GW Pharmaceuticals plc
Q1 2018 Earnings Call Transcript

Published: 6 Feb 2018

[Operator:]

Greetings and welcome to the GW Pharmaceuticals' First Quarter 2018 Financial Results Conference Call. At this time all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Stephen Schultz, Vice President of Investor Relations. Please go ahead.

[Stephen Schultz:]

Welcome all of you and thank you for joining us today for our first quarter 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; Dr. Volker Knappertz, our Chief Medical Officer; Scott Giacobello, our Chief Financial Officer; and Julian Gangolli, President of North America. We hope you’ve had a chance to review our press release and 6-F filing issued a short while ago. As a reminder, during today’s call, we’ll be making certain forward-looking statements. These statements reflect GW’s current expectations regarding future events, including, but not limited to, statements regarding financial performance, clinical and regulatory activities, patent applications, timing of product launches, and statements relating to market acceptance and commercial potential. Forward-looking statements involve risks and uncertainties and actual events could differ materially from those projected herein. A list and description of risks and uncertainties associated with an investment in GW can be found in the Company’s filings with the U.S. Securities and Exchange Commission. These forward-looking statements speak only as of today’s date, February 5, 2018. 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 are able to join us today. On today's call, following my introduction, our Chief Medical Officer Dr. Volker Knappertz will provide a research and development update, Julian Gangolli will provide an update on our U.S. commercial operations, and Scott Giacobello will discuss our financial results. At the conclusion of our prepared remarks, we will open the line for questions. At the end of December, GW achieved the important milestone of FDA acceptance of its Epidiolex NDA submission. Also at the end of December, we submitted a regulatory application to the European Medicines Authority and I'm pleased to announce today that this application has been accepted for review by the EMA. These achievements position us for a midyear NDA approval and an anticipated U.S. launch in the second half of the year. This timeline reflects an expedited review by the FDA. In Europe, we anticipate an approval decision in the first quarter of 2019. I'm also proud that recently our first Phase 3 trial of Epidiolex in patients suffering with uncontrolled seizures associated with Lennox-Gastaut syndrome was published in Lancet. We also anticipate the results of our second LGS Phase 3 trial will be published in the first half of this year, also in a top tier journal. This publication highlights the potential of Epidiolex to address the significant unmet need in two of the most difficult types of epilepsy to treat. In December, we successfully completed the follow-on offering raising net proceeds of approximately $300 million. The funds raised in this offering are primarily intended to ensure that we are investing appropriately in the Epidiolex launches in the U.S. and Europe as well as continuing to expand manufacturing capacity and advance the pipeline. We sincerely appreciate the support of those investors who participated in this important offering. Looking forward, we are very excited about 2018, a year in which we anticipate not only the launch of our first medicine in the United States, but also continue progress on our product pipeline in a number of therapeutic targets. Let me now hand the call over to Dr. Volker Knappertz for his update.

[Volker Knappertz:]

