GW Pharmaceuticals plc
Q2 2020 Earnings Call Transcript

Published: 6 Aug 2020

[Operator:]

Greetings and welcome to the GW Pharmaceuticals Second Quarter 2020 Financial Results Call. [Operator Instructions].As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Stephen Schultz, Vice President, Investor Relations. Thank you, sir. You may begin.

[Stephen Schultz:]

Welcome all of you, and thank you for joining us today for our second quarter 2020 results call. Again, I'm Steve Schultz, Vice President of Investor Relations at GW. Today, I'm joined by Justin Gover, GW's Chief Executive Officer; Darren Cline, U.S. Chief Commercial Officer; Chris Tovey, our Chief Operating Officer; Dr. Volker Knappertz, Chief Medical Officer; and Scott Giacobello, our Chief Financial Officer. We hope you've had a chance to review our press release issued a short while ago and we expect to file our Form 10-Q tomorrow. Before we begin, let me remind everyone that today’s discussions contains forward-looking statements based on the environment as we currently see it and as such does include risks and uncertainties. A list and description of risks and uncertainties associated with an investment in GW can be found in the company’s filing with the U.S. Securities and Exchange Commission. Finally, an archive of today's call will be posted to the GW website in the Investor Relations section. I'll now turn the call over to Justin Gover, GW's Chief Executive Officer.

[Justin Gover:]

Thank you, Steve. And welcome to all those who have joined us today. In these somewhat extraordinary times in COVID-19, I hope that you all remain healthy and safe. At the time of the quarter one call in early May, GW had responded to the COVID pandemic by adopting a work-from-home policy for most of the company with the exception of our manufacturing team, which continued to operate under strict safety protocols to ensure patient access to our medicines. In the last few months, our manufacturing operations have continued to operate smoothly and I remain grateful to all those staff who have continued to come to work everyday to ensure that our patients receive the medicines that they need. Our field commercial teams in both the U.S. and Europe have been able to maintain active engagement via remote channels with clinicians prescribing Epidiolex. During Q2, our sales organization pivoted well for the virtual environment using rapidly adapted educational and marketing material tailored to remote engagement. Overall, I’m extremely proud of how even in the face of the challenges of this unprecedented pandemic we have delivered quarter-on-quarter revenue growth in the U.S. with Epidiolex net sales in the U.S. in Q2 reaching $111 million. I think this growth is a real testimony to the importance of Epidiolex in meeting a serious unmet need in patients with treatment resistant seizures, and to the commitment of our organization to these patients and their families. Within the last week, we were delighted to announce that Epidiolex was approved by the FDA for the treatment of seizures associated with tuberous sclerosis complex or TSC. This approval is a very significant milestone in the expansion of the market opportunity for Epidiolex, representing a near doubling of the target patient population. We believe that the launch of this new indication this month will offer strong support to the commercial momentum of Epidiolex as we move through the second half of the year and beyond. We view Epidiolex as the first of what we believe will be several novel cannabinoid medicines to emerge from our platform in the coming years. At the end of June, we hosted a webcast to announce details of the U.S. development and commercialization strategy for nabiximols, which we expect to be our next us commercial product. I hope that you have had the chance to review this webinar, if not, an archive is available on the GW website on the investor homepage. In summary, we have designed a clinical program that provides multiple accelerated pathways to an NDA submission, including as early as next year, and believe in nabiximols very significant commercial potential over the short, medium and long term. You will hear on this call U.S. and European commercial update from Darren and Chris respectively. Volker will then provide an R&D update, and Scott will review our financial results. Let me now hand the call over to Darren for U.S. commercial update.

[Darren Cline:]

