GW Pharmaceuticals plc
Q4 2018 Earnings Call Transcript

Published: 28 Nov 2018

[Operator:]

Greetings and welcome to GW Pharmaceuticals Fourth Quarter 2018 Financial Results Conference Call. At this time, all participants are in a 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, Steve Schultz. Thank you, you may begin.

[Steve Schultz:]

Welcome all of you, and thank you for joining us today for our fourth 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; Julian Gangolli, President of North America; Chris Tovey, our Chief Operating Officer; Dr. Volker Knappertz, our Chief Medical Officer; and Scott Giacobello, our Chief Financial Officer. We hope that you’ve had a chance to review our press release issued a short while ago. We expect to file our Form 10-K tomorrow. 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, November 27, 2018. Finally, an archive of today’s call will be posted on 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. With the recent launch of Epidiolex on November 1st, GW has opened a new chapter as a commercial stage company. This launch reinforces our leadership in cannabinoid science and validates the importance of cannabinoid’s pharmaceutical medicines [indiscernible] rigor of controlled clinical trials and regulatory review. Most importantly, this launch offers patients and their families the first and only FDA approved CBD medicine to treat too severe childhood onset epilepsy. In a moment, I will ask Julian Gangolli, GW’s President North America, to provide some very early observations on how the initial launch is going. I'm sure investors will understand that this has been only one month since this launch, so information provided will be high level only. Beyond the U.S., we’re moving into the final stages of the European regulatory review of Epidiolex with the decision expected in Q1 2019. In parallel with this regulatory review, we are advancing commercial launch preparations about which Chris Tovey, our Chief Operating Officer, will provide more color during this call. We also continued to advance our research efforts. Just yesterday, we announced positive results in our second Epidiolex Phase 3 trial in Dravet syndrome. And while the Epidiolex program has been transformative for GW, it is only the beginning as we look ahead to leverage the potential of our pipeline beyond epilepsy with a number of important and exciting active programs. Volker Knappertz, our Chief Medical Officer, will review the latest Dravet data and provide a pipeline update in his report. Finally, on this call, Scott Giacobello, our Chief Financial Officer, will review our financial results. I’d also like to take this opportunity to thank those investors that participated in our recent financing that raised net proceeds of approximately $324 million. This financing provides GW with the balance sheet necessary to execute launches in both the U.S. and Europe, continue to expand our manufacturing capacity and to invest in the pipeline. Let me now hand the call to Julian Gangolli for his update. Julian?

[Julian Gangolli:]

