Morgan Stanley Sees Favorable GW Pharma (GWPH) Entry Point Ahead of Second LGS Trial Data
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Morgan Stanley analyst Andrew Berens issued positive comments on GW Pharma (NASDAQ: GWPH) saying they see a favorable entry point ahead into the second Phase 3 LGS data given their assessment of five potential scenarios and anticipated movements. They believe the most likely outcome is data showing efficacy in-line with the prior LGS trial, moving GWPH to ~$120. They see fair value ~$112 into the data
Berens commented, "Ahead of the data release for Epidiolex from the second Phase 3 Lennox-Gastaut Syndrome (LGS) trial, we have performed a scenario analysis of possible outcomes. We see five potential outcomes, with resulting stock reactions ranging
from +25% in a best-case scenario to -50% in an unlikely worst-case scenario. We believe the most likely outcome is Epidiolex demonstrating similar efficacy and placebo rates as what was seen in the first LGS study, and for shares to react positively given the incrementally positive data and continuing de-risking of the program. Importantly, we note that perception of strategic optionality following a Sept 7 Reuters story (available here) may impact share reaction following the data release, potentially fueling exaggerated movements in the scenarios given the perceived impact on optionality, factors that we consider in our analysis. Our scenario analysis suggests fair value of $~112 into the data release, slightly higher than current share prices."
The firm reiterated an Overweight rating and price target of $152 on GWPH.
Shares of GW Pharma closed at $109.76 yesterday.
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