Thank you, Justin. The US achieved Epidiolex net sales of $111 million in the second quarter, compared to $68 million in Q2 of last year. We're very pleased with this result, which showed growth from $106 million in Q1 despite the challenges of COVID. I want to thank the U.S. commercial team for continuing to support our healthcare professionals so effectively, while also managing through the impact of the pandemic, on their own personal lives. In the year and a half since the launch, we remain humble by the impact that Epidiolex continues to have on patients with Dravet and Lennox-Gastaut syndrome. We are very pleased with the new inclusion of TSC in the label, which will enable us to expand the impact that Epidiolex can have on patients with TSC. I will speak about the TSC opportunity and our commercial launch plans in a moment. The attributes of Epidiolex continued to be demonstrated during the quarter. Epidiolex sustained strong persistency and a modest increase in average dose. While we were initially concerned about the impact on new patient acquisition during the early stages of a pandemic, new patient starts continued at a healthy rate throughout Q2, albeit at a lower rate than pre-COVID. With a heightened focus on ensuring Epidiolex prescriptions were received by patients, I'm pleased to report our specialty pharmacy network played a key role in ensuring delivery of products and decreasing our average time to fill a prescription to below 10 days during the quarter. The specialty pharmacy network also played an important role in ensuring that patients are able to access refills as seamlessly and safely as possible, resulting in our strong performance. During the second quarter, we witnessed the shift to telemedicine by providers, and a significant reduction in patient clinic and institution visits. To meet our customer needs, we also transition to a virtual promotional model during the quarter. While this transition impacted our ability to engage our customers, approximately 40% of our customers are willing to engage virtually with our sales team. All of our sales tools are available in digital formats, and our field teams continue to master the art of virtual customer engagement. As a result, the quality of remote engagement is high. To ensure we can get information into the hands of patients who may be engaging with neurologists virtually as well, we recently launched the Epidiolex YouTube channel. To help support healthcare providers, we have enhanced our Epidiolex hcp.com website, providing self-service access to easily start a patient, as some of our customers have recently indicated, willingness for face-to-face visits. Our Field Sales Team began live engagements on a very limited basis in June. Access to HCPs remains highly variable, dependent on region and care setting. And the overall situation remains very fluid as the pandemic impacts different parts of the country. The vast majority of customer interactions at this time remaining virtual. We will continue to navigate this changing landscape during the remainder of the year. I also wanted to update you on our progress into the long term care segment in the U.S. While this segment has been hit especially hard by COVID-19, the team has made progress during the quarter with a focused effort on driving engagement and education. We continue to work with the largest finder it's on education centered around Epidiolex and identifying appropriate patients that can benefit from the therapy. We are pleased with our progress thus far. Following the recent federal rescheduling of Epidiolex, we continue to progress our de-scheduling efforts at the state level, with nearly half of the U.S. states now recognizing Epidiolex as a non-control product. The conversion of some states has been impaired by COVID. But we anticipate the majority of the remaining states to be converted by the end of 2020. Now turning to our newest indication in TSC. As a reminder, there are approximately 50,000 individuals with TSC in the United States, of whom 85% suffer from seizures and nearly two thirds which are refractory. Market research with patients and their treating physicians indicate there is an unmet medical need and a dissatisfaction with current therapies. I would like to highlight two noteworthy items in the label. The first is an update to the age range. Epidiolex is now indicated in patients one year of age and older for all our indications. This newer, lower age limit, down from two years of age speaks directly to the safety profile of Epidiolex which is the only product specifically approved for seizures associated with Dravet syndrome, or TSC down to the age of one. The second pertains to dosing. The label now includes a recommended maintenance dose of 25 milligrams per kilogram per day for TSC patients, which differs from the 10 to 20 milligram per kilogram per day range for LG and Dravet. We will be focused on two critical success factors for the TSC launch. The first will be to establish Epidiolex as a first in class AED with TSC prescribers and the treatment of choice for seizures associated with TSC. We believe a 48% seizure reduction in refractory patients with TSC and the effect on seizure reduction in a wide range of specific seizure types demonstrates the broad spectrum efficacy of Epidiolex. Additionally, the novel mechanism of action remains important to distinguish Epidiolex from other anti-seizure medicines. The second is to drive swift uptake of Epidiolex and increase use earlier in the treatment algorithm. One specific initiative we will be executing is focused on the 66 TSC clinics across the United States. We are implementing a specific peer-to-peer webinar program specifically targeted at approximately 200 directors of these TSC centers and their ancillary staff across the country. Three well respected key opinion leaders will review the clinical data and their own personal experience as investigators in the clinical trials. These virtual data reviews will be subsequently followed at via our field salesforce. We will also augment these data reviews with additional virtual TSC speaker programs, and other TSC initiatives to drive patient identification. The field sales team has been focusing on preparing for the launch of a TSC indication. While we would prefer to launch this exciting label expansion with live interactions with our customers, we are prepared to execute this launch using whichever method our customers prefer. Now turning to the payers in the U.S. As a reminder, Epidiolex currently enjoys 97% coverage across commercial Medicaid and Medicare plans. In preparation for the approval of TSC, the payer count team has conducted clinical presentations with our largest commercial payers. We expect a number of large commercial health plans and PBMs to add TSC indication and lower the age range immediately at approval. We anticipate the remainder of commercial payers to add TSC reimbursement post their next P&T review. We also anticipate that 46 of the 50 state Medicaid programs will include TSC in their policies within 90 days. Certain states, including California, Florida, and Illinois, will be adding TSC immediately into their policies. Removing utilization management barriers, so patients can access Epidiolex without payer intervention across all payer channels continues to be the team's objective. While these efforts were affected by COVID in Q2, we are now starting to see some wins and expect the pace of widening access to pick up in the second half of 2020. To provide some recent examples, across Tennessee, Michigan, and New Hampshire's Medicaid, removed their prior authorization from Epidiolex adding more than 2 million lives gaining unrestricted access. We anticipate additional updates like these two occur before the end of the year. During the quarter, we made significant progress in building our field reimbursement team. The area reimbursement manager will interact with HCP offices and their staff to uncover specific reimbursement needs, and provide educational support of product coverage for patients in accordance with the payer policy. These new roles have been filled and will be deployed in August. We believe this team will play an important role in helping patients gain access to Epidiolex after the prescribing decision by the HCP has been made. Our sales force will continue to focus on identifying patients and generating new demand. In conclusion, I'm very proud that despite the challenges of COVID, the team remains focused during the quarter, and continue to advance our commercial initiatives supporting Epidiolex patients and their families. We look forward to launching the TSC indication later this month, and believe that Epidiolex will offer an important new treatment option for these patients. I look forward to updating you on our progress. Now I'll turn the call over to Chris to provide an update on our progress in Europe, in manufacturing. Chris?