Thank you, Justin. I want to begin by expressing how excited we are to have launched our first product and believe that Epidiolex has the potential to become an important new treatment within the field of Dravet and LGS. While it took the full 90 days for the DEA to publish their rescheduling action, we are pleased with the DEA rescheduling of Epidiolex to Schedule V, which is the least restrictive schedule. This outcome is completely consistent with the FDA's assessment of the low abuse potential of Epidiolex. I would also like to share on the call that on the DEA announcement of their scheduling action our state government affairs team, who for the last two years have been working on our state rescheduling initiatives, have been able to ensure that each of the 50 states and Washington DC have also rescheduled Epidiolex, allowing product to be freely prescribed across the United States. Once rescheduled, the company moved quickly to ship the first batches of Epidiolex into the U.S. supply chain. The product was officially launched on November 1st of this year. Looking at our sales organization, I am proud to say that this team is highly experienced team with an average of over 16 years of experience in rare disease, neurology, or epilepsy. We have initiated an extensive series of educational broadcast and speaker programs to support the launch. On November 8th, we undertook a national live broadcast to educate clinicians, which included 55 live sites and extensive remote access across the United States. In total, some 500 plus target physicians participated in the call. The Salesforce is also been setting up local speaker programs with 20 events completed in the first week of launch and over 80 speaker events planned for the rest of 2018. We are also very active with Patient Advocacy Organization, completing 46 local sponsorship events by launch with 110 events scheduled for the remainder of this year. Our marketing team has developed an extensive array of resources and materials to support the sales team as they educate healthcare providers, caregivers and patients. These include print, broadcast, social media and online resources. For example, we have established a number of important Web sites designed to inform both patients and caregivers and our healthcare professionals. Since inception of these sites, we have had over 100,000 visits to each of the patient and caregiver and healthcare professional Web sites. Turning to the important role of medical information. Our medical information team is a dedicated in-house support center for both caregivers and HCPs with the objective of providing high-quality, consistent and comprehensive information in an empathetic and caring manner. Our medical science liaison team continued to disseminate our robust scientific and clinical data from the Epidiolex clinical program through data presentations at important medical congresses and to major academic centers and epilepsy centers in the U.S. We will have over 20 poster presentations at the upcoming American epilepsy society, annual meeting next week in New Orleans. As we are less than one month into the launch of Epidiolex, I don't have any specific launch metrics to provide today; prescriptions are being reimbursed and filled by both commercial payers and CMS; the latter being important due to the significant pediatric population that may likely try Epidiolex. Regarding our discussions with the payer community, we are seeing the patients with LGS and Dravet syndrome generally have a pretty standard prior authorization requirement. A number of clients have already established coverage policy with the most common being a prior authorization to label and failure on prior AEDs. As with any new drug the initial prior authorization process does take some time and as we have stated previously, it is not unusual for this to take up to two weeks. I would like to make reference on this call to a major large payer that we have been working with who has placed Epidiolex as a preferred brand in the antiepileptic drug category on their national formulary. We are also working with other major plans to reduce the prior authorization requirement. We believe that the advanced work by the Greenwich team has generated a meaningful level of understanding that we feel is encouraging relatively quick and positive formulary coverage and reimbursement decision-making. I do think it's important to note that while we believe that Epidiolex demand is high, the majority of the epilepsy specialist will face an initial learning curve as they introduce Epidiolex into their clinics. We expect that clinicians will likely focus on the younger LGS and Dravet syndrome patients first. They have also indicated that due to the complex nature of the disease and the number of concomitant drugs they are likely to titrate Epidiolex in line with the label guidelines, titrating to 10 mg/kg/day and observing the efficacy at that point before titrating up to higher doses. As we have previously stated, approximately 1,000 patients from the expanded access program an open label extension from the pivotal trials are currently receiving Epidiolex free of charge in the form of clinical research product. We will embark on a systematic program to help ensure that these patients have access to commercial product and most importantly, to ensure continuity of such treatment. As such, the company is focusing initially on new patients with an immediate need for Epidiolex and overtime, likely around mid 2019, we will begin working with physicians to commence migration of these existing compassionate used patients to commercial product. Having led many previous successful launches, I have to say I'm encouraged by the high level of interest from our target physician universe to Epidiolex and by the number of payers that have already made favorable coverage determinations for the product; in particular, the coverage determination that I mentioned earlier with a major large payout. With that said, the period from November 1st through to year end represents just two months of selling for this quarter. Further, the actual numbers of selling days in both November and December are reduced due to the holidays. On top of this, there is a timeframe of up to two weeks for payers to make coverage decisions during this launch period. Therefore, I do think it is important to set expectations that this current quarter ended 31st December is primarily about setting the successful commercial wheels in motion and that revenue build is expected to start to gain traction in the first quarter of 2019. I believe we have prepared and are executing against our plan for the successful launch of Epidiolex here in the United States, and we look forward to sharing those results with you on subsequent earnings calls. Let me now ask Chris Tovey, GW's COO, to provide an update on European commercialization. Chris leads GW's non-U.S. commercial activities and manufacturing. Chris?

[Chris Tovey:]

Thank you, Julian. With our confidence remaining high regarding the prospects of EU approval, we continue to advance the build of a commercial organization for Epidiolex in Europe and are planning to launch it in the five major European markets in 2019. Much like the U.S. team, our commercial leadership team in the EU consisted experienced epilepsy and rare disease experts who are now all in place. This team is now focused on progressing the necessary pricing and reimbursement, medical and pre-commercial activities required to deliver effectual European launch. Pricing and reimbursement plans are well advanced and we are seeing strong engagement from the reimbursement authorities. The GW commercial organization, using the hub-and-spoke model for the initial launch organization structure comprising essential GW team working closely with high-quality contract customer facing organization at the country level. Across the five major markets, we have planned a total of 17 sales professionals and seven 17 MSOs. Medical affairs activities are progressing well with national advisory boards now completed in all the major markets, and significant presence and data exposure at key National and European Congresses, such as this year's European Congress on Epileptology in Vienna, where GW had a substantial presence. Looking now at manufacturing which also falls under my responsibility. We are confident that our capacity is more than sufficient to meet launch requirements in both the U.S. and Europe, and that our manufacturing expansion plans are on track to service what we expect to be robust long-term demand. Thank you. And let me now hand the call to Volker for his update.

[Dr. Volker Knappertz:]

