Double trouble as GW faces US legal action and widening losses
Impending legal action in the US and widening losses add up to a crunch period for Cambridge UK cannabis-derived life science company GW Pharmaceuticals.
Revenues nosedived from £8 million to £3.7m year-on-year and losses more than quadrupled from £3.4m to £17.7m in the three months to December 31, just reported.
GW also burned £15.6m cash in three months from September 30 to December 31, seeing its cash and equivalents hoard of £234.9m dwindle to £219.3 million.
While the company is playing up the importance of US trials of its lead products and says it is excited at what could be a transformational period for the business, there are clouds all around the potential silver lining.
American media sources are reporting calls to arms to shareholders who feel they have an axe to grind against GW.
Goldberg Law PC, which represents shareholders around the world and specialises in securities class actions and shareholder rights litigation, has invited GW shareholders to get in touch to back a complaint that alleges: “The company made false and/or misleading statements and/or failed to disclose that: (1) GW Pharmaceuticals lacked effective internal financial controls; and (2) GW Pharmaceuticals lacked effective controls over completeness and valuation of clinical trial accruals.
And in San Francisco, Hagens Berman Sobol Shapiro LLP, a national investor-rights law firm, reminded investors in GW Pharmaceuticals “of the upcoming March 21, 2016, lead plaintiff deadline in the lawsuit related to the company’s misstatements about effective internal controls.”
It says: “If you suffered losses because of your purchases of GW Pharmaceuticals between December 4, 2014, and January 8, 2016, or have information that will help our continuing investigation, contact Hagens Berman Partner Reed Kathrein, who is leading the firm’s investigation.”
The lawsuit was filed in the US District Court for the Southern District of New York and investors have until March 21, 2016, to move the court to participate as a lead plaintiff.
As The Sunday Times reported on January 10, in its 2015 annual report GW disclosed that its internal financial controls were not effective as of September 30, 2015.
It also revealed that management had determined that it lacked effective controls over the completeness and valuation of clinical trial accruals.
The annual report stated that management did not have sufficiently precise controls to evaluate the completeness and accuracy of the calculation of clinical trial accruals due to the incorrect allocation of expenditure to clinical studies and that the company lacked sufficiently precise control to ensure completeness of clinical trial accruals in connection with contractual progress payment liabilities.
So GW is now sweating on the potential backlash from that legal action and three Phase 3 clinical trials of its Epidiolex technology, which are now fully recruited and on track for initial data in March.
GW’s US-based CEO, Justin Gover, reporting the first quarter results in the 2016 fiscal year (to December 31, 2015) remains upbeat and talks about expansion in the United States in 2016.
He says: “We are on track to report topline data from four Epidiolex Phase 3 trials in the months ahead and remain very excited at the transformational potential of these data for GW.
“The treatment effect data from our expanded access programme provide a solid basis for confidence in the outcome of these trials and the potential for Epidiolex to make a meaningful difference to the lives of patients with Dravet syndrome and Lennox-Gastaut syndrome.
“We are looking forward to an active 2016 that, in addition to the Epidiolex Phase 3 data, is expected to include our first NDA filing, expansion of our US commercial organisation and ongoing data read-outs from a number of clinical pipeline programmes.”