[Christopher Tovey:]

Thanks, Darren. First looking at our Epidiolex launch in Europe, which currently is predominantly focused on five major markets. In the second quarter, we've made further good progress against our launch plans. As I stated previously, the 2020 our principle focus is on securing favorable pricing reimbursement conditions for Epidiolex in the major European markets. In the U.K. towards the end of 2019, we received endorsement from NICE, and central funding for Epidiolex from the NHS in England was introduced in January. In Italy, Epidiolex was awarded innovation status on the basis of its clinical evaluation by the reimbursement authorities, which secure Central National funding. We're currently engaged in pricing negotiations with the same authorities, which are expected to conclude later this year. In Germany, where Epidiolex enjoys orphan medicine status within the pricing and reimbursement process, we've secured a positive GBA benefit rating. Further, the GBA also considered the value of Epidiolex 10 mg per kg per day to be considerable, which ensures that we're in good shape in the pricing negotiation phase. We're currently engaged in negotiations with the authorities which are anticipated to conclude later this year. In France, the number of Epidiolex patients in the French regulatory agency sponsored ATU early access program continues to grow, enrolling patients, physicians and hospital experience with Epidiolex. In parallel with this, we're progressing well with pricing and reimbursement. Transparency Commission wanted an SMR or rating following clear recognition of the clinical importance of Epidiolex putting us in a solid position to price negotiations, which we're now progressing and expect to conclude later this year. We're also enjoying early success in our second wave of European countries, following pricing and reimbursement dossier exhibitions early in the year, with the launch in Denmark and granting of early temporary reimbursement in Sweden, whilst our submission is still under review. Along with these pricing and reimbursement successes, ex-U.S. net sales in the first two quarters of $17 million represents a good start. As we stated at the time of our Q1 results, we had expected Q2 ex-U.S. sales to be marginally lower than Q1 as a result of COVID, which was indeed the case. Looking ahead, market research recently conducted in the U.K. and Germany, commercial launch countries, continues to show strong prescriber intent to increase Epidiolex use. However, during Q3, we expect epilepsy clinics to continue to be impacted by COVID and new patient initiations to be impacted by the holiday month, which is customary in Europe. Consequently, although we do anticipate very limited beginning and return to more normal treatments and prescribing practices, we expect European sales growth to be muted in Q3. Our European commercial medical customer-facing staff are in the majority still working from home and customer engagement is largely through digital channels. However, we have recently restarted limited face-to-face field engagement where appropriate, and we continue to monitor and adapt to the changing environment. Finally, let me provide an update on global manufacturing and supply chain, which falls under my oversight. Our manufacturing facility continues to operate at its highest levels of efficiency, and deliver against planned production schedules. We also continue to benefit from limited reliance on other organizations in our production processes, a consequence of our significant investment in our own manufacturing facilities over recent years. As a result, we've been able to build and maintain significant stocks with U.S. and European products. And our supply chain continues to deliver on-going resilience to ensure patient supply continuity, even though even through these recent months of coded restrictions. In addition, our longer term capacity manufacturing expansion plans are on track to service what we expect to be robust, long term demand. Thank you. And let me hand the call to Volker for his update.

[Volker Knappertz:]

Thank you, Chris. And good day everyone. As you've heard from Justin and Darren, we are very pleased with the approval of Epidiolex to treat seizures associated with tuberous sclerosis complex. Along with this new indication, the age range for Epidiolex now includes patients one year of age or older for all three approved indications. This is important because these syndromztic forms of childhood onset epilepsies often are diagnosed early in infancy, enabling physicians to now treat these patients at the time of diagnosis. Looking beyond Epidiolex. At our recent investor webinar, we discussed our accelerated U.S. development and regulatory strategy for nabiximols. Over the last 18 months, we've had multiple -- different collaborative meetings with the FDA regarding the path to an NDA for nabiximols. We've gained agreement to supplement and bridge the existing European pivotal data with data from one more trial with either muscle tone or muscle spasm as the primary endpoint. At our webinar, we detailed the program of five MS spasticity trials, two of which are anticipated to commence this year and three in the first half of 2021. We believe that positive results from any one of these trials will be sufficient for us to submit the NDA. All the other pieces of the NDA are either in place, or anticipated to be by the first half of 2021, thus enabling the NDA to be submitted as soon as we have data from one positive study. The first such opportunity should be mid next year. And there will be data readouts from the remaining four trials at regular intervals over the course of the remainder of 2021 and 2022. Our discussions with FDA also provide confidence in the ability for nabiximols to gain a broader specificity label over time. The FDAs view is that spasticity is a neurological manifestation which is common to several conditions. And we believe that our program to study spinal cord injury spasticity may therefore not only allow for expansion to this patient population, but may lead to a broad spasticity indication. We have planned a program of three spinal cord injury studies, and beyond specificity, we have selected Post Traumatic Stress Disorder as an additional target indication for nabiximols and expect the Phase 2/3 study to commence in the first half of 2021. With respect to other development programs, we recently completed the first cohort of newborns with Neonatal Hypoxic-Ischemic Encephalopathy, or NHIE using our intravenous CBD formulation. For other parts of trials, we are still experiencing interruption but are starting to see tried activity resumed. We believe that several studies will start recruitment again in September. This includes the Epidiolex phase 3 study in Dravet syndrome, the phase 2b study in Schizophrenia, the collaboration study in autism and several phase 1 studies. We also expect two of the nabiximols phase 3 MS spasticity studies to start in the fourth quarter. These studies are the 52 patient placebo controlled muscle tone study, and the 450 patient placebo controlled spasm frequency study. The three remaining nabiximols phase 3 MS trials are all on track to commence in the first half of 2021. Thank you and let me now hand the call to Scott Giacobello to provide the financial review. Scott?