Thank you, Chris, and good day, everyone. Let me begin by saying how pleased we are today to once again representing successful results from the Epidiolex pivotal clinical trial program. In this second Dravet Syndrome Phase 3 trial, for which we have just released top line data Epidiolex when added to the patient's current treatment, achieved the primary endpoint of production in convulsive seizures for both dose levels, 10 milligrams per kilogram per day and 20 milligrams per kilograms per day with robust statistical significance. Both Epidiolex doses also demonstrated statistically significant improvement versus placebo in all key secondary endpoints. During the 14 week treatment period, patients taken Epidiolex 20 milligrams per kilogram per day achieved a reduction in convulsive seizures of 46%, and patients taken Epidiolex 10 milligrams per kilogram per day achieve the reduction in convulsive seizures of 49% compared with a reduction of 27% in patients taken placebo. Results from key secondary efficacy endpoints, which include reduction in total seizures, a 50% or greater responder analysis and the caregiver global impression of change, which also achieved statistical significant for both dose groups compared to placebo. In the Epidiolex 20 milligrams per kilogram per day group 49% of patients achieved 50% or greater reduction in convulsive seizures from baseline over the treatment compared to 44% of patients taken Epidiolex 10 milligrams per kilogram per day, and 26% of patients taken placebo. The pattern of adverse events was consistent that reported in the previous three Phase 3 studies as for safety information detailed in the approved U.S. label. This positive outcome further demonstrates the Epidiolex effectiveness in Dravet Syndrome patients and reinforces an effective dose range for Epidiolex consistent with the FDA approved label, allowing for dose flexibility to address individual patient needs. Additionally, the study reaffirms the label language designating the 10 milligram dose at the maintenance dose of the 20 milligrams per kilogram per day dose as the maximum recommended maintenance dose. Full data from this study will be presented at a future medical meeting in 2019, and we will also now start to prepare the manuscript for publication. Turning now to the European regulatory process for Epidiolex, the review is progressing as anticipated and we expect to CHMP to reach a decision on the application in the first quarter of 2019. We continue to plan for success here. Regarding Epidiolex lifecycle management, we are working on important clinical developments, as well as formulation enhancements. On the clinical front, we are focusing our efforts on tuberous sclerosis complex and on Rett syndrome. Results from the TSC trial are expected in the first half of next year, and subject to positive results, we expect to file a supplemental new drug application for this indication in the second half of 2019. For Rett syndrome, we’ve submitted an IND for pivotal placebo control trial and expect this to commence in the first half of 2019. Regarding formulation enhancements, we have developed a capsule formulation and an improved oral solution, and Phase 1 work on both these formulations is on track and taking place in 2019. Beyond Epidiolex, Sativex represents an exciting late stage pipeline opportunity for GW. The nearest term opportunities to obtain FDA approval for Sativex is in the MS spasticity indication. Allow me to remind you that Sativex is currently approved in over 25 countries outside the United States and is providing patients with relief for the symptoms and the spasticity due to multiple sclerosis, for which we have already three positive Phase 3 trials that are completed. We are now scheduled to meet with the FDA next month in order to determine the most efficient regulatory pathway to achieve an NDA for Sativex in this indication. GW owns the full commercial rights to Sativex in the U.S. and plans to advance this late stage and de-risk asset in the U.S. market in the number of indications where CBD/THC product is scientifically appropriate. We have already completed over 10 placebo-controlled trials of Sativex in other indications, primarily in neuropathic pain syndromes. Regarding cannabidivarin or CBDV, we’re pursuing development under this molecule in the field of autism spectrum related disorders, as well as epilepsy. This program is active and includes open label and placebo-controlled trials, which are expected to progress significantly in 2019. In the near term, you will see some initial data on five patients with autism and seizures, which will be presented at the upcoming AES meeting. These initial data suggests that CBDV was well tolerated and exhibited AED properties. Of the five subjects treated to-date, two became seizure free while a third had 70% reduction in their seizures and two subjects had no change in their seizure activity. Moreover, there were positive effects on general autism scales and an increase in means length of verbal utterances, which occurred during the eight weeks of treatment. Finally, we are advancing plans for three additional pipeline programs, namely glioblastoma, NHIE and schizophrenia. We will provide more details on these programs in due course. Thank you and I look forward to keeping you updated on our future progress. Let me now hand the call to Scott Giacobello to provide the financial review.

[Scott Giacobello:]

