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GW Pharma progresses

TIP UPDATE: GW Pharmaceuticals is making impressive progress now that it's able to actively promote its cannabis-based product, Sativex
May 18, 2011

GW Pharmaceuticals is benefiting from being able to actively promote its cannabis-based medicine, Sativex, within European markets. UK sales, for example, reached £2m during the nine months since the medicine was commercially launched, compared with £900,000 of sales in same period last year - when only named patients could receive the drug. This, combined with £5.1m of additional milestone payments, leaves the group on track to make a small full-year profit - broker Peel Hunt anticipates pre-tax profits of £200,000.

IC TIP: Buy at 125p

But managing director Justin Gover remains focused on further development. "Despite the expected profits this year, we aren't quite an earnings story yet," he noted. "We still have to broaden our pipeline by developing non-Sativex cannabinoids into treatments for conditions such as diabetes and epilepsy." GW will fund most of its non-central nervous system and oncology research itself until licensing partners can be found. Research and development spending did, however, decrease to £11.3m from £12.1m due to lower activity by Otsuka, GW's main research partner. Otsuka is funding two Phase III clinical trials designed to gain approval for Sativex as a cancer pain treatment in the US, with data expected to be filed with the regulators by the end of 2012.

ORD PRICE:125pMARKET VALUE:£164m
TOUCH:124-127p12-MONTH HIGH:156pLOW: 82p
DIVIDEND YIELD:nilPE RATIO:15
NET ASSET VALUE: 13p*NET CASH:£28m

Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201011.4-2.67-2.1nil
201116.63.072.5nil
% change+45---

Ex-div: -

Payment: -

*Includes intangible assets of £5.2m, or 4p a share

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