Thank you, Justin and good day everyone. Let me begin today with our Epidiolex program. We have now completed regulatory submissions in both the U.S. and Europe for Epidiolex in the treatment of seizures associated with Lennox-Gastaut syndrome and Dravet syndrome. As you likely know, we have been assigned a PDUFA decision goal date by FDA of June 27 this year, which reflects an expedited review period. We have also received communication from the FDA regarding an Advisory Committee Meeting which is expected to be held in the second quarter. Our team is preparing for this meeting and we look forward to continuing to expand the awareness of Epidiolex in this form. Regarding the manufacturing and clinical inspections, these are scheduled and the process is proceeding in a standard manner. In addition to LGS and Dravet syndrome, we are pursuing development of Epidiolex to expand into other epilepsy indications. To this end, we are currently recruiting a single Phase 3 trial for our third target indication of tuberous sclerosis complex, results of which are expected in the fourth quarter of this year and we have also commenced the first part of the two-part Phase 2/3 study in infantile spasms. Data from the first part of this study, involving 10 patients with infantile spasms are expected in Q2. These results will inform our decision regarding whether we will proceed into the pivotal safety and efficacy part of this study in this indication. Beyond Epidiolex, we are evaluating Cannabidivarin or CBDV as add-on therapy in adult patients with inadequately controlled focal seizures for which we are conducting a Phase 2 double-blind randomized placebo-controlled trial. Recruitment in this trial has completed with 162 randomized patients. We are expecting top line results from this trial to become available this quarter, which we will communicate in a press release. I have been asked what our expectations are for this study. While we have yet to see the data, I will remind you that this is a proof of concept study, and as such we are most interested in the clinical outcomes in terms of seizure reduction in order to validate our preclinical hypothesis that CBDV offers utility as an anticonvulsant agent and to support proceeding into a pivotal phase of development. We anticipate to learn a lot about the pharmacology and the pharmacokinetics of CBDV. The statistical significance of the efficacy outcomes will not be critical in such a POC study, but the totality of information on outcomes will inform our clinical development program for CBDV. CBDV has also shown promising preclinical data regarding cognitional behavior, which has led us to pursue development of this molecule in the field of autism spectrum related disorders. A small investigator-led expanded access study in 10 patients with autism has started in the U.S., while an investigator-led placebo-controlled trial in autism is also expected to commence in the first half of 2018. In addition, we are progressing the evaluation of CBDV in the condition of Rett syndrome, for which we have received orphan drug designation from the FDA. Rett syndrome is a rare non-inherited, genetic, postnatal, neurodevelopmental disorder that occurs almost exclusively in girls and leads to severe impairments affecting nearly every aspect of the child's life including their ability to speak, walk, eat, and even breathe easily. The hallmark of Rett syndrome is near constant repetitive hand movements while awake. We expect an investigator-sponsored open label trial in Rett to commence in the second quarter followed by the start of a company sponsored Phase 2 placebo controlled trial in the third quarter. As we recently reported, GW has now recovered from a former licensing partner full ownership of the U.S. development and commercialization rights to Sativex. As a reminder, we developed this product in Europe several years ago, and the product is now approved and being used by patients in numerous countries outside the U.S. to manage their spasticity associated with multiple sclerosis. We believe that this asset represents an exciting, new, late stage, and de-risked pipeline opportunity for the U.S. market within the field of neurology. We expect that an additional pivotal trial in the U.S. may be required prior to submission of an NDA and believe that the design of this study would be very similar to those already completed, which demonstrated positive results. Indeed, the efficacy of Sativex in MS spasticity was further reinforced by exciting new data from a placebo-controlled trial presented at ECTRIMS in September last year in Paris. This trial met its primary and key secondary endpoints including effects on the modified Ashworth scale national scale showing that Sativex provides clinically relevant improvements in treatment-resistant MS spasticity. In this trial, the safety profile was consistent with that seen in previous trials. We are currently planning consultation with the FDA with a view to commencing development activities later this year. We also continued to perform a detailed analysis on the data from our previously completed Phase 2 placebo-controlled clinical study of a combination of CBD and THC in patients with recurrent glioblastoma to ensure that our initial observations are substantiated prior to pursuing this promising pipeline opportunity and advancing into a pivotal clinical development program. You will recall that the data from this study was presented at last year's ASCO meeting where we presented impressive survival results in the active group compared to placebo. Thank you and I look forward to keeping you updated on our future progress. Let me now ask Julian to provide some comments on the commercial status.

[Julian Gangolli:]