Thank you, Volker and good afternoon. I’ll now provide some high-level comments on GW's financial results for the three months and fiscal year ending September 30, 2018. As previously communicated, the company no longer qualifies as a foreign private issuer, and will now file periodic reports and registration statements on U.S. domestic issuer forms with the SEC. Therefore, GW's financial results for the three months and fiscal year ending September 30, 2018, are presented in accordance with U.S. Generally Accepted Accounting Principles in U.S. dollars. This is our first period reporting under U.S. GAAP and it is worth noting that the adjustments from IFRS to U.S. GAAP did not have a material effect on GW's net results as presented in our previously issued financial statements. The period over period comparisons that I will discuss momentarily are based on our recapped U.S GAAP financial statements which are included in the results release. A more detailed discussion of our results we will be included in our 10-K, which will be filed with the SEC shortly. Starting with revenue, total revenue for the quarter was in line with the prior year quarter at $2.4 million. For the year, total revenue grew to $12.7 million compared to $8.6 million in the prior year due mainly to increased Sativex sales and the recognition of R&D fee revenue resulting from the termination 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 amounted to $28.9 million compared to $30.1 million in the prior year quarter. Under U.S. GAAP, we began capitalizing EPIDIOLEX inventory costs upon FDA approval on June 25, 2018. Prior to approval, these costs were recorded as R&D expense. R&D expense for the year amounted to $153.7 million compared to $112.2 million for the prior year. This year on year increase reflects the ongoing Epidiolex development program, including the progression of the NDA and MAA submissions, as well as our other pipeline programs. Turning to SG&A. Sales, general and administrative expenses increased to $52.7 million in the quarter from $19.4 million in the prior year quarter. For the year SG&A spend totaled $141.8 million compared to $58 million for the prior year. Consistent with previous quarters, this substantial increase is a result of continued investment in our commercial operations and prelaunch activities in both the U.S. and Europe, including the on boarding of the U.S. sales force during the current quarter. This has all resulted in a net loss for the quarter $79.9 million. For the year ended September 30, 2018, our net loss amounted to $295.2 million. Moving to cash flow. Net cash provided by financing activities of $297.8 million for the year reflecting the equity financing completed in December 2017. Capital expenditure for the year ended September 30, 2018 was $33.4 million compared to $20.1 million for the prior year. This increase reflects continued investments in the expansion of our cannabinoid production facilities. Net cash used in operating activities for the year amounted $231.9 million compared to $149 million for the prior year, reflecting the increases in R&D expenditures and SG&A costs previously discussed. The resulting net increase in cash and cash equivalents for the year amounted to $32.8 million. At September 30th, we held closing cash of $354.9 million. Following this period end, in October 2018, the company completed an equity financing raising net proceeds of $324.2 million. The company therefore has a strong cash position. Turning to guidance, operating expenses for the quarter ended September 30, 2018 were $83 million. We expect operating expenses for the quarter ended December 31, 2018 in the range of $90 million to $100 million, reflecting the ramp up of Epidiolex launch in the U.S, progression of the MAA and launch preparations in Europe and continued investments in our R&D portfolio. As of December 31, 2018, we will be changing our year end from September 30th to a calendar yearend and will file the requisite periodic report on Form 10-KP with the SEC. I'll provide further operating expense guidance for calendar year 2019 in February at the time of our results release for the period ended December 31, 2018. Thank you. Now, I'll hand the call back to Justin.

[Justin Gover:]

Thank you, Scott. In closing, we have every reason to be excited about the commercial prospects for Epidiolex. It is clear to us that there is a significant unmet need, and that Epidiolex provides a novel differentiated treatment option for patients with LGS and Dravet syndrome. Insurance coverage decisions to date are encouraging and provide support to GW's pricing strategy. The most recent data from the second trial into Dravet syndrome refers to reinforce the efficacy and safety profile of Epidiolex and the dose range as detailed in approved U.S. prescribing information. We expect a very active American epilepsy society meeting next week with over 20 company-sponsored scientific poster presentations, which will include first time presentations of data from the Epidiolex phase 3 pivotal trials in LGS and Dravet syndrome, reports on the expanded access program, presentation of phase 1 and 2 studies and collaborative preclinical research. In addition, we expect there to be numerous additional Epidiolex related posters by independent investigators. We will also host an innovation Pavilion on Monday of the meeting will only Epidiolex company-sponsored posters will be presented. GW will also be hosting an investor an analyst dinner at the AES meeting next Monday December 3rd. I know that many of you have registered. However, if you would like to join us and have not registered already, please reach out to Steve Schultz. GW will continue to invest in maximizing Epidiolex opportunity by expanding into areas such as tuberous sclerosis complex and Rett syndrome, expanding commercial geographies, enhancing formulations and continuing to broaden exclusivity protection. We now have six patents listed in the orange book and having just received grant to two additional patents, we will be adding these two patents shortly. We also expect to continue to identify novel findings from the Epidiolex development program and to submit future patent applications with a view to adding further protection in the years ahead. As world leaders in cannabinoid science, a field which now has widespread recognition, GW is committed to advancing its pipeline beyond Epidiolex. This pipeline benefits from our 20 year history during which many placebo controlled trials have been completed, providing a large number of short, medium and longer-term pipeline opportunities. We expect major progress in our R&D pipeline over the coming year. 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:]

[Operator Instructions] Our first question is from Ahmad Tazeen from Bank of America. Please go ahead.

[Ahmad Tazeen:]

I think that might be me. Justin, you have got a THC study that’s going to be reading on in the first quarter. Ahead of that, I was wondering if you could remind us of how many patients you think are addressable on that indication. What the current standard of care is and what results from your study would you consider to be clinically meaningful? And then I have a follow up for Julian.

[Justin Gover:]

Thanks Tazeen. I'll let Volker address the THC.

