GW Pharmaceuticals PLC (NASDAQ: GWPH) was recently listed as the top medical marijuana stock for National Weed Day, but other things are going on here besides weird holidays. GW recently presented positive drug data on its cannabinoid study. Now it has received the famed orphan drug designation from the U.S. Food and Drug Administration (FDA) for Cannabidiol for use in treating newborn children with neonatal hypoxic-ischemic encephalopathy (NHIE). Going into that designation, a late day call on Thursday from Bank of America Merrill Lynch took the stock’s price target far higher.

NHIE is acute or sub-acute brain injury due to asphyxia caused during the birth process and resulting from deprivation of oxygen during birth (hypoxia). The incidence of NHIE was said to be 1.5 to 2.8 per 1,000 births in the United States. This generates 6,500 to 12,000 cases per year. GW went on to show that 35% of the cases are expected to die in early life and 30% may suffer from permanent disability.

While 6,500 to 12,000 cases per year might not sound large, what investors will want to know is that there are currently no FDA-approved medicines specifically indicated for NHIE. GW has held a pre-IND meeting with the FDA and expects to submit an Investigational New Drug Application in mid-2015 and to commence a Phase 1 trial in the second half of 2015.

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Under the Orphan Drug Act, the FDA’s orphan drug designation targets rare diseases or conditions with cases of less than 200,000. The first NDA applicant to receive FDA approval for a particular active moiety to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period for that drug and use.

The Merrill Lynch call backing GW Pharma included a Buy rating, and it raised the analyst price objective to $155 from $115. This is now the official street-high target, and it seems as though there are just too few formal analysts following GW Pharma to discuss “consensus” data.

The Merrill Lynch report said:

GW Pharma presented updated data from its investigator-sponsored trials for Epidiolex at the Emerging Science session at the AAN meeting Wednesday evening. We previously wrote that we found the 54% reduction in seizure frequency over three months compelling. New data included breakouts by seizure type and 6-month efficacy for a subset of patients. Based on these results, we raised our probabilities of approval for Dravet’s (to 40% from 35%) and LG (to 30% from 25%). We raised our peak share for LG (to 60% from 50%) and the bucket for other intractable epilepsies (to 20% from 15%). We also assume faster ramps, based on high parental interest.

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Merrill Lynch’s report also addressed the poster updates and new indication announced:

Six-month data from 48 patients showed good durability (45% median reduction in seizure frequency, with 46% of patients showing at least a 50% reduction). We found the data from 25 Dravet’s patients presented to be particularly impressive (65% median reduction at 12 weeks), as well as results from 11 LG patients (55% median reduction at 12 weeks). GW announced a new target indication (tuberous sclerosis complex, TSC) that has an addressable US market of ~25k patients. Results from a small number of TSC patients treated thus far showed promising results…

We attended a KOL meeting on Thursday, at which four investigators involved in the Epidiolex IND trials spoke. We noted a high level of excitement, with doctors citing cognitive benefits on top of efficacy as differentiating factors for Epidiolex vs. current therapies. 90% of the >200 children who started therapy are still on drug, which docs cited as supportive of Epidiolex’ overall traits. Based on data collected thus far, the doctors hypothesized a high likelihood of success in the ongoing phase 3 trials. Due to the severity of illness in this patient population, doctors did not believe the observed side-effects were concerning. Regarding pbo effect, one doctor hypothesized that rates could be in the 15%-25% range. Physicians also noted a willingness to use Epidiolex.

GW Pharma also commented on the fresh FDA orphan drug designation. Justin Gover, GW’s chief executive officer, said:

GW continues to explore the opportunity for the development of cannabinoids in rare pediatric conditions characterized by significant unmet need. This orphan drug designation for cannabidiol for the treatment of newborn children with neonatal hypoxic-ischemic encephalopathy follows several years of pre-clinical evaluation and we look forward to advancing a clinical development program in this important medical condition later this year.

GW Pharma rose by almost 7% on Thursday to $120.77. Its news 52-week range is $58.16 to $120.98, and its market cap is now close to $2.4 billion.

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