Here's how it's supposed to work. A biotech wins FDA approval for a promising new drug. The biotech stock then goes up. But that's not what happened for GW Pharmaceuticals (NASDAQ:GWPH) on Monday. GW Pharmaceuticals got the first part right. The biotech announced FDA approval for cannabidiol drug Epidiolex in treating Dravet syndrome and Lennox-Gastaut syndrome (LGS), both of which are rare forms of epilepsy. However, GW stock didn't go up. Instead, it dropped more than 4%. Why didn't the stock jump on the great news? Here are three reasons behind GW Pharmaceuticals' drop. 1. Overall market drag There's an old saying that a rising tide lifts all boats. However, a falling tide also brings all boats down. I think this was a big factor for GW Pharmaceuticals stock on Monday. Most stocks fell on reports that the Trump administration planned to impose new trade restrictions on China, and potentially other countries. What do these trade restrictions have to do with Epidiolex? Nothing. The FDA approval allows marketing of the drug only in the U.S., but the market doesn't care about such details. Many simply see that stocks are selling off, so they think they should sell off nearly every stock. It doesn't make sense, but it's what sometimes happens. 2. Approval wasn't a surprise Would GW Pharmaceuticals stock have gone up if the market wasn't having a down day? Probably, but not necessarily by a large amount. The approval of Epdiolex was fully expected. In April, an FDA advisory committee voted unanimously to recommend approval for the drug. This vote was based on stellar results from three late-stage clinical studies. The advisory committee couldn't find much not to like about Epidiolex. While the FDA doesn't have to follow the recommendations of advisory committees, it usually does. An analysis conducted by McKinsey found that the FDA approved a drug in 88% of the cases where an advisory committee had recommended approval. The actual approval of Epidiolex on Monday removed the sliver of a doubt that might have been in some investors' minds. However, I think that anticipation of an approval was already largely baked into GW Pharmaceuticals' stock price. 3. Now comes the hard part Another likely reason GW Pharmaceuticals stock didn't enjoy a solid bounce on Monday is that the biotech now faces the hard part -- achieving commercial success for Epidiolex. Actually, there's a hurdle before commercialization that GW must clear first: Epidiolex must be scheduled by the U.S. Drug Enforcement Administration (DEA), a process that can take up to 90 days. GW Pharmaceuticals will probably begin marketing Epidiolex in the U.S. in early fall. There are three keys to achieving commercial success. First, payers must cover Epidiolex. Second, physicians must prescribe the drug. Third, patients must want to take Epidiolex rather than use medical marijuana instead. I thought GW Pharmaceuticals executives made some good points at the Bank of America Merrill Lynch 2018 Health Care Conference in May. The company's president of North American operations, Julian Gangolli, stated that payers "get the science" and "understand the value" of Epidiolex. That's key to winning them over to cover the drug. I suspect that if payers cover Epidiolex, physicians will definitely prescribe it because of the unmet medical need in treating epilepsy. As for patients potentially taking medical marijuana instead of Epidiolex, GW Pharmaceuticals CEO Justin Gover pointed out that the costs of using cannibidiol (CBD) oils at the therapeutic dosages provided with Epidiolex are really high. He thought that patient out-of-pocket costs would be manageable -- and much lower than buying CBD products. I suspect this view is right. Will GW Pharmaceuticals stock go up? I think whether or not GW Pharmaceuticals stock does move higher depends entirely on what happens later this year and in 2019. A better-than-expected launch of Epidiolex would likely send shares soaring. Estimates for peak sales of Epidiolex are all over the map. Pessimists think the figure could be around $300 million. Market research firm EvaluatePharma projects peak sales close to $1 billion. The most optimistic analysts think the drug could make $2 billion or more. GW Pharmaceuticals' market cap currently stands at close to $4 billion. If the early launch of the drug hints that the optimists could be right, the stock has a lot of room to run even without additional pipeline victories. But anything short of a significant commercial success could cause GW Pharmaceuticals' stock price to sink a lot more than it did on Monday.