VEGA Group Issues Short Report On GW Pharma; Expert Calls Thesis 'Flawed'

GW Pharmaceuticals PLC-ADR GWPH stock more than doubled on positive Phase III data on its CBD-derived Epidiolex drug for treatment of Dravet syndrome. In a new report, The Vega Group says that the market has gotten way ahead of itself on the stock and that the valuations analysts are now placing on the drug are completely detached from reality.

“GW Pharmaceuticals falls short in every metric of how once should evaluate an early-to-mid stage drug development company; and yet, we believe WS analysts covering the equity have entirely neglected to price in both internal and external risk factors, a history of operational weakness and unfathomable levels of shareholder dilution,” the report reads.

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Vega believes that the post-news spike now has GW’s stock trading more than 50 percent higher than its true value.

Industry expert Alan Brochstein tells Benzinga that the author of the Vega report makes several key mistakes in his analysis.

“He thinks that there will be competition from non-FDA approved manufacturers of CBD products, like Charlotte’s Web. This is not the case,” Brochstein explains. “If you read hit tweets, it appears that he isn’t especially qualified.”

Only time will tell if the market for Epidiolex and GW’s business execution will justify the stock’s huge surge.

Disclosure: the author holds no position in the stocks mentioned.

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