Shares in GW Pharmaceuticals have slipped more than 2% after the company said its cannabis-derived treatment for multiple sclerosis patients would cost the health service £11 a day.
With the government planning cost cuts across the board in tomorrow's budget - when even the NHS may not be spared - analyts said the company would have to convince that its Sativex treatment was cost effective, which may hinder sales growth. Still, after 11 years of development, the treatment is finally launched for spasticity in multiple sclerosis patients, after gaining UK approval at the end of last week. GW said the move marked "the beginning of the company's transition from late stage development company to a commercial pharmaceutical business."
GW will now receive a £10m milestone payment from Bayer Schering, which will sell the treatment in the UK under licence. The company is hoping for approval in Spain shortly and will make further European submissions in the second half of the year.
The company's shares are currently down 3p at 138p. Analysts at KBC Peel Hunt kept their buy recommendation, although admitted the company's view of the UK potential was at the bottom end of its expectations. Analyst Paul Cuddon said:
GW has become one of the first UK biotech companies to take a major product all the way from discovery, through clinical trials and partnering, to launch, a process that has taken 11 years. The company has disclosed more details on the potential UK opportunity; this sits at the lower end of our expectations. The company has set expectations that we hope it can outperform over the next 6-12 months.
According to company data, the UK opportunity amounts to £11.5m in potential annual sales (which is in line with our forecasts), and estimates that around 5% of the UK's MS patients could be eligible for Sativex. Clearly off-label use of Sativex could drive sales higher, although we would expect the UK market to be fairly tightly regulated. We model £50m of peak sales for Sativex across Europe, and GW stands to receive around 20-30% manufacturing margin.
GW will now receive a £10m payment from Bayer, and is due a further £2.5m from Almirall (in addition to the £8m received last year) once approval and pricing has been secured in Spain (this could be delayed). Additional milestones will become due from Almirall as the product is approved
across Europe (France, Germany, Italy etc).Not only is this news important for Sativex (which is also in development for cancer pain and potentially neuropathic pain), but also for GW's entire pipeline. It demonstrates that cannabinoid-based therapeutics are approvable and can provide a meaningful clinical benefit for patients no longer responding to gold-standard therapy.