<doc-sep>The Food and Drug Administration approved the first cannabis-derived drug on Wednesday. Called Epidiolex, the GW Pharmaceuticals drug is designed to treat two rare forms of childhood epilepsy using a marijuana compound called CBD. Experts say the approval will galvanize research into other marijuana-based drugs and unleash a sea change for the CBD industry. A new drug derived from marijuana just became the first of its kind to get the green light from the US government. Called Epidiolex, the drug is designed to treat two rare forms of childhood epilepsy using a cannabis compound called cannabidiol (or CBD). British-based GW Pharmaceuticals makes the drug. It does not contain THC, the well-known psychoactive component of marijuana responsible for the drug's characteristic high. The federal thumbs-up comes on the heels of several months of promising research results and a positive preliminary vote from the Food and Drug Administration this spring. Experts are hopeful that the approval will unleash a wave of new interest in the potential medical applications of CBD and other marijuana compounds. “This approval serves as a reminder," Scott Gottlieb, the FDA commissioner, said in a statement on Monday, "that advancing sound development programs that properly evaluate active ingredients contained in marijuana can lead to important medical therapies." In three large clinical trials which the FDA considered before giving Epidiolex the official green light, researchers presented strong evidence that the pharmaceutical-grade CBD in the medicine had the power to significantly curb some of the worst symptoms of two of the hardest-to-treat forms of epilepsy, known as Lennox-Gastaut syndrome and Dravet syndrome. "This is clearly a breakthrough drug for an awful disease," John Mendelson, a panel member and senior scientist at the Friends Research Institute, said at a public FDA meeting this spring that was called to discuss the scientific merits of the drug. But although the green light means that patients will soon be able to access Epidiolex with a doctor's prescription, many will also likely turn to less expensive sources of CBD, such as those sold in marijuana dispensaries. Researchers and advocates cautioned against this, however, with the caveat that it's impossible to verify that what's in those products is actually pharmaceutical-grade CBD. 'A boatload of evidence to show at this point' Courtesy GW Pharma Starting last spring with a study presented at the American Academy of Neurology's yearly meeting in Boston, GW Pharmaceuticals has consistently presented strong clinical studies that appear to support Epidiolex. "There’s a boatload of evidence to show for this drug at this point," Orrin Devinsky, a lead author on one of those studies and a neurologist at NYU Langone Health, told Business Insider. A month after the Neurology meeting, Devinksy and his colleagues published a positive study of the drug in children with Dravet syndrome in the New England Journal of Medicine. Roughly 43% of the children in that study who got the drug saw their number of seizures cut in half, and 5% stopped having seizures entirely. In comparison, children who got a placebo had barely any noticeable change in their symptoms. Almost exactly a year later, Devinksy and his team followed up those results with another favorable study in the same journal using a smaller dose of the drug in patients with Lennox-Gastaut. Devinsky said that low dose might be "the sweet spot" where most patients can achieve relief from symptoms without any unwanted side effects, such as drowsiness. Also, although Epidiolex is designed to treat only two types of epilepsy, medical professionals can technically prescribe it "off-label" for other conditions as well. (The anesthetic ketamine, for example, is prescribed this way for some hard-to-treat forms of depression.) "We would expect that once this is approved as a drug it's quite likely this will be tried in other populations off-label so it has a big opportunity to affect others," Lubbers said. Epidiolex vs. other CBD products Scientists and advocates representing families of patients with epilepsy are hailing Epidiolex's arrival as a long-awaited treatment. But they are also aware that desperate patients — especially parents of young children — may actively seek alternate sources of CBD that may be cheaper and don't require a doctor's prescription. In states where marijuana is legal (or in states with laws legalizing CBD on its own), oils and salves made with CBD are widely available. But experts caution that these products may not be what they seem. "What's different with [Epidiolex] is that this is a well-studied and well-controlled product," Laura Lubbers, the chief scientific officer of a nonprofit called Cure that funds epilepsy research, told Business Insider in April. But most dispensary-grade CBD products are not well-studied or well-controlled. For a 2017 study published in the Journal of the American Medical Association, researchers tested 84 products purchased from 31 different online CBD sellers. Roughly seven out of 10 items had different levels of CBD than what was written on the label. Of all of the items they tested, roughly half of the items had more CBD than was indicated; a quarter had less. And 18 of the samples tested positive for THC, despite it not being listed on the label. "The main thing is that CBD as approved by the FDA is pharmaceutical-grade CBD. It's manufactured under stringent standards, the same as other FDA-approved drugs," Shlomo Shinnar, the president of the American Epilepsy Society and a professor of neurology and epidemiology at the Albert Einstein College of Medicine, told Business Insider. "That’s not the same as when people tell you, 'Oh, I’ve got marijuana and it’s high in CBD,' or 'Oh, I've got a CBD product.'" A powerful catalyst for deeper research into cannabis-derived drugs An employee holds up cannabis in the laboratory at the headquarters of herbal medicines manufacturer Bionorica in