RealMoney

With 4/20 upon us, it's only natural to look at probably the hottest pot stock in the cannabinoid sector. GW Pharmaceuticals (GWPH) is the real medical marijuana play, Jim Cramer said recently on CNBC's "Mad Money."

The U.K.-based pharmaceutical company has several cannabinoid treatments, one of which targets epilepsy in children and has been able to reduce the number of seizures in its patients significantly.

The stock recently lit up after the American Academy of Neurology (AAN) issued a press release on GW's investigational medicine, Epidiolex(R) (pure cannabidiol, or CBD). Analysts issued positive notes following the release, pushing the stock up more than 24% last week. GWPH is giving some of the gains back today, down about 1% in midday trading.

Data in the AAN release were from physician-led, Food and Drug Administration-authorized "expanded access" programs administering GW's drug Epidiolex to children and young adults with treatment-resistant epilepsy who have exhausted available treatment options. The data provided treatment-effect information on a total of 137 patients who have at least 12 weeks of Epidiolex exposure. Safety data were provided on 213 patients, representing these 137 patients plus additional patients still in their first 12 weeks of treatment. More data will be presented at the AAN's annual meeting on April 22, at which time GW will make an additional disclosure.

"We are pleased that the American Academy of Neurology has chosen to highlight the importance of the Epidiolex expanded access data and look forward to more detailed information at the forthcoming AAN Annual Meeting being made available by the physicians leading this program," GW CEO Justin Gover said.

Analysts at Leerink reiterated an Outperform rating and raised their price target on the shares, to $120 from $102, following the release. Across the board, Leerink believes the Epidiolex data are better than Wall Street expectations, as they showed a much greater magnitude of overall seizure reduction than in the October update (54% vs. 40% at weeks nine to 12), and exhibited a consistent, robust effect in larger samples of patients with Dravet Syndrome and Lennox Gastaut (LGS), both rarer forms of epilepsy that begin in infancy.

"We now assume higher Epidiolex peak market penetrations and more use in the broader refractory pediatric epilepsy population," Leerink's Paul Matteis and Joseph Schwartz wrote in a note April 13.

Piper Jaffray maintained its Overweight rating and $147 price target on the stock, providing more details on the "excellent results" with cannabinoids for seizures. About 75% to 85% of patients with seizures have some benefit and stay on Epidiolex, Piper Jaffray noted on April 8, after hosting a call with a practicing physician in Colorado Springs, Colo., specializing in medical cannabis.

About 75% of patients had at least a 50% reduction in seizures, 40% had at least an 80% reduction in seizures and 11% become seizure free. The physician also noted "meaningful" benefits in patients' behavior, sleep and cognition particularly in those who have an autism component.

Overall, no smoke signal is needed to see that this pot play may be the best way to go in a complex subsector, where specialty exceptions and regulations can lead to surprise moves in stocks. And although the group remains speculative, the addition of data to substantiate GW's development and offerings suggest that the haze of uncertainty may be lifting, and a potential path to profit is clearing.