[Scott Giacobello:]

Thanks Volker, and good afternoon I'll now provide high level comments on financial results for the quarter and six months ended June 30, 2020. A detailed discussion of results will be provided in our 10-Q to be filed with the SEC tomorrow. I'll start with revenue. Total revenue for the quarter increased to $121.3 million, compared to $72 million in the prior year quarter due primarily to global Epidiolex net sales of $117.7 million in the quarter. Total deductions from gross sales for allowances were $31.2 million for the quarter, compared to $14.5 million in the prior year, and relate mainly to Epidiolex. Gross to net was consistent with Q1, as the unfavorable seasonal impact from Q1 was largely offset by a higher Medicaid mix in Q2. Cost of sales amounted to $8.7 million for the quarter or 7% of net product sales compared to $6.6 million or 9% of net product sales in the prior year quarter. This improvement is due to a substantial increase in Epidiolex net sales over the prior year period. Moving to R&D spend, research and development expense was in line with the previous quarter of $45.7 million. This represents an increase of $13.3 million from the prior year quarter, and reflects expenses related to the ongoing Epidiolex development program, as well as advancing the readiness of the nabiximols clinical program and our other pipeline programs. Turning to SG&A. Selling, general and administrative expenses increased to $75.9 million in the quarter from $62.3 million in the same period in 2019. This increase is primarily due to costs related to the launch of Epidiolex in the U.S. and the build-out of our commercial operations in Europe. This has all resulted in a net loss for the quarter of $8.8 million compared to net income of $79.7 million in the prior year quarter. The Q2 2019 results included net proceeds from the sale of our priority review voucher of $104.1 million, which were recorded in other non-operating income. Moving to cash flow for the six month period. Net cash used in operating activities for the six months ended June 30 amounted to $34.3 million, compared to $89.9 million for the prior year period. Net Cash used in investing activities for the six month period was $19.2 million compared to net cash provided by investing activities of $80.6 million in the prior year period, which included the proceeds from the sale of the priority review voucher. Capital expenditure for the period was $12.8 million compared to $23.5 million for the prior year period, reflecting continued investments in the expansion of our cannabinoid production facilities. The resulting net decrease in cash and cash equivalents for the six month period was $59.4 million. And we ended the quarter with cash and cash equivalents of $477.6 million. Turning to guidance, the full extent to which the COVID-19 pandemic will impact our expenditure for the remainder of the year continues to be uncertain. However, we are modestly lowering our guidance, and now expect R&D and SG&A expenses for 2020 in the range of $520 million to $550 million and capital expenditure in the range of $25 million to $35 million. Thank you. And I will now hand the call back to Justin.

[Justin Gover:]

Thank you, Scott. In closing, we are very pleased with the performance of GW’s business in the second quarter, the strongest in our 20-year history. In particular, we are seeing continued growth of Epidiolex U.S. revenue during the quarter. And with the TSC approval now in hand, our U.S. commercial team is poised for the launch of this important new indication, which should provide a solid tailwind for Epidiolex growth through 2020 and beyond. We are very excited about the impact of this expanded label and about the progress we are starting to see with U.S. payers in widening access. We also continue to make progress in further solidifying the exclusivity position of Epidiolex. In this last quarter, we added a further three patents to the orange book, bringing the total now the 13 patents listed, 12 of these patents expire in 2035, providing real confidence in the durability of the brand. One of the three recent patents is a non-U.S. patent directed to the oral formulation of Epidiolex. We think the addition of this first formulation patent is an important new feature of the portfolio. We expect to continue to file and prosecute further related patent applications to grow. In addition to the patents granted and under review, we continue to progress the composition patent application. We believe this growing and complex patent portfolios and corresponding exclusivity position is under appreciated. Beyond Epidiolex, our new nabiximol program offers an exciting new horizon line for investors. We now have a clear path to an NBA with multiple shots on goal perhaps as soon as next year. We also believe that nabiximol offers extended exclusivity due to the complex botanical composition of this medicine. We strongly believe that now is the ideal time for this product to emerge in the United States and believe that it has the potential to become a broadly used medicine meeting patient needs across numerous indications in the coming years, providing another important growth driver for investors in GW well into the future. More broadly, our leadership in developing cannabinoid medicines is second to none. And we intend on maintaining that leadership as our pipeline of earliest stage products in multiple additional indication continues to evolve. Thank you for your time today, and I look forward to updating you on future progress. I would now like to open the call for a few questions.

[Operator:]

[Operator Instructions].Your first question comes from a line of Tazeen Ahmad with Bank of America.

[Tazeen Ahmad:]

Good afternoon guys. Thanks for taking my questions. Just a few. Justin, I just wanted to get your thoughts on the quarter itself and some of the dynamics. You did talk about on the prepared statements I believe, that there was an increase in the Medicaid grouping this quarter. Can you talk about what that split was? And do you expect that to continue? My first question? ` Can you also talk about what tick-up [ph] he was looking like so far on new patient ads? Is it possible for you to tell us by what percent new patients were added sequentially from 1Q to 2Q? And then I might have a follow up after that.

