Cannabis drug maker is caught in takeover frenzy
MEDICAL firm GW Pharma, which makes drugs from cannabis, saw its shares hit a high on hopes it might become the latest participant in the takeover frenzy that has gripped the healthcare sector in the last couple of years.
GW jumped by 22pc in London after an overnight spike in the US, on talk that the AIM and Nasdaqlisted group founded in 1998 has hired investment bankers at Morgan Stanley to explore its options after being approached by an unnamed suitor.
GW’s main drug Sativex is a treatment for cancer-related pain and is in late-stage trials for US approval to treat multiple sclerosis. The medicine has already been approved for both outside the US where it is marketed by Big Pharma companies, including Bayer in the UK and Canada, Novartis in Australia and New Zealand and Almirall in Europe.
Epidiolex, a treatment for childhood epilepsy, which is in late stage trials for two separate indications, is another key drug in the GW pipeline. Cantor Fitzgerald analysts have pencilled in sales of £ 1.4bn a year in the US and Europe once it is granted approval, a process that is likely to take 12 to 15 months.
‘ Considering the pharma- like pipeline behind Epidiolex, we would not be surprised if competition would arise for owning the entire company,’ said Cantor.
Biotech companies that have traditionally been targeted for M&A activity have late- stage drugs in development, positive data underpinning those clinical trials and marketing rights for the US – the largest market for drugs in the world.
‘GW does fit that profile,’ said an analyst who spoke on condition of anonymity.
Still, GW is in a different position to the majority of its biotech peers given that it is sitting on a near $500m cash pile following a recent fundraising and can afford to forge ahead as a stand-alone company.
A spokesman for GW Pharma poured cold water on the bid speculation and pointed out that Morgan Stanley have acted as GW’s advisors for many years. The shares closed 26.6pc, or 140p higher at 666.5p and are trading 33pc higher on the year to date: a boon for shareholders M&G, with an 8.2pc slice of the company and cofounder Geoffrey Guy with 4.6pc.
Back on the footsie, the blue chip index ended the session just above the tide line, up 20.53 points at 6,846.58 after Micro Focus jumped by 15pc on news it is acquiring Hewlett Packard’s software business for $8.8bn.
‘It’s a big scalp for the FTSE 100 group, which has been on a buying spree of late, and marks the end of the Autonomy saga for HPE,’ said Neil Wilson of ETX Capital.
‘It’s a confident move – it would be the biggest acquisition by a British company of a foreign tech firm and comes in the face of a massive drop in the value of the pound that has made UK firms the target of overseas bidders.’ The shares closed up 14.73pc, or 288p at 2243p.
Elsewhere, there was little corporate news to keep the indices afloat on either side of the Atlantic and all eyes were on the ECB’s decision to maintain interest rates.
‘With UK data improving and the ECB running out of options, realignment in market expectations could spark further currency strength and stock market weakness in Europe,’ said IG’s Josh Mahony. Among blue chips, Provident
Financial was boosted by Jefferies initiating coverage with a ‘ buy’ stance and a 3732p price target. The shares rose nearly 3pc, or 86p to 3044p.
But Pearson was marked down following disappointing sales of college textbooks at US peer John Wiley educational division. The shares were down 7.7pc, or 66.5p at 797p. Thomas Cook was the highest riser on the FTSE 250 after announcing it has launched a China travel business in partnership with Fosun, which owns an 8.2 stake in the UK travel group. The shares rose 6.1pc, or 4.4p to 76.05p.