Drug Development

GW Pharma spikes as the latest buyout rumors swirl around cannabinoid pipeline

Shares of GW Pharmaceuticals $GWPH shot up 23% Wednesday afternoon after Reuters reported that the company had hired Morgan Stanley to help manage some unsolicited interest in a buyout.

Investors are on heightened alert status for anything that looks like a deal in the works, and GW has been on a roll recently with back-to-back positive readouts for Epidiolex. The cannabinoid drug has proven promising for reducing seizures for Lennox-Gastaut syndrome as well as a rare form of severe epilepsy, which has helped push its stock price steadily northward.

Epidiolex uses a pure form of CBD, a compound found in marijuana. The plan now is to follow up with pre-NDA meetings with the FDA with a filing planned next year as some of the more enthusiastic analysts project peak sales in the billions.

The company has a market cap of $2.3 billion, which is still bolt-on size for any of the big buyout players in the market for new therapies.

Pfizer’s $14 billion Medivation buyout, which thwarted Sanofi’s desire for a takeover, has helped reinforce the common wisdom that biotechs with a desirable profile and sales potential are able to command some big premiums.

According to Reuters, GW hasn’t been seeking a bid, but the standard practice in these cases is to play as hard to get as possible, hoping to inspire a bidding war among competing buyers.

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