts annually. He explains, “Our analysis reveals that, with an optimistic 75% reimbursement rate and 25% COGS assumption, over 1.3mn Veltassa paid prescriptions would need to be filled in 2020 to break even, even including our forecasted E.U. royalties…We also note that in May, Veltassa is likely to face significant competition from a product (ZS-9) with much lower costs and in our opinion, a preferential profile and commercialization strategy.”
Reimbursement still remains a challenge as well. Relypsa has not achieved a Medicare formulary win and the drug has been accessible for 3 months. The analyst explains, “We believe obtaining broad Medicare formulary placement, along with preferential tier status, is a critical hurdle to potentially converting free drug samples to paid prescriptions, and ultimately realizing net revenues… Until we see significant progress on the payor front, we remain concerned about Relypsa’s ability to translate Veltassa scripts into net revenue.”
In light of these several issues facing the company, Berens reiterates an Underweight rating on the stock with a $9 price target. According to TipRanks, Andrew Berens has a 76% success rate recommending stocks with an average return of 22.6% per recommendation.
As of this writing, all 8 analysts who have rated the company in the last 3 months gave a Buy rating. The average 12-month price target for the stock is $53.29, marking a 271% upside from current levels.