Thank you, Volker. I'm pleased to report that the U.S. organization's leadership team is now fully in place with the recent appointment of our Head of U.S. Sales. This individual has extensive experience in the rare disease space and has a strong track record of success. Beyond this important hire we continue to build out an experienced team of medical sales professionals, marketing and market access, and payor expertise. From a medical affairs perspective our team continues to develop Dravet and LGS disease state information, rolling out programs in cannabinoid education and intensifying interaction with key epilepsy opinion leaders to collect their insights related to the science emerging from the Epidiolex program. We expect to continue dissemination of important scientific data from the Epidiolex clinical program as evidenced by the recent Lancet publication of our first LGS Phase 3 study. We also anticipate data presentations at important upcoming medical congresses including the American Academy of Neurology meeting in April. We appreciate the fact that many of you joined us the at the recent American Epilepsy Society Annual Meeting held this past December where a comprehensive set of new data was presented from the Epidiolex program. A key focus of the commercial team is on payor education and readiness. Our initiatives there include active interactions with a wide variety of payors and insurance programs, including most of the large commercial, state and federal payors to assist in post-approval reimbursement decision-making. We also continue to focus on our interactions with the major epilepsy patient advocacy groups, an important channel of communication as we prepare for Epidiolex launch. In our interactions with these groups, parents of children with Dravet syndrome or Lennox-Gastaut syndrome have shared their experiences and have given us some important insights into how to help families along their journey. These insights truly are a powerful reminder of just how much unmet need there are in these communities. Finally, we are preparing to hire approximately 70 sales professionals in the U.S. and I could tell you that there's been no shortage of interest in these sales positions as Epidiolex represents a potentially exciting, new therapeutic alternative for the treatment of these child onset epilepsies. Turning to outside of the United States, we continue to make great organizational progress for the commercialization of Epidiolex in Europe and the rate of this progress is now accelerating following submission and acceptance of the MAA. This European commercial effort is being led by our Chief Operating Officer, Chris Tovey who has significant experience commercializing and launching pharmaceutical products including products within the field of epilepsy. We continue to hire quality staff in the areas of medical affairs, market access and marketing all with strong epilepsy or specialist disease experience. These hires include country leadership and local medical staff in the major five European markets and are actively engaged in local activities supporting market access, medical affairs and commercial plans. In parallel with the U.S. medical communications, key Epidiolex data is being communicated through European medical congresses and international medical journals. Significant focus is now being placed on the specific activities associated with securing acceptable and prompt pricing and reimbursement post MAA approval. Overall, both U.S. and European commercial teams are well-positioned and we have great confidence in their ability to achieve our company's commercial goals. I thank you for your time and attention today and I now hand over the call to Scott Giacobello to provide the financial review.

[Scott Giacobello:]

Thank you, Julian good afternoon. I will now provide some high level comments on GW's financial results for the three months ending December 31, 2017. A more detailed discussion of our results is provided in the 6-K we filed with the SEC a short while ago. We present GW's results in accordance with International Financial Reporting Standards in British Pound Sterling. For convenience purposes on this call, I will refer to U.S. dollar equivalents using the rate of December 31, 2017 of 0.7417 British Pound Sterling to U.S. $1. Starting with revenue, total revenue for the quarter were $7.7 million up from $2.8 million in the prior year quarter. this $4.9 million increase is primarily due to the accelerated recognition of deferred revenue fees resulting from the mutually agreed termination during the current quarter of the Sativex U.S. licensing agreement with Otsuka under which GW reacquired U.S. rights to this pipeline product. Moving to R&D spend, total research and development expense for the quarter increased to $40.8 million compared to $33.6 million in the prior year quarter. This increase reflects the ongoing Epidiolex development program and cost related to the NDA and MAA submissions as well as our other pipeline programs and additional costs related to the scale up of Epidiolex growing and inventory build for potential launch, all of which are expensed as incurred. Turning to SG&A, sales, general administrative expenses increased to $23.4 million in the quarter from $9 million in the same period last year. Consistent with previous quarters, this substantial increase is a result of continued investment in the ramp-up of our commercial operations and prelaunch activities in both the U.S. and Europe. Foreign exchange volatility continues to have a significant impact on our results. During the first quarter continued weakening of the U.S. dollar against the Pound Sterling has resulted in the recognition of a net foreign exchange loss of $3.4 million. This loss is primarily due to the revaluation of the company's dollar denominated cash balances at the closing Sterling exchange rate. This has all resulted in a loss before tax for the first quarter of $59.9 million. In the quarter the company recognized tax expense of $3.4 million a portion of which was due to the revaluation of deferred tax assets related to the passage of the Tax Cuts and Jobs Act in the U.S. Moving forward, the impact of U.S. tax reform is not expected have a significant impact on our results as we expect group results will primarily be subject to UK's patent box regime. When taken in combination with our available tax losses carry-forward and relief available on research and development tax expense in the UK we expect this will result in a long-term low rate of corporate tax in the range of 12%. Net loss after tax for the current quarter was $63.3 million. Moving to cash flow, net cash inflow from financing activities was $299.8 million in the quarter reflecting the successful equity financing completed in December 2017. Capital expenditure for the quarter amounted to $9.3 million compared to $2.2 million for the prior year quarter reflecting continued investments in the expansion of our cannabinoid production facilities. Net cash outflow from operating activities for the quarter was $53.3 million compared to $32.3 million for the prior year quarter reflecting the increases in R&D expenditures and SG&A costs already mentioned. Total net cash inflow for the quarter amounted to $234.1 million. At December 31, 2017 we held closing cash equivalent of $559.2 million. Turning to guidance, consistent with our previous guidance, we continue to expect total cash outflows for the first half of the year excluding the impact of December financing in the range of £75 to £90 million or $100 million to $120 million based on today's prevailing currency exchange rates. This includes capital expenditure of $10 million to $20 million related to manufacturing expansion. Thereafter if Epidiolex is approved we expect cash outflows to increase in preparation for product launch and we'll update guidance at that time. Thank you. I will now hand the call back to Justin.

