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GW Pharmaceuticals (GWPH): What Awaits in Q4 Earnings?


GW Pharmaceuticals plc GWPH is scheduled to report fourth-quarter fiscal 2016 results on Dec 5, before the opening bell. The company has an impressive track record so far. In fact, in the four trailing quarters, GW Pharma has surpassed estimates every time, with an average positive surprise of 41.67%.

In the last reported quarter too, the company has comfortably beaten expectations with a positive surprise of 57.80%. Let's see how things are shaping up for this quarter.

Factors at Play

GW Pharma’s key growth driver is Sativex, which is approved outside the U.S. for the treatment of spasticity due to multiple sclerosis. Sativex is expected to keep up the past several quarters’ growth trend. Moreover, the company is evaluating Sativex in a phase II study in children with spasticity due to cerebral palsy.

Meanwhile, GW Pharma has made significant progress with its lead cannabinoid pipeline candidate, Epidiolex. During the quarter ended Sep 2016, the company announced positive phase III data on Epidiolex for the third time this year. The company reported favorable data from the second pivotal phase III study on Epidiolex for the treatment of seizures associated with Lennox-Gastaut syndrome (LGS).

In Jun 2016, it had reported data from the first pivotal phase III study on Epidiolex for LGS. GW Pharma has also reported positive top-line data from the first pivotal phase III study on the candidate for the treatment of seizures associated with Dravet syndrome. GW Pharma is presently enrolling patients in the second phase III study on the candidate for Dravet syndrome.

The company expects to file for an FDA approval of Epidiolex for both Dravet syndrome and LGS in the first half of fiscal 2017. Assuming all goes well on the regulatory front, the company anticipates simultaneous approval in the two indications. The company has already started pre-launch commercialization activities for Epidiolex in the U.S. and Europe.

R&D expenses are expected to rise due to costs associated with the development of Epidiolex.

At the upcoming earnings release, focus will be on the company’s overall performance. Investors are also expected to keenly await updates on Epidiolex and other pipeline updates.

What Our Model Indicates

Our proven model does not conclusively show that GW Pharma is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to post positive surprise. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of $1.48. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: GW Pharma currently carries a Zacks Rank #3. Although the company’s Zacks Rank #3 enhances the predictive power of the ESP, its 0.00% ESP makes a surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

GW PHARMA-ADR Price and EPS Surprise

Stocks That Warrant a Look

Here are a few health care stocks that have the right combination of elements to post an earnings beat in their next release. All the three stocks carry a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

AVEO Pharmaceuticals, Inc. AVEO has an Earnings ESP of +18.18%.

Biogen Inc. BIIB has an Earnings ESP of +1.20%.

Clovis Oncology, Inc. CLVS has an Earnings ESP of +5.99%.

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