Peter Michaelis

Goodbye to an old friend – GW Pharma to leave Sustainable funds after 20 years

Peter Michaelis

Enabling innovation in healthcare has been one of the defining themes over our 20 years running the Sustainable Future funds and it is with mixed emotions that we prepare to see one of our longest holdings, GW Pharmaceuticals, exit our portfolios in the coming weeks.

UK company GW has been in the funds since right back in June 2001, shortly after launch, and is the global leader in developing cannabinoid-based treatments, changing the lives of many people with epilepsy. Recognising this expertise, Irish-based Jazz Pharmaceuticals has recently agreed a $7.2 billion cash-and-stock deal to acquire GW and expand its neuroscience portfolio, which has approval from both boards and is expected to close in Q2.

Among our healthcare investments, a key theme is companies focusing on areas of unmet need and GW’s Epidiolex product treats rare forms of childhood epilepsy for example. Around fifty million people worldwide are estimated to have epilepsy but research into therapies has been relatively underfunded and 30-40% of patients are resistant to the drugs available. By focusing on orphan diseases (defined in Europe as affecting fewer than one person per 2000), not only has GW helped those with serious needs, it has also received benefits such as longer exclusivity and a cheaper/quicker registration process.

In many ways, GW encapsulates three core elements of our approach, producing a positive outcome for society and our clients, exemplifying the need for a long-term investment horizon, and requiring courage to stray from the herd. When we participated in the IPO, we received a number of innuendo-laden comments linking the ‘hippy’ image of cannabis to the traditional tree-hugging stigma around sustainable investing. We always felt this was a serious business, however, exploring an area where traditional pharmaceutical companies have feared to tread, ignoring centuries of evidence about the health benefits of cannabis in traditional medicine. 

GW’s history also shows the patience often required in healthcare investing, with the company’s Epidiolex product only approved by the US Food and Drug Administration in 2018 (the first plant-derived cannabinoid medicine ever certified) and added to the NHS’s prescribable drugs to help children with severe types of epilepsy such as Lennox Gastaut syndrome and Dravet syndrome the following year. The company is in late-stage trials for another cannabis-based product to treat multiple sclerosis, and working on candidates for autism and schizophrenia. It has taken nearly two decades, and a move to the Nasdaq (shifting to dual status in 2013 and abandoning the London listing three years later), for the company to reap the rewards of its investment in science and manufacturing.

While the shares have produced considerable returns for our funds over 20 years (with a total return of around 1460% in dollar terms from September 2001 to end January 2021*), performance has been volatile, with the company often caught up with other ‘cannabis’ stocks. In 2020 for example, the shares dipped on disappointment over Epidiolex take-up in the US but for our part, we are keen this innovative treatment is not over-prescribed or used ‘off-label’, and only employed to treat those conditions for which it has been trialled. There have also been safety concerns over the years but we have continued to engage with the company on this and many other areas, and have always been confident GW’s products can help reduce the occurrence of life-threatening seizures. 

Innovation is clearly central to the healthcare sector and sustainability overall, with people needing to be fit and healthy enough to enjoy a cleaner and safer world in future. It is also what attracts us to these companies and, although GW is leaving our portfolios, we will continue to focus on similar businesses working hard to address those unmet medical needs.

*Source: Bloomberg

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Friday, February 26, 2021, 11:03 AM