Project 10: GWPHLiu, Yi and Zhou, Bo08-30-2015PSIC © http://pstrand.com

Legalization of Marijuana (Cannabis)Marijuana, once a useful herb medicine in history, has been classified as a strictly controlled psychoactive substance in the last century. Recently, the need for medical use and the desire for recreational use have driven many legislations to loosen the control.

Nature Outlook Special Issue (09.2015):

www.nature.com/nature/outlook/cannabis

**Marijuana Research Supports Its Safety and Benefits (2015)

神农

Medical Potentialhttp://upliftingwellness.org/medical-cannabis/

Challenge and mismatch in use vs knowledge

1. Lack of research: Research has been undermined by a lingering assumption that all cannabinoids share the properties of THC (responsible for psychoactivity) — and regulators apply the same restrictions to all of them

2. How will rising use resulted from looser control affect public health?

http://www.nature.com/nature/journal/v525/n7570_supp/full/525S4a.html

Cannabis compounds: gold mine?

http://www.nature.com/nature/journal/v525/n7570_supp/full/525S2a.html

GWPH is world leader in Cannabinoid scienceCompany Web Lead Product Financial

InSys www.insysrx.com/ Cannabidiol Oral Solution (CBD)

INSY (2.7B)

Cannabis Science http://www.cannabisscience.com/ Phase I OTC:CBIS ($0.01/shr, 18M)

Inmed Pharma http://www.inmedpharma.com Pre-clinical OTC:IMLFF (MCap: 8M)

Phytecs http://www.phytecs.com/ Not focused. Also covers food, cosmetics Private

GW Pharma: Leader in Cannabis science

Controlled cultivation● Concentrations of active substances vary a lot in marijuana products sold in stores. ● High levels of chemical consistency are important in applications made to medical regulatory

authorities. ● At GW Pharmaceuticals' growing facility, cannabis clones are grown to ensure chemical

consistency and to meet commercial supply capacity.

Pipeline1. One “partnered” product

approved in EU. 2. One product in phase III

with two indications: two types of childhood epilepsy.

EpidiolexCannabidiol

a major phytocannabinoid

accounting for up to 40% of the plant's extract.[5]

have a wider scope of medical applications than tetrahydrocannabinol (THC).

An orally-administered liquid containing CBD has received orphan drug status in the US, for childhood epilepsy.

Childhood epilepsy: unmet medical needs

Dravet Syndrome 1. Syndromes are highly

fragmented.

2. Dravet syndrome is a severe infantile-onset, genetic, drug-resistant epilepsy syndrome with a distinctive but complex electroclinical presentation.

3. 5,440 patients in US and 6,710 patients in EU under 20 [vii], [viii].

4. no FDA approved treatments[xii]. SOC usually involves a combination of anticonvulsants: clobazam, clonazepam, levetiracetam, topiramate and valproic acid .

Lennox-Gastaut syndromeLGS, is a rare disorder characterized by multiple types of seizures with slow spike wave

complexes on EEG, such seizures usually beginning before 4 years of age.

14,000 – 18,500 patients in US [vi] and 23,000 – 31,000 patients in EU under 18.

Drug resistance is one of the main features of LGS[vii]. Often requires broad spectrum anti-epileptic drugs and/or polypharmacy[viii]. It will also depend on the seizure type as some treatments that are effective for one type of seizure may worsen another. The treatments already approved by the FDA for LGS and used as adjunctive therapy with existing medications are: Onfi (clobazam); Banzel (rufinamide); - Topamax (topirimate)).

http://www.gwpharm.com/Lennox-Gastaut.aspx

Trial efficacy resultsOnly median, no distribution (stdev) results provided.

9% total pts, 16% Dravet patients were seizure free after treatment.

Epidiolex Trial Design: 2nd Darvet and LGS

Add placebo control and randomized. previous trials were either controlled or randomized

Safety: lots of SAEs

SAEs that were deemed possibly treatment related

occurred in 10% patients

Chance of approval1. Neurology low first round rate 37%2. lots of SAEs3. Controversial Marijuana4. First time NDA, small company

}=> First round CRL

Effective with some patients. FDA will eventually approve it.

GW Pharma: peak sales of pipeline productsEdison's healthcare team forecasts peak sales for [link]:

Epidiolex in Dravet syndrome (DS) of $288m, THC/CBD (GBM) of $246mGWP42004 (type 2 diabetes) of $1,025m. Sativex peak sales potential of $814m – MS Spasticity at $278m (US $176m,

ex-US $102m) and cancer pain at $536m (US $350m, ex-US $186m).

Financial

- Valuation:- 12.2013 $48~59/share [link]- 04.2015 $~80/share [link]

- Technical analysis: - downtrend along with bear market- a few price gaps to be filled (see pic)

- 财报 : little debt (funded by equity); expense up big recently due to phase III trial- public offering

- $8.9 5.01.2013 (cheap IPO; was an ignored gem)- $86.83 6.18.2014 (We should buy at most half price of these guys)- $112 4.28.2015

PSIC RecommendationAs of 9.27.2015: 1. GWPH, leader in cannabis science, is a good company.

2. Downtrend of GWPH and biotech sector in general is apparent. GWPH is overvalued at this price ($99).

3. Bear market will probably bring down the price further. It will be more attractive below $40, or even $20.

4. Let’s be patient and wait for the bear to do its job.