[Justin Gover:]

Hi, Tazeen goodness me -- a few few, a few ones to go. Let me -- I'll let Scott talk to the gross to net dynamic and mix. I think on the -- more broadly, I think, we did continue to see new patient adds in Q2, as we said, those trends are continuing into Q3. So in assuming, it's a very fluid world out there, but assuming those trends continues, you'll continue to see growth in Q3. And so, I think that the dynamics in the world where there's been -- we are in a situation where telemedicine is the norm and remote detailing is the norm. It is a unusual world, which we genuinely think we're navigating well, and engagement with physicians remains high. I’m not going to give you percentages of quarter-on-quarter and on patient numbers. But, Scott, would you like to just elaborate on your Medicaid mix point?

[Scott Giacobello:]

Yes, sure. Thanks, Justin. Hi, Tazeen. Just the context on that comment overall. I think what we were trying to communicate, there -- there's gross to net normally moving in the calendar year from Q1 to Q2, given some of the seasonal dynamics, you would expect your allowances to be a little bit better in Q2, versus Q1. And what we actually saw was that we were pretty consistent, actually. And really what all that really happened there is we did see a slight tick up. And it's like, on the Medicaid mix side. And from an overall perspective of a payer mix, it's not enough that it's anything to be worried about; we just see a little tick up in the quarter. And that's not surprising. And we may continue to see that tick up in the back half given the economic environment in the U.S. but all-in-all; it was a very modest movement. So I don't think anything to be concerned about.

[Tazeen Ahmad:]

Okay, so you had a modest movement in Medicaid, and you did say in your prepared remarks that you are seeing continued growth in the U.S. those for this quarter. Can you talk a little bit about the cadence of that growth? Maybe compare it to what you were seeing in 2Q?

[Justin Gover:]

You mean in Q2 or Q1? I mean, I think, in general, we said at the time in May, that we -- that we've seen continuing new patient starts in April, albeit at a lower level than pre-COVID and as Darren put in his remarks today that, that dynamic is essentially continued through Q2. And so, I think we can absolutely continue to see new patients come on to therapy. And we're about to launch of course, the TSC indication. And I think it is an important moment for the product as we seek to roll that out later this month. And, obviously it will be a very important new dynamic as we go through the latter part of this quarter and into Q4.

[Tazeen Ahmad:]

Right. Okay, just was looking for some qualitative comments about how July worked potentially.

[Justin Gover:]

Okay. But as I said, I think July is kind of looking consistent with what we were seeing in June.

[Tazeen Ahmad:]

Okay. Thank you.

[Operator:]

Our next question is from the line of Cory Kasimov with JPMorgan.

[Cory Kasimov:]

Hey, good afternoon, guys. Thanks for taking my question. Now that the Epidiolex label broadly indicates use in patients a year and older, can you talk like what this means incrementally in terms of your target market and how it could potentially either change the trajectory or the longer term potential of the product? And I have one follow up.

[Justin Gover:]

Hey Cory, thank you for the question. Darren, can I hand that one to you?

[Darren Cline:]

Yes. Hi, Cory. Thanks for the question. Yes, it's an important component of the label expansion. As Volker said, many of our patients with Dravet and TSC in particular, are diagnosed very early in their lives, if not by their birth. And so, this is an important and I think it speaks directly to the safety profile of the therapy. And I think as clinicians now understand, and we educate around this component of the label, I just think they'll look, they'll continue to look at Epidiolex as an option earlier in patients. And as I pointed out, we're the only one with within Dravet and TSC seizures associated with both of syndromes to go down to one year of age. So, it's exciting and I think physicians will continue to think more broadly now as they think about early diagnosis of these patients.

[Cory Kasimov:]

Okay. And then Darren you previously mentioned, you're not anticipating a bullish effect of TSC patients in the initial launch phase, but can you kind of talk about how you envision this indication coming online? And maybe how COVID has potentially changed your thinking on this front? If it has?

[Darren Cline:]

Yes, I think we've, folks -- I've referenced kind of list of patients and I think, that was the way I think the patient backlog was thought of prior to the launch 18 months ago, right. For LGS Dravet, and but I think this one is different in the fact that it's less than about list but it's now about physicians actually looking at within their practice at their TSC patients, and evaluating where Epidiolex can now be used within their armamentarium. So, I think that's how we look at it and what customers through some of our market research and adboards think of it. Regarding your question, regarding COVID it’s this is unprecedented times as we've talked about customer engagements have been down in person. Patient visits clearly have been down. And as the country now kind of maybe goes a little bit backwards, it's very fluid and you know, we're watching it constantly. But as we've stated, this is important label expansion and an important treatment for TSC patients. And we really feel that physicians will want to know about this, this label expansion. And as I spoke in my prepared remarks, we got some very specific initiatives aimed at these TS clinic's key staff and physicians within those clinics. And I think it's an important label expansion that physicians don't want to hear about.

[Cory Kasimov:]

Okay, great. Thanks for taking the questions.

[Darren Cline:]

Thanks, Cory.

[Operator:]

Your next question is from Salveen Richter with Goldman Sachs.

[Salveen Richter:]

Good afternoon. Thanks for taking my questions. So as you're engaging in pair discussions regarding the TSP label expansion, how would this help your existing restrictions on LGS and Dravet if any? And then, could you just comment on the comfort that the overall focal seizure market falls under this current label? And I have a follow up.

[Darren Cline:]

Yes. Thanks. Justin, I'm assuming you want me to take…

[Justin Gover:]

Yes, go ahead. Yes.

