Promising
GW Pharmaceuticals (LSE: GWP) shares shot up 70% in March, to end the month at 421p. The company specializes in developing “novel therapeutics from its proprietary cannabinoid product platform“, and got some good news from a phase 3 trial of its Epidiolex (cannabidiol) treatment for Dravet syndrome on 14 March.
Dravet syndrome is a rare and severe form of epilepsy that affects children, and as yet there are no FDA-approved treatments — and so a breakthrough there could be nicely profitable. The trial results found that the drug reduces seizures, with “high statistical significance” when compared to a placebo control. As a result, the share price more than doubled on the day, though it’s fallen back a bit since.
Epidiolex notwithstanding, the shares are down 40% since their peak in June 2015, and the company still looks to be some years away from turning a profit. There was $324m in cash on the books at 31 December, although GW did make an operational loss of $86.6m in its last full year. The next step for Epidiolex is a regulatory submission, but though the drug does seem promising, this still looks like a risky investment to me.
Partnership
A takeover approach is one event that can make a share price jump, and we heard on 23 March that Premier Foods (LSE: PFD) had kicked out an offer by McCormick & Company saying it “significantly undervalues Premier’s growth prospects and represents an insufficient premium to Premier’s enterprise value“. The announcement was accompanied by news of a cooperation agreement with Nissin Foods, the inventor of instant noodles.
The McCormick offer, revised from an earlier 52p bid, valued Premier shares at 60p, and on the day we saw a 70% share price rise. Since then, McCormick has upped its offer to 65p per share, and the shares ended the month trading at 57p for an 88% rise during March. The Premier board still believes that’s too cheap, but it’s going to have talks and hopes for an even better offer to emerge, and if that comes off then there’d be a profit to be made.
Even after the month’s rise, Premier shares are still valued on a P/E multiple of under seven based on 2016 forecasts, so it looks like there’s room for negotiation.
Rising oil
Results on 17 March gave oil explorer and producer EnQuest (LSE: ENQ) a 31% share price boost, and since then the price has kept on going for a 71% rise over the month. We’ve now seen a 118% gain since 20 January’s low point, buoyed by the price of oil which seems to be steadying at around $40 per barrel.
EnQuest reported a 31% rise in production for the year to December 2015 to 36,567 barrels of oil equivalent per day, which was above the upper end of the company’s guidance. The price of extracting the stuff dropped dramatically, due to continuing savings in operating costs, from $42.10 per barrel in 2014 to just $27.70 per barrel.
Net debt rose to $1.55bn at year-end, but the firm reckons it’s “well within its net debt to EBITDA covenant of five times“. EnQuest isn’t expected to get back to profit this year and next, so it’s tricky to value — but I reckon there could be more to come.