GW PHARMA (GWP) - Lead drug approval close to fruition

ABOUT GW PHARMACEUTICALS

GW Pharmaceuticals (GWP) was founded in 1998 and listed on AIM, a market of the London Stock Exchange, in June 2001. The Group's lead programme is the development of a product portfolio of cannabinoid prescription medicines, including Sativex® Spray. In 1999 GWP commenced its first clinical trials evaluating different cannabinoid formulations as potential treatments in the fields of Multiple Sclerosis and pain. GW focused on the development of Sativex, an oromucosal spray with two principal cannabinoid components, Cannabidiol (CBD) and Delta-9 Tetrahydrocannabinol (THC). Since 1999, the safety and efficacy of Sativex has been studied in over 20 randomised placebo-controlled trials in over 3,000 patients. In 2003, GW entered into its first pharmaceutical licence agreement with Bayer Healthcare AG for the UK marketing rights to Sativex. This agreement was expanded to include Canada later that year. In 2005, GW and Almirall signed a licence agreement granting Almirall exclusive marketing rights to Sativex in Europe (ex-UK). In 2007, GW granted Otsuka the US development and marketing rights to the product.

Sativex was first approved in Canada in 2005 under Health Canada’s Notice of Compliance with conditions (NOC/c) policy for the treatment of neuropathic pain in MS. This approval was extended to cancer pain in 2007. In May 2009, a licence submission was made for Sativex in the UK and Spain for the treatment of MS spasticity. In the United States, the FDA granted a Phase III IND (permission to enter Phase III trials) for Sativex in 2006. A US-focused Phase IIb/III trial in cancer pain is currently ongoing.

SATIVEX APPROVAL IN EUROPE

GW Pharma submitted the European regulatory submission for Sativex for the treatment of spasticity due to Multiple Sclerosis on 20th May 2009. The UK regulatory authority (MHRA) in effect sponsored the application as RMS (Reference Member State). The application is being progressed through the DCP (Decentralised Procedure) which allows simultaneous approval in all EU member states once the paperwork for a MRP (Mutual Recognition Procedure) has been fully approved.

The DCP procedure timings are as follows: "The applicant requests one country to be the Reference Member State (RMS) in the procedure. After 70 days the RMS circulates the first Draft assessment report. The Concerned Member States (CMS) and the applicant can then make their comments. On the 120th day of the assessment procedure, the RMS circulates another Draft assessment report, including comments on the SPC, package leaflet and labelling texts. There is also a Mutual Recognition Procedure during the next 90 days, in which other Member States generally adopt the RMS's assessment, unless they have important objections on the grounds of a potentially serious risk to public health. In such situations, further discussions will also be held in the Coordination group for Mutual recognition and Decentralised procedures (CMD(h)). Once a positive opinion on products has been taken in the Mutual recognition and Decentralised procedure, translations of the SPC, package leaflet and labelling texts are submitted and a national marketing authorisation is issued"

So 210 days from 20th May is 16th December 2009. Approval will be pushed back as the company receives questions (which stops the regulatory clock) and sends in responses. Given the strong phase III clinical trial data, it certainly looks likely that Sativex approval will be granted by March 2010 in the U.K. and Spain and in the rest of Europe by the second half of 2010.

INVESTMENT CASE

Buy initiated at 84.5p. A likely positive outcome for Sativex approval within a 3 month time frame  backed up by a good package of large scale clinical studies plus the backing of 3rd party players such as Bayer makes GW pharma a long play.