GW could be next big pharma takeover target

Marijuana-based drug specialist GW Pharmaceuticals is emerging as a takeover target, according to press reports, as big pharma companies seek to buy its key epilepsy medicine.

GW's shares soared this year after Epidiolex (cannabidiol) met primary endpoints in two phase 3 studies for treatment of Lennox-Gastaut Syndrome and Dravet Syndrome – rare kinds of childhood epilepsy.

The UK-based company, which is worth around £2 billion, has also begun a phase 3 trial of Epidiolex in a third indication, Tuberous Sclerosis Complex (TSC).

According to press reports, GW has hired investment bank Morgan Stanley to help handle approaches from pharma.

In August, Pfizer bought cancer drug firm Medivation for $14 billion, suggesting that the pharma M&A market is hotting up.

But Reuters reported that GW is not exploring a sale and there is no certainty that a deal will occur.

The identity of potential suitors has not been revealed. But the reports were enough to send GW's share price soaring to more than £6.60 each on the London stock exchange, although they have since fallen back.

In a research note, Edison predicted Epidiolex will generate peak sales of $195m in Dravet syndrome, $601m in Lennox-Gastaut and $255 million in TSC, based on a 2018 launch year.

This was in line with consensus forecasts compiled by Thomson Reuters Cortellis, which suggest Epidiolex could generate annual sales of $1.1 billion by 2021.

GW already markets Sativex (nabiximols) in multiple sclerosis spasticity, but a failed attempt to get this drug approved in cancer pain have meant sales have fallen short of expectations.

Neither GW nor Morgan Stanley were prepared to comment.