[Dr. Volker Knappertz:]

Yes, so tuberous sclerosis complex is -- has been associated in the past before the genetics of that condition, which really understood Lennox-Gastaut Syndrome. In fact, many patients received in their childhood the diagnosis of Lennox-Gastaut and subsequently the diagnosis now with genetics available in some of the classical stigmata that are prominent that'll be more recognized. But it is therefore a condition that is very similar in its epilepsy phenomenology to Lennox-Gastaut Syndrome. So our clinical trial really is designed in the very similar way that we designed our LGS and Dravet studies with very similar endpoints. Therefore, looking at -- and we have two dose arms that are actually higher than the current dose range in the study, but we were looking very much in a percentage seizure reduction at caregiver reported outcomes and the derivatives of these endpoints as we just reported for the Dravet study. In addition, we have some non-seizure endpoints that we are looking at again, which are related to the autism aspects of tuberous sclerosis and we will learn a lot more about the non-seizure outcomes from this data and that's really what we're looking for. The market potential is similar to the numbers of patients with LGS and it's one of the major epilepsy, genetically determined epilepsy syndrome of early childhood answered.

[Ahmad Tazeen:]

And then Julian, I know it's very early in the launch days for Epidiolex but you know you have spent a couple of years now trying to prep ahead of launch. And obviously, you must have internal expectations on how we each stage you are proposed to go. Maybe you can give us a sense, directionally, of how these early days are progressing. And if there is anything that's standing out about this launch if you could share that with us. And then secondly, in your K that was put out today, it was noted that you do have plans to retire from the company. I just wanted to get a little bit of your view on why you think now is the right time to do that and what your future plans might be? Thanks.

[Julian Gangolli:]

Thank you, Tazeen. Let me address the first question, which is very important. Obviously, we are in fact less than one month into the launch. And I would characterize it in three different buckets. The first one is what's demand looking like, what is access of our selling organization into these epilepsy centers. Some of them of which frankly are very difficult to get into, particularly some of the academic medical centers. And I think the color would be that our access from selling organization is being astonishingly higher. I think there are physicians who typically don't see industry, who know that the only source of information that they have to make an educated decision is to whether or not this product is the correct product for a patient is our sales organization. So frankly, we have had quite, quite meaningful access and extended time with many physicians. So I think that allows us to get across a very balanced starrer comprehensive message as opposed to a sound bite that can typically happen at the launch phase. So that’s the first thing. Second thing, demand; demand is an interesting animal at this stage, because as I mentioned previously on the call and as mentioned previously before that; the process of getting -- going from a prescription to a dispense for a patient, particularly for a brand new product in this environment, can take up to 14 days and in some case in Medicaid, longer, because of the mandatory 90 day coverage gap assessment that needs to take place. What I would say is that demand has been very healthy. I think the knowledge that physicians have of this product, their interest and prescribing it early on and the process by which when you have setup the harbor, et cetera, I think we’re encouraged by that. In terms of staging of patients, so I think the physician community is being correct in their assumption that it’s probably a less onerous task, particularly on the PA side if they sequence their Dravet and LGS younger patients first into the system. So we are getting a lot of Dravet and LGS pediatric patient flowing into the system early on. And those typically, we believe given our discussion with the payers, are going to flow through pretty quickly with regard to the prior authorization step. And then finally the third bucket, if you will, is where the payers in this in this discussion. And I have to say, we are surprised, pleasantly surprised that many of the commercial payers have already made coverage determinations, which is unusual. Many payers have a new to market block for at least six months, which makes uptake somewhat onerous. But for Epidiolex, there are a number of plans that have actually already written coverage determination, and many of them are relatively simple and relatively easy for the practice to operate against. And that is a prior authorization to label. The child needs to be older than two years old. Typically, there is a requirement of the failure on an anti-epileptic drug and the prescription be written by a specialist. And in that context, it’s a neurologist. So I don’t think there is too onerous an environment in the commercial world. I will say this is a building quarter. We’ve got two months of this quarter to go. A lot of that is taken out with holidays. So I think what we’re planning for is really putting in place the traction that’s going to be needed to make sure that we hit our expectations in 2019. I hope that answers your question.

[Tazeen Ahmad:]

Thank you for that color. And then I guess the second question about your future plans.

[Julian Gangolli:]

Well, thank you, Tazeen. I’ve been in this industry for 40 years. And when I joined GW over three years ago, I did say to Justin that this was my last chapter, if you will, and that I would do everything that I've had experience doing and help be part of the team putting together the U.S. commercial operation here in the U.S. And I'm extremely impressed with what the operations has been able to achieve in a relatively short period of time. And although early -- albeit early, the launch is I think going well. With the operation now been fully built out, I felt it's important that I give Justin and the Board as much time as possible to find a successor. So following this announcement today, we will be initiating a comprehensive search for that person. Up until that time and the individuals is identified, I will be actively involved in leading the commercial efforts here in the U.S. I’m very confident and proud of the talent and experience that GW is attracted in the U.S. team and their ability to build on the launch platform that has been put in place and for the success of the company into the future. From my point of view continuing to lead the team and the successful identification and transition to the new leader in 2019 will be my highest priorities. And as to next steps, I actually plan to retire from everyday work. So I'm very happy about that and I’m tongue-in-cheek in front of everyone on this call. I think my wife is as well. So thank you.