[Justin Gover:]

Thank you, Scott. In closing, our primary focus is on ensuring that we deliver regulatory approvals and highly successful launches in both the U.S. and Europe for a world class team. In the near-term we are actively engaged with the FDA on the NDA review and are well prepared for the upcoming Advisory Committee Meeting as well as manufacturing and clinical inspections. We also continue to be highly focused on actively prosecuting our current patent applications and are filing new patent application as we develop additional novel findings to maximize the value of the Epidiolex opportunity the only orphan protection. We anticipate that a number of these filings being prosecuted under the Track One prioritized patent examination program may go to grant in the second quarter this year. Beyond Epidiolex we continue to stay focused on leveraging our deep expertise and proprietary development platform to generate important and valuable product candidates which include CBDV for epilepsy for which we should have top line data soon, CBDV in autism and Rett syndrome and next steps in the Sativex multiple sclerosis program. I expect 2018 will be an exciting and pivotal year for GW. I look forward to updating you throughout the year on both the Epidiolex program and our pipeline expansion. Thank you for your time today and for your interest in GW and I would now like to open the call for a few questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Salveen Richter with Goldman Sachs. Please proceed with your question.

[Salveen Richter:]

Thanks for taking my questions. So in regard to CBDV, could you just comment about the mechanistic read-through from Epidiolex and talk about the dose work that's been done to date? And I have a followup.

[Volker Knappertz:]

Yes, thank you for your question. This is Volker Knappertz, Chief Medical Officer. So CBDV is a cannabinoid that is a cannabinoid in its own right, so mechanistically we've examined CBDV and have compared it also to CBD in preclinical models, and there's differences in the dose concentration relationship with the seizure suppression in the models which are of course reductionists. So we have done dosing work within our animal models of pertinent epilepsy readout, and so as you know in this study, in this particular proof of concept study, we're testing only one dose which is 800 mg twice a day, and these are all adult patients of course with focal onset epilepsy. So the relationship to Epidiolex is that they are both cannabinoids, they both have potentially similar active moieties, but because CBDV has a different ethnic [ph] profile, different pharmacokinetic profile, and has shown some different pharmacology in the preclinical models, we believe the read through is indirect at best between these two different cannabinoid entities.

[Salveen Richter:]

Okay, and then just with regard to Epidiolex, as you've conducted these early payor work and market research, you know what, maybe you could just provide us with some color as we think about the launch going forward, and then just with regard to the uptick in SG&A, you know who is left to be hired at this point?

[Julian Gangolli:]

Thank you, Salveen and this is Julian. We've done an extensive amount of research with the payor community. I think our approach has been fairly comprehensive. We've talked to payors that represent close to 200 million, 220 million lives in the United States, so I think we've got a reasonable picture of where the understanding that the payors have of these childhood onset epilepsy’s, the unmet medical need, and also importantly the referenced products that are typically used to treat these conditions, namely the two branded products, Onfi clobazam and Banzel rufinamide. So obviously a number of those discussions are still ongoing. We are testing a number of pricing corridors, and you know we'll be honing in on what the price range is going to look like. We're not there yet, but I think it's moving forward. What I would underscore though is the understanding that the payors have, and their reflection on the fact that a company such as Greenwich G.W. has been able to publish data both in the New England Journal of Medicine and in the Lancet, and those types of peer reviewed journals hold reasonable importance in their decision making. Hopefully that, yes with regard to SG&A, let me talk to you as to where we are. We have just hired our head of sales. We're delighted that we've brought in an individual with adjacency experience, not epilepsy, but rare disease orphan drug adjacency experience from the area of cystic fibrosis, and she has extensive experience in actually building sales organizations from ground zero, if you will, and so we're very excited that she's on board. In terms of building out the U.S. operation, we will be bringing two regional directors closely followed by seven or eight regional managers, and then in turn closer to the PDUFA date and depending on how the discussions with FDA goes a further 70 sales professionals. Outside of that, most of the infrastructure has already been built out, so medical affairs is built out. Our payor strategy is and our field based payor team now that is complete, so outside of the sales force, we're pretty much built out, so I hope that answers your question.

