A recent article by Reuters indicates that GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) has made the strategic decision to hire an investment bank as potential suitors approach the biotech firm, in hopes of exploring strategic alternatives.
In light of this, Cantor analyst Elemer Piros reiterates a Buy rating on shares of GWPH with a $165 price target, which represents a 53% increase from where the stock is currently trading.
Currently, the firm’s promising pipeline cannabis-based drug for epilepsy, Epidiolex, “represents the largest value driver in our model,” although Piros understands that if one or more of the four ongoing Phase III clinical trials fails to reach statistical significant, this could critically cut its prospects of approval.
GWPH’s cash flow as of July 2016 hit over $500 million, but Piros also foresees a potential financing risk with an estimated $153 million cash burn over the next year.
Ultimately, the analyst remains positive on the firm, concluding, “We estimate that the drug has a $2 billion peak sales potential in the U.S. and in Europe. With manufacturing being scaled up, drug supply won’t represent a constraint for achieving even higher sales. Considering the pharma-like pipeline behind Epidiolex, we would not be surprised if competition would arise for owning the entire company. We estimate that a takeout value could be in the vicinity of our target price ($165/ADS).”
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, Elemer Piros is ranked #3,950 out of 4,147 analysts. Piros has a 38% success rate and faces a loss of 14.0% in his annual returns. When recommending GWPH, Piros loses 7.9% in average profits on the stock.
TipRanks analytics demonstrate GWPH as a Buy. Based on 7 analysts polled in the last 3 months, 6 rate a Buy on GWPH, while 1 issues a Sell. The 12-month average price target stands at $129.67, marking a 22% upside from where the shares last closed.