[Unidentified Company Representative:]

You picked the right city to retire and that’s for sure. Thank you for explaining your plan, we appreciate it.

[Operator:]

Our next question is from Paul Matteis from Stifel. Please go ahead.

[Paul Matteis:]

I guess my first question in light of Julian's last comments -- Justin I was wondering if you might comment on your level of comfort with the timing of Julian's departure, if you are at all worried about the disruption to the organization and what your plan is here and your sense of urgency to get someone incorporated to fill that role. Thanks.

[Justin Gover:]

Well it hasn’t done it. To be clear, we want to make sure in fact exactly the reasons implicit in your question that this is a planned smooth transition, which we know will take time. So the signal today is really a signal of intent its business as usual at this company and will be for the months ahead. But I think we just need to make sure that as we start to think about the next phase of the commercial operation that the search that we perform is active and the team here understands and we try to be a transparent organization both internally and externally. So the team here understands. And I think what you're hearing from Julian and I would support it entirely is Julian would only do this if he felt the organization was in very, very good shape. And so the timing actually I think is reassuring to me, actually, because it showing that that I think we have a robust commercial team. And there as the new leader will then be thinking about the next three to five years as opposed to the launch and I think that's perfectly appropriate. So it's a very harmonious process here, it’s something that Julian and I discussed even before he joined the company several years ago so I think no need for concern.

[Paul Matteis:]

Julian, is there a certain amount of time you have committed to stay on with GW as the search is ongoing?

[Julian Gangolli:]

Absolutely, Paul. My commitment to Justin and the Board is I will go through until the successor is found and the transition takes place. I have no interest in doing anything other than that. And I think you know to find the next successor that’s going to take Greenwich and GW to the next level. You need to give yourself some time and that's exactly the reason why we wanted to get this publicly known, because talented people want to know the company that they are going to be -- they are potentially looking at and confidential searches can sometimes be very complicated. So we wanted to get out into the open the fact that my retirement is happening, it's happening for all the right reasons. So that we can attract the highest quality individual we can.

[Paul Matteis:]

Thank you for that transparency. And then just one more quick question on reimbursement dynamics right now; I was wondering if you could tell us anything about the large payer and the number of covered lives there; and then just separately, Julian, on the nature of the prior op process for Epidiolex, maybe the PA form or any of the logistical stuff. At this stage, how similar different is that to the mechanics of the prior op process per se, clobazam when it was a brand or Banzel today?

[Julian Gangolli:]

Yes, we are in the position to add more color to who exactly the PBM is. We are very happy to announce that the agreement we have come with is with Express Scripts, so a very large commercial PBM. We are basically on their national formulary as the preferred brand in 22 million lives commercialized. They also have what they call a high-performance plan, which is that slightly more restrictive plan that has 8 million lives, and it's a preferred brand with an electronic edit and that’s all patient needs being two years of age, patient has to try two AEDs or one LGS indicated AED and it has to be prescribed by a neurologist. But the 22 million lives that I referenced first is preferred with no restrictions whatsoever, so no PA. And then Express Scripts does have custom lives around about another 30 million lives where those clients will have access to the national formulary agreement. So they will have basically what the 22 million lives will have. So aggregating that you have somewhere close to 60 million lives with a relatively -- with either no or very light utilization management impact. So we are delighted that within the month of launch we have a large PBM like that having access for us. Now I will say that that is -- that’s not going to open the floodgates in month of December but what it does is giving us an enormous amount of opportunity as we look at 2019 and the access that we are likely to get. Your other question around the PA for Epidiolex versus the PA for let's say Banzel and clobazam. As expected, Paul, what we're seeing right out the gate -- and I think appreciate that this is a good thing that for the plans that have got coverage determination, they are basically saying PA is a label and a minimum of two years and above a neurologist and a failure on an AED. That is a reasonably good place to have determination within the first month of launch as opposed to a new to market block. So yes, it is slightly different to Banzel and Onfi as it is now, as they are seven to nine years into their product introduction. But for a new product to actually have coverage determination right in line with the label languages, which is seizures associated with Lennox-Gastaut and Dravet, I think that is allowing physicians to get prescriptions covered in a relatively short order. I hope that answers your question, Paul.

[Operator:]

Our next question is from Marc Goodman from Leerink Partners. Please go ahead.

