Approval Is Key For Cannabis Drugmaker

Cannabis has been a controlled substance in the UK since 1971, despite
anecdotal evidence of its benefits for those suffering from conditions such
as multiple sclerosis. One in 700 people in the UK suffer from MS and the
market potential for a drug treating the disease's symptoms seems obvious.

However, on Monday, Cannacord Capital initiated coverage of GW
Pharmaceuticals, whose Sativex treatment is the cannabinoid-based MS drug
closest to market, with a "sell" recommendation. A spate of selling duly
resulted, which yesterday sent the stock down 2.6 per cent to 189 1/2p, its
lowest level since April.

Regulatory approval is the key risk. In July's interims, GW suggested
Sativex 's UK approval was likely by December 2003. However, Cannacord
analyst Karl Keegan said approval was not the only factor. "Even if the
drug is approved, the share price also reflects estimated peak sales of
Pounds 250m," he said, suggesting that the "label", or terms of use, may
only extend use to a specific group of MS sufferers, limiting potential
profits. Julie Simmonds at Evolution Beeson Gregory added that political
pressure may be necessary to force approval through.

Although giving GW a fair value of 152p, Cannacord said UK approval would
raise its target price to 160p, while failure to secure approval could send
the stock plunging to just 36p. "Investors would do better to lock in any
profits now, and await the final approval and label before reassessing,"
was Cannacord's conclusion.


Pubdate: Fri, 28 Nov 2003
Source: Financial Times (UK)
Copyright: The Financial Times Limited 2003
Contact: letters.editor@ft.com
Website: http://www.ft.com/