[Darren Cline:]

Thanks, Salveen. Yes, I mean, we're been as we've as I've pointed out, over the last several months engaging with payers not only on just the general Epidiolex policy, and just what we think is the natural evolution of LGS and other refractory epilepsies now intersecting with with TSC expansion into the label. And so, again, those discussions continue to go very well. I think as there are some commercial plans that TCSC will be available now and some over within definitely within the next 30, 60 and 90 days depending on the P&T reviews at which the same time they'll be evaluating Epidiolex the whole entire policy as it relates to our three indications and how they're going to manage it moving forward. So, again the efficacy, the safety profile, very well received, not surprising, and even the dose of up to 25. They understand it in the context of it's in the label now, that's the dose that shows efficacy. So I think those continue to progress and we look forward to the third and fourth quarter with continued momentum across both the commercial and Medicaid lives.

[Salveen Richter:]

Great. And then can you just elaborate further on your outreach to the next wave of prescribers you were targeting? I think the greater than 1000, provider cohort, and then the long term care segment, and how that might impact the second half?

[Darren Cline:]

Yes, I mean, it's definitely continued focus for us. And I think, again, kind of stepping back and looking at kind of the unprecedented time we're in this move to telemedicine, this move to virtual promotions, can never replace the in-person patient visit, and the in-person communication between our sales force and the physicians. And so, I think moving forward, we'll continue to focus on not only our high prescribers but also now the second tier. And I do think, with the TSC, a label expansion does give us and because, not only are TSC patients treated at the TSC centers, the 66 throughout the U.S., but they're also treated by their -- within their community, by the neurologist and they manage the seizure portion of the TSC patients disease. So, it's another nice entry point for us to communicate the broad safety and efficacy of Epidiolex, and how it can impact patients within their practice.

[Justin Gover:]

And regarding the long term care segment, again, it's been hit particularly hard, but our dedicated team that's been in the field now since January are very pleased with the progress there. And we're really been focusing on education around Epidiolex with their clinical pharmacists at these large buying groups and group homes, and we continue to that focus and actually feel very good about some of the progress we've made. And again, particularly in a setting that's been hit particularly hard.

[Salveen Richter:]

Thank you.

[Justin Gover:]

You’re welcome.

[Operator:]

Your next question comes from the line of Marc Goodman, with SVB Leerink.

[Marc Goodman:]

Hi. You talked about quite a few it was like – I think you said 40% of the customers are willing to virtually engage which means 60% are not willing to virtually engage. Can you just talk about why is that? What are the problems? I know in the last conference call, you talked about how the epilepsy centers were working to set up for telemedicine, so maybe this is all related and is just not quite getting there yet. Can you give us a flavor for adult versus pediatrics as well like you normally do? Thanks.

[Justin Gover:]

Hey Marc, thank you. Darren?

[Darren Cline:]

Yes, thanks, Marc for the question. Yes, I just -- regarding the ability to virtually communicate with our customers. I do think that regarding large epilepsy centers that transition has gotten much better now, as we think about four plus months past. And it's just based on our customer base not everybody's willing, at some point in time to engage. I will say, we have seen those numbers increase month-by-month, and fill that particularly with the TSC label expansion and some of the tactics we have moving forward, we feel that number will increase. And I just think that there's a -- kind of waves of the ability to engage. And I think that we have some important updates throughout the year. The descheduling now with the TSC label expansion, that we feel that, a greater majority of our customers will be willing to engage. And regarding your question on the mix, it’s largely unchanged. It sits around that 60, 40 that we've alluded to previously.

[Marc Goodman:]

Thanks.

[Operator:]

Your next question comes from along of Paul Matteis with Stifel.

[Paul Matteis:]

Hey, thank you so much for taking my questions. I really appreciate it. I was wondering if you could comment on patient retention. You talked a lot about new starts, and I think patient retention would be helpful to cover. And then separately, I think this is relevant for sort of backing into net [ph] patient ads this quarter, but I think you said 1Q was similar to 4Q and both of those quarters were around say 1500 to 2000 net patient ads by our math, and you had said you had this script dynamic where the average script per patient went down in 1Q, did that go up in 2Q? And how should that again, kind of inform the patient base for which we model off of going forward? Thanks a lot.

[Justin Gover:]

Hey Paul, I'm not sure we're going to get that level of granularity for the actual numbers. But Darren, can you give this a go?

[Darren Cline:]

Yes, so I, you know, Justin, I think that, we said about kind of the first of the year we overcame some of the seasonality, started to build momentum towards the end of the quarter and then, and then COVID hit. And then so, we, while we did have healthy starts during Q2, not at the level that we've seen previously. So, again I think that the fundamentals of the business are solid and you spoke about the persistency, again that remains a strength of the brand. The ability for and the ability of our specialty pharmacy network really stepped up and during the quarter to ensure that the patient's got their therapy on time, and even dropping down the time to fill. So, so again, it remains that the fundamentals of the business remain strong there. But I, you know, I'll just say that this is we're kind of in a during Q2 in an unprecedented time. And I think for us to continue, new patient ads, persistency being strong, I think speaks to and now with TSC giving us a nice tailwind for the remainder of the year. We're pretty proud of the result we put up and really look forward to the future in the second half of the year, and beyond.

[Operator:]

Your next question comes from the line of Serge Belanger with Needham.

[Serge Belanger:]

Good afternoon. Thanks for taking my questions. First one is related to penetration of the Dravet syndrome in Lennox-Gastaut patient population. Like in the past, you’ve talked about being close to 50%. Just wondering if that 50% market penetration is moved at all? And what is your outlook to increasing that number going forward?