[Marc Goodman:]

Yes, couple of questions. One is on the TSC study. Can you just tell us when that was enrolled completely, which month was that? Second, you mentioned the manufacturing build out and everything is going well. Can you just give us a sense of what does that mean, are you 50% of the way of where your goal is and what are your goals? Just give us a sense of what you need there and then just lastly on where the patients are coming from. Are these patients that have to be on Onfi, because it's now generic or does it really matter? And what AED that the payers are asking you to make sure the patients have been on? Thanks.

[Justin Gover:]

THC study completed enrollment recently and the guidance is first half of 2019 to date, or it's -- the treatment period with the -- as with all the other studies, it's months of treatment period as a follow-up as well. So we're guiding to date from the first half and I think that's a pretty much behind your question about the enrollment timing. Manufacturing, the history of this company is there's has been a very rapid focus because of the rapid timeline that’s been a key focus on inventory building capacity. We shied away from giving specific numbers, but we have in terms of inventory build and capacity at this point in time looking at U.S. and Europe as we mentioned on the call, we are comfortably ahead of where we would need to be even on the most aggressive of demand forecast. And the decisions we took over the last of couple of years to invest in additional capacity really through from the 2020 timeframe onwards mean that manufacturing is an area, which I think is we really broken-up back of that issue. But I don’t give patient numbers, because otherwise it provides a potential demand forecast but we are where we need to be.

[Julian Gangolli:]

And then finally Marc on what are they asking the patient to who have failed on, it's across the board, some are very unspecific. They say two prior AEDs within the category of how many AEDs there are. Some indicate that it needs to be an AED that is used or an indicated for LGS and those are -- there are six indicated products for LGS of which one is obviously Onfi and the other one is Banzel. So it’s either one of those two lines. Frankly, that's not a particularly onerous prior authorization or step for us. The vast majority of the patients who we will be hopefully treating have been on multiple AEDs previously. So the ability for the physician to basically say a test to the fact that they have -- that patient has had those medications as relatively easy.

[Operator:]

Our next question is from Salveen Richter from Goldman Sachs. Please go ahead.

[Unidentified Analyst:]

This is Ross on for Salveen. Previously, you guys mentioned you’re targeting around like 5k physicians. How many of those have you reached so far? And then I have a follow-up.

[Julian Gangolli:]

Ross, I would say we probably covered somewhere in the region of around 50% to 60% of those. We haven't done that post launch. I make that very clear. In the post launch environment it is just physically impossible to get 5,000 physicians covered within less than a month. But I would say since the selling organization, our neurology camp managers have been out there since the end of training in the August, September timeframe. We probably had coverage around about 50% to 60% of the physician universe.

[Unidentified Analyst:]

And then lastly, so when we look at a state-by-state basis. Do you guys have access to distribute Epidiolex across all states in the U.S., or do you have to still get state approval or rescheduling on a state-by-state basis?

[Julian Gangolli:]

As I mentioned in my section earlier in this call, we had an initiative or have an initiatives over the last two years that once the DEA had rescheduled that we would be actively involved in doing that. As I mentioned in that section, we have achieved that. In fact, Epidiolex has been rescheduled in all 50 states and the -- and Washington DC. So product can freely flow into state and there are no restrictions within the state -- any state compared to another state. So basically, we will be glad to prescribing any other product that's available.

[Operator:]

Our next question is from David Lebowitz from Morgan Stanley. Please go ahead.

[David Lebowitz:]

I guess and my understanding is that it’s early in the launch. Has there been much of demand at this point from beyond the EAP patients, or is it mostly early demand from the EAP?

[Julian Gangolli:]

David, actually there’s very little demand for the EAP. I would say these are all de novo Epidiolex patients. We've actually suggested to all the institutions that they hold their clinical program and their EAP patients until we have a much more stable payer environment, because we are very cognizant of maintenance, continuity of their Epidiolex care. So we've actually requested that those centers of excellence keep those patients until next year unless there are those who really want to transition earlier for other reasons. So the vast majority of the patients that we are seeing being suggested for Epidiolex are actually brand-new to therapy, our therapy, obviously, not antiepileptic drug therapy. Does that answer your question…

[David Lebowitz:]

Thanks for that, that’s very helpful…go ahead…

[Julian Gangolli:]

No, I was just wondering if that answered your question.

[David Lebowitz:]

Very helpful, thank you. And just to give you a question that’s not Epidiolex related, with respect to Sativex to the upcoming discussions with the FDA. Whether the particular alternatives for routes forward in the U.S. for the drug?

[Julian Gangolli:]

We’re meeting with the agency, the neurology division in December. And there is pre-IND meeting the IND under Otsuka was closed when we obtained all the rights back. And so this is to opening up the official standing with the agency again. We are really looking at leveraging a lot of the information and data that we have already obtained with lead pivotal positive trial from MS spasticity and really over decade of experience in over 25 countries worldwide with Sativex in this indication. It’s really hard for us to now speculate really opening the standing, if you wish, with the neurology division on this product and we will have to discuss on what of the existing data will be entering an NDA filing and what additional data may be required.