Neumarkt, Germany February 9, 2018 REUTERS/Michaela Rehle Epidiolex's approval could also be a powerful catalyst for deeper research into other marijuana-derived medicines. Cannabis has more than 400 compounds, of which CBD and THC are only two, and researchers think the others could hold promise as well. The drug's green light also means that the Drug Enforcement Agency now has 90 days to reschedule CBD, which it listed in January of last year as a "marihuana extract" separate from "marihuana" or THC. That means instead of being listed alongside marijuana as a Schedule 1 drug with "no currently accepted medical use," CBD will soon be categorized as either a Schedule 2 or 3 drug, much like the popular ADHD medication Adderall. "We don't have a choice on that," DEA public affairs officer Barbara Carreno told Business Insider. "It absolutely has to become Schedule 2, 3, 4, or 5." Once that happens, it'll unleash what Carreno called a "sea change" for CBD manufacturers and the industry as a whole, which up until this point has existed in a legal grey area. Apart from CBD, researchers are also actively studying THC and other marijuana compounds for a range of potential medical uses, from relieving pain to soothing severe nausea. Although Epidiolex is the first marijuana plant-based drug to land FDA approval, the agency has already given the green light to drugs whose active ingredient is a lab-made version of THC, for example. In the meantime, experts look forward to seeing Epidiolex made available to patients in need. "I'm not currently aware of any other major new drugs that are close to being where this drug is," Shinnar said.<doc-sep>
(Reuters) - The U.S. health regulator approved GW Pharmaceuticals Plc’s epilepsy treatment on Monday, making it the first cannabis-based drug to win approval in the country and opening floodgates for more research into the medicinal properties of cannabis. FILE PHOTO: A flowering marijuana plant. REUTERS/Chris Wattie The drug’s approval permits its use in patients aged two years and older with Dravet Syndrome (DS) and Lennox-Gastaut Syndrome (LGS), rare childhood-onset forms of epilepsy that are among the most resistant to treatment. “This approval serves as a reminder that advancing sound development programs that properly evaluate active ingredients contained in marijuana can lead to important medical therapies,” said Food and Drug Administration Commissioner Scott Gottlieb. The drug, Epidiolex, is made up of cannabidiol (CBD), one of the hundreds of molecules found in the marijuana plant, and contains less than 0.1 percent of tetrahydrocannabinol (THC), the psychoactive component that makes people high. GW Pharma grows its own supply of cannabis in specialized glass houses in the United Kingdom to ensure uniformity in the genetic composition of the plants, which are then processed into a liquid solution of CBD. Although THC can induce paranoia, anxiety and hallucinations, CBD has the opposite effect and has been cited by scientists as a potential treatment for mental health issues. While supporters of legalizing marijuana say the decision is a step in the right direction, businesses reliant on the plant must contend with the federal government’s ban on its use. Based on the potential for abuse, the Drug Enforcement Administration (DEA) categorizes chemicals into five schedules, with Schedule 1 substances - like marijuana and heroin - considered the most deadly and deemed to have no medical benefits. As a result, Epidiolex’s launch remains at the discretion of the DEA, which must now evaluate the drug and consider reclassifying it as a substance that has medical properties, so as to allow GW to begin selling it. GW said it expects the reclassification to occur within 90 days. The company has not yet set a price for the drug and said it would work with insurance providers to ensure the medicine would be covered under health plans. GW’s Nasdaq-listed shares marginally fell in afternoon trading. The stock has run up nearly 50 percent in the past 12 months. Most patients with LGS and DS require multiple seizure medications and the majority are resistant to currently approved anti-epileptic drugs. The two epilepsy forms are severe and associated with high rates of mortality. Some LGS patients have to wear helmets to avoid brain injuries from “drop seizures”, where muscles suddenly become limp and cause standing patients to collapse. Epidiolex would also be the first approved therapy for DS, treatments for which are currently limited to a combination of seizure medication and drugs to prevent emergencies. Treatments available for both disorders are far from perfect and some patients resort to buying “self-prescribed” CBD online or from unregulated vendor sites, Dr. Pavel Klein, founder of the Mid-Atlantic Epilepsy and Sleep Center, said. “I hope patients have conversations with their physicians about whether this product (Epidiolex) provides them with treatment they have been looking for with other unapproved products,” said Douglas Throckmorton, deputy director of regulatory programs at the FDA’s Center for Drug Evaluation and Research. (This version of the story has been refiled to correct paragraph 12 to show DEA must make a decision within 90 days of FDA approving a medicine, instead of there is no time limit.)