[Salveen Richter:]

Yes, thank you.

[Operator:]

Our next question comes from Paul Matteis with Leerink Partners. Please proceed with your question.

[Paul Matteis:]

Awesome, thank you so much for taking the questions. I have a couple of quick ones on CBDV and then one on the DEA process. Just on the CBDV program, I was wondering first what the impetus was for starting the open label study, examining the impact on seizures in that sub population and if that came from anything that was seen or heard about the ongoing Phase 2?

[Justin Gover:]

Paul, its Justin here. Do you mean the autism study or the Rett study or both?

[Paul Matteis:]

I think I mean in the autism study where you're looking at the ten patient investigator expanded access program for seizures and autism.

[Justin Gover:]

There is some history there, but there's been a lot of interest in the community in the U.S. following the Epidiolex program in looking at cannabinoids more broadly than just the seizures. So this was a logical sort of if you will response to an investigator interest in this area and also discussions as the investigator was interested to look at the novel cannabinoid in CBDV as opposed to Epidiolex to understand obviously this would be breaking new ground and so it was really in response to that interest.

[Paul Matteis:]

Okay, got it and then I understand the ongoing CBDV study is a Phase 2, but by the same token it's actually a pretty big trial. It's a 162 patients and I think the first Dravet Phase 3 was 120 patients, so it seems reasonably well powered. I guess why the commentary regarding the fact that statistics are unimportant to you, it would seem like they should matter?

[Volker Knappertz:]

Yes, thank you, Paul. This is fall this is Volker. Yes, we do have some statistical power design to the study. As you alluded to there are 162 patients in this study, so half of them are on placebo and half of them are on the active drug. So, but as you know the Phase 3 pivotal study in focal onset epilepsy, partial epilepsy often have a 1000 plus patients in them or at least 300, 400 patients per arm, so this would be fully powered study. As you know the placebo response rate in recent trials has quite a bit increase over the years and that's a pretty well known phenomenon in these patients that are becoming increasingly treatment resistant and having tried many of the available anti-epileptic agents. So the contrast to placebo may be diminishing over time as well. So it is a proof of concept study. It's clearly a small study in the big scheme of things. It's difficult to complete [ph] this to these orphan early childhood onset treatment refractory and populations in Dravet and Lennox-Gastaut that we've studied before, but we do have some power to detect large effects. And as I was alluding to earlier, this is really for us to start to understand CBDV's role, a lot about the pharmacology about the pharmacokinetics, the [indiscernible] profile of the drug. And if there is a substantial effect we will know this from multiple of the end point whether or not a marginal p value on the primary endpoint is met, it’s not going to influence our decision making in moving this program forward. We will be looking at the totality of evidence and they were cautiously optimistic that we learned a lot from the study which should be reading out this quarter.

[Paul Matteis:]

Okay great and then just one quick question for Julian, can you talk about the process and the timing for DEA scheduling or I guess rescheduling a CBD and in the context of that after the PDUFA of June 27 is it realistic for you guys to be able to generate revenue in that next quarter or do you think it's something where it's really going to take until fiscal year 2019 to be locked and loaded with respect to access and sales potential?

[Justin Gover:]

Right, so Paul just on the process, so the PDUFA is as you indicated in June. The DEA has up to 90 days to file or to put out their interim final goal which takes us into the September timeframe. We have plans to launch in the September timeframe for a number of important reasons. So effectively for revenue recognition we would be looking at only a few weeks of September to have product recognized, so it would basically be Q1 of fiscal Q1 in which you are really going to get the uptake in the product.

