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Marijuana and opioids have been used to treat serious ailments for an awfully long time, and they're about to get some important upgrades. Some investors are convinced GW Pharmaceuticals PLC (NASDAQ: GWPH) and Cara Therapeutics Inc. (NASDAQ: CARA) have found the right way to improve on some old favorites.
With one about to launch the first FDA-approved drug extracted from marijuana and the other developing an itch-relieving opioid, investors are right to wonder which stock is the better option. To decide, let's look at the different directions they're about to take.
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The case for GW Pharmaceuticals PLC
There are around 2.2 million Americans living with epilepsy and around one-third of them keep having seizures despite using one or more of today's standard therapies. On the surface, GW Pharmaceuticals looks like a great stock to buy because it recently earned approval for a new class of anti-epileptic drugs, and it appears to work when others don't.
Epidiolex is purified cannabidiol (CBD) extracted from real marijuana. Since CBD doesn't make patients high, the Drug Enforcement Agency recently placed it in the least restrictive schedule of the Controlled Substances Act, which makes it the only CBD Americans can purchase legally under federal law.
For a small population with two forms of childhood-onset epilepsy, Epidiolex is about to make a big difference. Earlier this year, investigators showed that a majority of Lennox-Gastaut syndrome patients who added Epidiolex to other treatments experienced a 41% reduction, or better, to their seizure frequency. When you consider the median patient was experiencing 74 drop seizures per month at the beginning of the study, strong demand seems more than reasonable.
Investors need to realize that less than 1,000 children are diagnosed each year with disorders that Epidiolex is approved to treat in the U.S. and that might not drive sales high enough to support the company's recent $4.3 billion market cap. In order for this stock to continue rising, GW Pharmaceuticals needs to convince investors that Epidiolex can generate sales beyond its limited indications, which won't be easy.
Insurers are hesitant to cover expensive off-label treatments, which could drive plenty of adults to seek a less expensive option. That could be a problem because non-FDA-approved CBD is already a big industry, and many patients who use it to treat epilepsy are convinced that it works much better when mixed with cannabinoids that Epidiolex doesn't contain. To top it off, a formulation of fenfluramine being developed by Zogenix recently produced impressive results for a group of patients with Dravet syndrome, one of two forms of epilepsy that Epidiolex is approved to treat.