[Justin Gover:]

Thanks, Serge. Darren, it’s you again.

[Darren Cline:]

Yes, thanks for the question, Serge. Yes, so we've said, below 50% we still are, although I think that with Dravet syndrome, we think we're higher, but there's still plenty of opportunity with LGS moving forward. And listen, I think the opportunity, how we feel about it is Epidiolex, again has all the key attributes to be a blockbuster brand. I mean, we are faced now in with this COVID environment. We do need in person visits to return, but even with that said, we'll continue to grow the brand. I think that with our increasing focus on the payer and those, the Epidiolex policies, anything where there's no intervention by payers once a physician writes a prescription. I think and now with the TSC label expansion again, provided what we think are strong fundamentals for the business moving forward.

[Serge Belanger:]

Okay. And then on in terms of the TSP driven growth that we expect in the second half here, given that payer determinations or payer coverage for TSC likely won't happen for a few months, should we expect sequential growth to really take off towards the fourth quarter or something we should look for as soon as the third quarter?

[Justin Gover:]

Yes, I think maybe I'll think that Serge, it’s Justin here. I think we know Darren has said that actually there's some major commercial plans and Medicaid states that we'll be covering TSC straight away. Actually, they remain with both within the commercial and Medicaid environment, I think it's reasonable to expect within 90 days for coverage to be in place. And so, we're well set in terms of coverage. And I think the timing of coverage looks to be very favorable. And I think you’re -- the last point of your question does recognize of course we are launching this indication, sort of midway through Q3. So, inevitably, whilst I think we're excited to see what we can do with TSC, first full quarter of TSC will be the fourth quarter, but we're still expect to see some important progress with TSC through the remainder of Q3.

[Serge Belanger:]

Thank you.

[Operator:]

Your next question comes from David Kideckel with ATB Capital Markets.

[David Kideckel:]

Hi, good evening. Thanks for taking my questions and congrats on the quarter. A couple of questions. First, I think Darren you mentioned that the new patient starts for both LGS and Dravet while they were good. They didn't necessarily meet your expectations and understandably due to COVID. So I guess my question is can you maybe provide a bit of color on that? I mean, what type of magnitude that did not meet your expectations by, but also just bringing in another point given that Epidiolex, given the descheduling in the U.S. and rescheduling in Europe, part of the benefit of this was to use access for patients, increase efficiency for tap engine, etcetera. So I'm just wondering how do both of these points kind of do the cancel each other out, or should I be looking at it slightly differently? Thanks.

[Justin Gover:]

Yes, Darren, you don’t take that. I will just correct David. We -- didn't meet expectations. Bear in mind. I mean, I think actually, it has met expectations. But Darren, you want to comment more further?

[Darren Cline:]

Yes, no, David I yes, and exactly. I think actually not knowing what the impact of the pandemic would have knowing that, we wanted to shelter in place during the quarter. We -- you saw a vast reduction of in-person visits by patients, epilepsy centers, essentially shutting down and kind of reopening at much reduced capacity. I think actually if I look at the quarter based on kind of what we knew starting, I am very pleased with what the commercial team was able to deliver in the quarter. So, just that's how we the lens in which I'm looking at it. And I think so, in your second question regarding de-scheduling. We've always highlighted that it's good for the brand. And there are key things around longer prescriptions. Using [Indiscernible] prescriptions to get to the right network, within our long term care facilities being able to dose based on state regulations. And so, we're very optimistic about the de-scheduling, but it's really going to be a second half of the year and beyond. As I stated in my prepared remarks, just about half the U.S. states have descheduled. We expect the remainder by the end of the year. So again, we view it as a absolute positive. It's good for patients, it’s good for physicians, and it's something that will unfold over the latter half of the year and we'll be able to update you when it's complete. And, we'll start to see those benefits that I outlined.

[David Kideckel:]

Got it. Thank you. And just a follow up that for the price of Epidiolex for TSC. I know currently for Dravet and LGS the average price, I know it’s weight based obviously, but average price will be around 32 5 [ph] mark, is that similar for TSC as well, in the U.S?

[Justin Gover:]

Darren.

[Darren Cline:]

Yes. Thanks for the question, David. Yes, the average price is for Dravet and LGS around 32 5. I think it's too early to really see the impact of TSC, while the maintenance dose is as we've noted, up to 25 milligrams per kilogram per day. It remains to be seen how physicians in the U.S. do dosing. And so I think you can have a couple of quarters out, we'll have an idea of a better idea of, of how physicians are, are dosing it. Just to remind you that there Epidiolex was approved a year and a half ago. There's a lot of familiarity with it, particularly around dosing and the starting dose, and how physicians escalate dose. And so I think having that 25 dose is, is obviously good because it does provide physicians with additional data on dosing of the product. So I think it'll play out over the next couple of quarters, what the impact of dose and price will be.

[David Kideckel:]

Understood. Thanks very much.

[Operator:]

Your next question comes from the line of Neena Bitritto-Garg with CITI.

[Neena Bitritto-Garg:]

Hey, guys, thanks for taking my question. So just a question on again, kind of the impact of telemedicine on new starts. I guess over the second quarter and then kind of end of July, did you see the pace start to take off I mean, it sounds like from your prior commentary that it kind of has remained flat. And then I guess, if telemedicine does kind of stick around for a longer period of time, if you think that we can get back to a period of kind of an uptick in new starts for Dravet and LGS you know, kind of not counting in the TSC launch? Or do you expect [Indiscernible] to kind of go back to a normalized level we will have to have patients come back into the office? Thanks.