[Paul Matteis:]

Okay, thanks for the clarification. I appreciate it.

[Justin Gover:]

Thanks Paul.

[Operator:]

Our next question comes from the line of Mark Fram with Cowen & Company. Please proceed with your question.

[Mark Fram:]

Hey guys, thanks for taking my questions. Just thinking about the outcome if you can just, what you expect to be the major point of discussion and in particular maybe discussion of the REMS and how that might interact with the payor conversations you've been having in terms of beyond LGS and Dravet?

[Justin Gover:]

Yes, so let me thank you for the question Mark. Let me take a first stab at this. I’m going to then probably ask Julian to answer if there are implications for payors. But we really have no significant communication from FDA regarding the outcome other than a very simple standard communication that at this current time and that was the day 60 letter basically at the end of December that they were anticipating to hold an Advisory Committee Meeting. So it's very difficult for us to speculate. We are preparing for broad swatch of topics, so we're looking really at everything that's possible. Frankly, we have no indication to specifically focus on the REMS. We have disclosed the safety profile extensively to you all before and published on it and as you saw in the recent Lancet and New England publications, from what we've seen none of those actually themselves to a REMS program at this time, but don't want to be presumptuous because we really have not had in-depth communications with FDA about these topics and they will be then disclosed by FDA in due course as they will announce the meeting on the federal register. But at this time we really we’re taking a broad approach. We're very well preparing external consultants that have done 200 plus advisory committee meetings with pharmaceutical companies and we're going through a fairly vigorous process preparing for all eventualities.

[Mark Fram:]

Thank you. And then maybe just also following up on the – you're reacquiring MS spasticity rights. What really is changed in that market, you know since the historic decisions to kind of de-emphasize that and out-license it d out? Is it just this new data that was presented ex-REMS [ph] or something really changed in kind of your market research that makes it a more attractive opportunity for you?

[Julian Gangolli:]

I'm not sure much has changed other than the fact that the company's own position has changed markedly since the decision to out-license this which was a decade ago. So at that point we didn't have the data we have today and the U.S. program was pondered and focused on outside of the MS area. So what really has changed is the opportunity for GW to take this on and most certainly the data that came out last year that trends with I think very exciting for us because it was yet another placebo controlled study, very high level of significance in primary and secondary endpoints, just to reconfirm I think what we already knew that we have a strong possibility in future studies of seeing similar data. And so, the route forward towards the relatively near term additional opportunity neurology is just something that would be remiss of us not to overlook and not to prosecute and until now we have that opportunity with full ownership of the rights, clearly when it's pointed out has a different level of priority but with full ownership it can get full attention.

[Mark Fram:]

Okay and then I know it's early discussing these, but for the trial, you do you expect to have to look in refractory patients to things like Zanaflex or would you think about going head to head how do you think about that?

[Justin Gover:]

The design of the studies are all as adjunct to therapy for patients who are still suffering from spasticity despite currently available anti-spasticity medication. So it will be that kind of concept.

[Mark Fram:]

Okay, thank you.

[Operator:]

Our next question comes from the line of Josh Schimmer with Evercore ISI. Please proceed with your question.

[Josh Schimmer:]

Thanks for taking the questions. Just quick one, would you consider advancing CBD or other cannabinoids for autism, especially if you do not see a robust signal for CBDV in seizures? Thanks.

[Justin Gover:]

Hi Josh. It's Justin here. So I mean I think the - at least some of the early signals that would justify us being interested in autism clearly arose from some of those observations of CBD, So I think the question is an interesting one for us to consider of we don't see CBDV as the most promising candidate. I think to run you through the sequence, so I don't think any, I don't think the outcome of the epilepsy study of CBDV changes our view that CBDV would be interesting in autism. So I don't think that the near term study result is going to affect the plans to do the CBDV autism work, but clearly we we've seen, we think a signal in open label of effects beyond seizures in patients on CBD. And I think it remains – it remains something that we will continue to monitor very carefully. So it's hedged off with your question, but certainly it's not ruled out.

[Josh Schimmer:]

Thanks very much.

[Operator:]

Our next question comes from the line of Tazeen Ahmad with BOA. Please proceed with your question.

