Measuring Up: Two NASDAQ-traded Cannabis Stocks Announce Earnings

By Michael Berger of Technical420.com

Two Nasdaq traded cannabis companies announced earnings during the last week. These companies, Insys Therapeutics (INSY) and GW Pharmaceuticals (GWPH), are focused on improving daily life for millions of people around the world by developing medicines derived from cannabis.

Insys Therapeutics, Inc. (INSY)

Insys Therapeutics, Inc. is commercial-stage specialty pharmaceutical company that develops and commercializes innovative supportive care products. INSY is one of the few NASDAQ traded companies that is focused on the development of medicines derived from cannabis. Its pharmaceuticals portfolio consists of one approved product and a number of product candidates targeting cancer supportive care and cancer therapy. On August 19, 2011, the FDA approved its Dronabinol SG Capsule product, a generic equivalent to Marinol, for the treatment of chemotherapy induced nausea and vomiting (CINV), and anorexia associated with weight loss in patients with acquired immune deficiency syndrome.

On May 7th, INSY announced its financial results for first quarter of 2015 which ended on March 31, 2015.

Financial highlights

  • INSY generated $70.8 million in net revenue which represents a 70% increase compared to the first quarter of 2014 ($41.6 million in 1Q14).
  • INSY recorded 91% gross margins during the quarter (89% in 1Q14).
  • INSY generated $8.0 million in net income, or $0.23 per basic and $0.21 per diluted share ($7.7 million, or $0.23 per basic and $0.21 per diluted share in 1Q14)
  • As of March 31, 2015, INSY had $124.4 million in cash, restricted cash, cash equivalents, and short-term and long-term investments, no debt, and $184.6 million in stockholders’ equity.

Statements from the CEO

The CEO stated that this was the 12th consecutive quarter of Subsys revenue growth. Subsys will remain INSY’s largest near-term revenue driver as the company advances products in its pipeline through clinical trials.

The CEO said that INSY’s discussions with FDA regarding the company’s pediatric plan for its Dronabinol Oral Solution are almost complete. INSY plans to submit a New Drug Application (NDA) in the near future. INSY views the market opportunity for its Dronabinol Oral Solution as a $200+ million market.

Forward guidance

INSY is working on a number of initiatives that should serve as catalysts for 2015. The company is:

  • Conducting Phase 3 clinical studies for multiple sublingual spray candidates, as well as a clinical trial to support label expansion for Subsys.
  • Advancing longer-term pipeline assets, including its pharmaceutical CBD formulation.
  • Currently conducting a Phase1/2 safety and pharmacokinetic study in pediatric epilepsy. INSY has started dosing patients.

Board of Direction approve 2-for-1 stock split

The Board of Directors approved a 2-for-1 stock split through a stock dividend. Shareholders of record as of May 26, 2015, will receive one additional share of INSY for each share they hold. This means that the ex-dividend date is May 21, 2015. If an investor wants to be entitled to the stock dividend they must own INSY as of May 20, 2015.

The share distribution date is scheduled for Friday, June 5, 2015, and INSY will commence trading on a split-adjusted basis on Monday, June 8, 2015. Total shares outstanding will increase from approximately 35.7 million to 71.4 million shares.

Why do you need to own INSY as of May 20th to receive the stock dividend?

If an investor wants to be entitled to the stock dividend they must own INSY before the ex-dividend date. The ex-dividend date is two business days prior to the record date. To be a stockholder on the record date an investor must purchase the stock before the ex-dividend date. The latest date an investor can buy the stock and be the stockholder on record would be 1 day prior to the ex-dividend date.

Outlook

Technical420 is favorable on this report due the improving fundamentals, as well as the company’s catalysts. Recently, we have raised concerns regarding the dangers associated with INSY’s Subsys product, however, we view the company’s pharmaceutical CBD product…

GW Pharmaceuticals (GWPH)

GW Pharmaceuticals is a biopharmaceutical company focused on developing novel treatments from its proprietary cannabinoid platform. GWPH’s key growth driver is Sativex which is approved for the treatment of spasticity associated with multiple sclerosis in 27 countries. GWPH is also focused on developing various other cannabinoid-based treatments for diseases like glioma, ulcerative colitis, schizophrenia and type II diabetes.

On May 11th, GWPH announced its financial results for the quarter which ended on March 31, 2015.

Financial highlights

  • GWPH generated $9.4 million in revenue during the quarter which is less than Wall Street expectations. The company generated $21.3 million revenue during the first half of 2015.
  • GWPH generated a loss of $0.58 per share, which is less than the average Wall Street estimate. The market forecasted a loss of $1.23 per share.
    • GWPH announced a net loss of $16.2 million during the first half of 2015.
  • As of March 31, 2015, GWPH had $220.7 million in cash and cash equivalents
  • After expenses, GWPH raised approximately $167.8 million from a secondary offering.

Operational highlights

GWPH also announced that it commenced a Phase 3 clinical trial of Epidiolex for the treatment of Lennox-Gastaut syndrome (LGS), a rare and severe form of childhood-onset epilepsy. During 2014, GW received Orphan Drug Designation from the FDA for Epidiolex for the treatment of LGS. GWPH expects to report top-line data from this trial in early 2016.

Market reacts favorably to poor earnings?

Wall Street firms and investors remain focused on GWPH’s pipeline products. Updates on these products are catalysts for shares of the company during the rest of 2015 and 2016.

The company’s key growth driver, Sativex, continues to be the main revenue driver for GWPH. The company is also trying to expand the label of Sativex which is being evaluated in a Phase 3 study for the treatment of pain associated with cancer. The company has initiated pivotal Phase 3 studies on Epidiolex for childhood epilepsy. Initial top-line data from these studies should mature around the end of 2015.

Outlook

Technical420 is favorable on the long term outlook of GWPH due to its deep pipeline of products that are in various stages of FDA testing. The company has seen its shares rally 66% during 2015 and Technical420 expects to see shares of the company…

 

Michael Berger is the president and founder of Technical420.com, an online research firm for publicly traded cannabis companies. Michael started following the cannabis industry in 2012 while working at Raymond James Financial. Michael worked in the equity research department at Raymond James before leaving to start Technical420. Technical420 utilizes an algorithm developed by Michael that merges technical, fundamental and sentiment data to yield the most comprehensive analysis.

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