US Approves First Cannabis-Based Drug

The U.S. Food and Drug Administration has approved a cannabis-derived prescription medicine for the first time in the country’s history.

Epidiolex, a childhood epilepsy drug developed by British company GW Pharmaceuticals (GWPH), contains cannabidiol (CBD), one of the many chemical compounds found in marijuana plants. However, the treatment, administered in a syrup form, contains less than 0.1 percent of tetrahydrocannabinol (THC), the substance that makes people high.

In April a 13-member FDA advisory committee voted in favor of approving Epidiolex after clinical trials showed that it was effective at reducing seizures and posed minimal risk of side effects, such as potential liver complications.  (See also: What Stocks are on the Marijuana Index?)

Epidiolex is used to treat severe seizures in patients aged 2 years and older caused by rare forms of epilepsy called Dravet Syndrome (DS) and Lennox-Gastaut Syndrome (LGS). 

"Today's approval of Epidolex is a historic milestone, offering patients and their families the first and only FDA-approved CBD medicine to treat two severe, childhood-onset epilepsies," said Justin Gover, GW's Chief Executive Officer, in a statement. "This approval is the culmination of GW's many years of partnership with patients, their families, and physicians in the epilepsy community to develop a much needed, novel medicine."

“For those living with intractable seizures caused by LGS and Dravet syndrome, Epidolex represents a true medical advancement,” said Philip Gattone, president and CEO of the Epilepsy Foundation.  

Analysts Bullish

“While Epidiolex is derived from cannabidiol (CBD), the FDA noted it does not cause intoxication or euphoria that is seen in tetrahydrocannabinol (THC). Additionally, Epidiolex is the first FDA approval for the treatment of patients with Dravet syndrome, and the first in a new category of anti-epileptic drugs (AEDs),” said analysts from Cantor Fitzgerald in a note reported on by Benzinga. They reiterated their Overweight rating and increased their 12-month price target from $205 to $235/ADS.

Cowen & Co analysts have forecasted sales of $1.3 billion for the treatment by 2022, according to Reuters. Analyst Phil Nadeau has said that approval could have big implications for the use of CBD in drugs. “This should aid CBD in being efficiently rescheduled by the Drug Enforcement Administration,” he said. U.S. federal law states that marijuana does not have any medicinal value.

GW Pharma’s shares rose 3.62% in after-hours trading to $150.

The world's first marijuana ETF, Horizons Marijuana Life Sciences Index ETF (HMMJ.U.XTSE), allocates 9.52% of its combined weight to GW Pharma. The company also makes up 4.29% of the overall holdings in the U.S.-listed ETFMG Alternative Harvest ETF (MJ).  (See also: Why Aren't There More Cannabis ETFs?)

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