[Tazeen Ahmad:]

Hi, guys thanks for taking mine. I wanted to just kind of narrow down market opportunities between the U.S. and Europe. So given the differences that we would be expecting in pricing for Europe versus the U.S. taking into account, how do you assume the ramp might be in Europe versus the U.S. of uptake?

[Justin Gover:]

Tazeen, it's, I think I'll let Chris Tovey who is leading the effort address that.

[Chris Tovey:]

Hi, Tazeen. The ramp in Europe obviously is going to be constrained by market access and by the staging of launch countries in Europe. In Europe it's never quite as simple in Europe to launch as it is in the U.S. because price reimbursement can take a while. And so I think we'd expect the ramp would look different just purely from a sort of an EU5 staging perspective. I think the other thing is that it's fairly well shown that EU positions tend to be a little bit more conservative around the rates which they adopt new medicine. So I think we’d expect the ramp in Europe to be slower and lower than in the U.S. although I think we see definitely that Europe is a very exciting opportunity probably, and a third sort of size potential of the U.S. market.

[Tazeen Ahmad:]

When you say a third is that by patient number or is that by dollars or monetized?

[Chris Tovey:]

It’s more by dollars. I think if you look at the global epilepsy market, you tend to see that value of Europe looks at one third that of the U.S. Although actually European market obviously is quite different to the U.S. given that sort of situation with rufinamide and clobazam is a little bit different. Clobazam obviously was launched in Europe a long, long time ago and has been off patent for quite a while and rufinamide goes off patent in 2019. So it’s a very different market, but back to your original question, slower and obviously it's a smaller opportunity in terms of cash, population very similar actually between the EU5 which is our focus and the U.S.

[Tazeen Ahmad:]

Okay and then on some of these studies that haven't been asked about yet for I asked what do you think the differentiating factor would be for your treatment versus other treatments that are already out there?

[Chris Tovey:]

Yes, so the current protocol stipulates that this is in patients that have failed the standard therapies, so these are patients who have no other options at this stage so that’s the differentiating feature.

[Tazeen Ahmad:]

And how many patients would that be?

[Chris Tovey:]

What percentage of IS patients are not controllable with the existing therapy?

[Tazeen Ahmad:]

Right.

[Chris Tovey:]

I would have to guess, but I think it’s a substantial proportion of patients I think it should be 50% or more that still have ongoing activity.

[Tazeen Ahmad:]

Okay, and what would you consider to be the data on that study?

[Chris Tovey:]

Yes, so we initially look in here at this pilot phase of ten patients and the number of patients would have to show fairly rigorous EEG endpoint of abrogating the hypsarrhythmia that is recorded at this chaotic epileptic tic form activity on the EEGs of these children and so we would look in the number of patients for abrogation of hard endpoint in order to proceed into the second phase of the study which then will be four [ph] Phase 3.

[Tazeen Ahmad:]

Okay and then one commercial question, Justin I think you talked about maybe Julian hiring 70 or so more people into the organization for the launches, is that for the world wide or is that just be covering U.S.?

[Julian Gangolli:]

Tazeen, Julian. That is a U.S. number. That is specifically for the U.S. And Chris, do you want to comment on Europe?

[Tazeen Ahmad:]

And what do you think you might need for…?

[Chris Tovey:]

Sorry Tazeen. So in Europe just basically the customer base is about quarter the size of the U.S customer base. Patients, a lot more consolidated in fewer physicians hands and fewer centers any five. So we'd expect to have in total really only about 30 MSLs [ph] [indiscernible] in place in the EU5 and then that's topped up with country managers and some additional commercial staff. So if you think about U.S as being 70 representatives, Europe is 15 to 20 and a matching number of MSLs. I think in Europe we really do see the criticality of having a significant number of medical staff in order to ensure we can get physician access and get obviously they key data across.

[Tazeen Ahmad:]

Okay, thanks guys.

[Operator:]

Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to management for closing remarks.

[Justin Gover:]

Thank you. This is Justin. Just to thank everyone for joining the call today. I look forward to updating you on the CBDV data, regulatory progress on both sides of the Atlantic and heading towards commercial launch, what should be a very exciting year for this company. So thank you for your time and no doubt we'll look forward to seeing you all very soon. Thank you.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.