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

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

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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Key Risks 
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
Some of the Funds managed by the Sustainable Future team involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. Investment in Funds managed by the Sustainable Future team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The value of fixed income securities will fall if the issuer is unable to repay its debt or has its credit rating reduced. Generally, the higher the perceived credit risk of the issuer, the higher the rate of interest. Some Funds may invest in derivatives. The use of derivatives may create leverage or gearing. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead.

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 
This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. Always research your own investments and if you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 
Peter Michaelis
Peter Michaelis
Peter Michaelis joined Liontrust in April 2017 as part of the acquisition of ATI, where he was Head of Investment. Peter has been managing Sustainable Investment funds since 2001 when he was promoted to lead Portfolio Manager at Aviva Investors.

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