[Operator:]

Our next question is from Phil Nadeau from Cowen & Company. Please go ahead.

[Phil Nadeau:]

Julian, congratulations on your retirement, maybe first question for you. Could you characterize the early demand for Epidiolex amongst physicians, specifically I guess I am curious whether there is any particular physician groups who seem to be more interested? In your prepared remarks, you noted that some groups may require training. Is there any way to differentiate between those who are fast adaptors versus those?

[Julian Gangolli:]

That’s really interesting question, Phil. So I think because this is a weight based drug, it's interesting that the pediatric epileptologist and the pediatric neurologist, basically because of the large range and the effect of drugs on pediatrics can sometimes be different, there are much more attuned to the titration of drugs and weight-based drugs. So in that community of pediatric specialists, I think the uptake has been strong. And frankly, a lot of them have been educated themselves or been very much educated by ourselves and our initiatives in terms of the availability and how the product should be used. So I think it would not be unusual to expect that in this first wave, if you will, of the launch that we're going to be seeing a lot of pediatric patients and most of those Dravet and LGS. I think where if I was to stage this what I would see coming in later on is the adult epileptologists who perhaps need more opportunity for learning on weight-based drugs and how Epidiolex should be used and titrated in those environments. They don’t do as much titration as their pediatric colleagues do. So if you want us to look at a curve, if you will, I would -- our best insight would be it would be really a pediatric adult curve in terms of adoption.

[Phil Nadeau:]

And one I guess for Justin. Justin, appreciate that the largest early and sales data for Q4 might not tell the whole story. Do you have a sense of what metrics you will be disclosing on future earnings calls when it comes to Epidiolex update? Could you expect to give things like prescriptions or patient numbers in addition to the revenue numbers?

[Justin Gover:]

Yes, I agree with the premise of your question. I mean, I think just to repeat again Julian's message. In the eight weeks going to the end of December, including holidays including time to fill scripts that’s not a lot of time to that to translate to revenue. And I think we are still working in exactly what else we will say, but we are likely to get I think some patient level information of some kind. We've yet to determine exactly what but I think it would be it will be that information, so you understand and investors understand some elements of the patient flow.

[Phil Nadeau:]

And then last questions just on 2019 consensus. I guess, first, how comfortable are you in 2019 current street consensus? And do you know whether that consensus reflects calendar 2019 currently? Or is 2019 consensus including calendar Q4 2018 and not reflecting a shift at fiscal year end?

[Justin Gover:]

I'm not sure it's for me to comment on my views on consensus. I think, they always -- I don’t think I should offer a view on that. I think my understanding is for most analysts they've been using the current fiscal year calendar going through the end of September. So it will be important for yourself and the other analysts to adjust to the new financial year and to recognize also that the quarter is ending December 31st of this year is a very short quarter. But I think to direct answer to your question is I think the current approach has been the 12 month ended 30, September '19 and that will need to be adjusted.

[Operator:]

Our next question is from Danielle Brill from Piper Jaffray. Please go ahead.

[Danielle Brill:]

So first, I know we talked a lot about the PA requirements and you did mention that you were working with some to decrease the requirement. So I'm just curious what are the most stringent Rex that you have encountered? And then apologies if you've answered this before, but what is the requirement for DEA rescheduling in Europe are they similar to the U.S.?

[Julian Gangolli:]

I think on the commercial side, we haven't been surprised by the PA requirements. I think where it is onerous, it is where it's a new to market block. And basically, it's on a case-by-case basis that the physician needs to provide a letter of medical necessity and that can sometimes be in the Medicaid environment and sometimes in some of the very restrictive commercial plans. But on balance, the PA is relatively standard for a new-to-market product other than where there's an absolute lock-in-play.

[Justin Gover:]

And Chris, could you address the European question?

[Chris Tovey:]

Europe as ever is different and each individual country. So obviously, the focus in the first wave of launches in Europe will be the major five countries and each country has a slightly different approach. For instance, the UK Epidiolex has being deemed to the exempt, so it's not considered as a controlled drug. So we're working with each country to finalize exactly what Epidiolex will be classified as during clinical trials in the clinical phase. It is largely being not treated as a controlled drug and we're optimistic that in the key markets that we'll be closer to that outcome than having a very, very prohibitive scheduling that will have an impact on the supply chain. So we are pretty optimistic that we'll end up with the pretty much a high level of freedom to move the product around key markets.

[Operator:]

Thank you. This concludes the question-and-answer session. I'd like to turn the floor back to management for any closing comments.

[Justin Gover:]

Great. Well, thank you all for joining the call today and thanks for your questions. Obviously, exciting week ahead at AES, our first AES as a commercial company large volume of data being presented, so we look forward to seeing many of you there yes and updating you on launch progress early next year. Thanks again for your time today.

[Operator:]

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