[Justin Gover:]

Neena, it’s Justin here. Maybe I'll take this just to give Darren a break. I think the -- from a perspective of you know, it's given what the pandemic sort of ebbing and flowing in Q2. I think, you noted from our remarks. I think it's, we've been cautious about attributing trends within quarter, because it just feels that they may, they may not be real. But overall, the trends have been pretty solid through the quarter. We didn't see dramatic swings throughout. And, I think we sort of feel like we navigated that quarter with all the challenges very well. Darren's already mentioned, but we know telemedicine, I think have become part of, of life within this field. With TSC coming on board, it does change the dynamic for as well as, living with COVID changing the dynamic. So I think there is a reason, pretty compelling reasons to think that for Epidiolex in particular, there's going to be a shift in dynamic as this new indication launches. And the level of interaction increases as we all get used to living in this COVID world. So, I think with the sort of -- whilst it's fluid, I think we've kind of got through, the uncertainties of Q2 and feel pretty good about how we're coming into Q3.

[Neena Bitritto-Garg:]

Okay, thank you.

[Operator:]

Your next question comes from Yatin Suneja with Guggenheim Partners.

[Yatin Suneja:]

Thank you. Thank you for taking my question. Just a couple for me, real quick ones. In EU you did mention you expect Q3 to be muted. You're not expecting it to be a down quarter there crack? So that's the first question EU front. And the second is if you could remind us where you are on the dose, on the average dose now versus let's say, a couple more -- last quarter, are you seeing any uptake? And the final question is, can you talk about maybe off label use in indications other than Dravet and Gastaut, I think some of our checks were suggesting that there is already some use in TSC. So maybe if you can provide what level of use if you have any visibility on that front? Thank you so much.

[Justin Gover:]

Hi, Yatin. Chris, you want to have a quick comment on Europe?

[Christopher Tovey:]

Yes, thanks for the question Yatin. I think, no, we're not expecting to be a down quarter. But it's going to be a little complicated in Europe by the holiday month. So I think everyone is aware that July and August spread across Europe tend to be pretty big holiday months. Combine that with COVID-19. It's no, I think, although we're starting now to see the return of a more normal treatment and prescribing sort of pattern for positions, it's not anywhere near normal during Q3. Now, I don't think we expect to be an adapter and I think we remain excited by all the market research we do and the feedback we get from physicians of around intend to prescribe and the satisfaction particularly in the launch markets in Germany, in the U.K, for those that have already prescribed Epidiolex Thanks.

[Justin Gover:]

And Darren you want to talk to our new south side [Indiscernible].

[Darren Cline:]

Yes, it's you know, we obviously hear anecdotally of use, it's hard to pinpoint, we don't have that specificity of data. But we do know that it does get used and other refractory epilepsies. We hear this from our from our payers and the discussions we have with fam and particularly in the context of whether it's an appeal or a peer to peer that those are getting a vast majority of them getting paid. And, again, there's really no other options for these patients. And regarding TSC, it's similar it's hard to pinpoint use because we don't have that level of hilarity [ph] into the utilization, but we feel that it's not used very much in TSC and so we think there's obviously tremendous opportunity for us moving forward.

[Yatin Suneja:]

Okay. Thank you.

[Operator:]

Your next question is from Dou Tsao with H.C. Wainwright.

[Unidentified Analyst:]

Hi, Chris Allison [ph] for Doug. Thanks for taking my question. I hope it hasn't been asked. I've been jumping on calls all day. So I want to know about GWP for 2003. I know all you guys are expecting a trial in schizophrenia. Do you have any plans? You give us a little more clear on that? Are you going to try to treat the positive symptoms or the negative symptoms?

[Justin Gover:]

Hey Volker.

[Volker Knappertz:]

Yes, well, thank you for the interest in me for 20003 for schizophrenia. So this study is a probe study for this compound and we're looking at a breadth of endpoints to really best characterize it. So we'll be looking at both positive and negative symptoms. The initial study that piloted this is published. And if you take a look at the results, this suggested efficacy on both of those domains predominantly on the positive symptom side. But both of these domains may be affected by this pharmacology.

[Unidentified Analyst:]

Awesome. Thank you.

[Operator:]

Your next question is from Laura Christianson with Cowen.

[Laura Christianson:]

Hi, thanks for taking my question. Just a quick one. I know the [Indiscernible] are theoretically less reliable than in the past right now from the low capture. But quarter-over-quarter trends actually seem to be pretty indicative in Q2. So I'm wondering if going forward you expect that to also be the case? Or if you kind of see that as just a fluke?

[Justin Gover:]

Hello, it’s Justin here? Yes, I think we continue to express extreme caution around the data, data services. They're not reliable.

[Laura Christianson:]

Got it. That's helpful. Thanks.

[Operator:]

At this time, I would like to turn it back over to management for closing remarks.

[Justin Gover:]

Right. Well, I think we've run through an hour. So thank you everyone for your attention today. You know, excited to let you know how TSC launch goes and reporting Q3 results later this year. So thanks for your attention today. And goodbye for now.

[Operator:]

Thank you. This concludes today's conference. You may now disconnect, speakers if you hold the line.