GW Pharmaceuticals plc
Q4 2017 Earnings Call Transcript

Published: 4 Dec 2017

[Operator:]

Greetings and welcome to the GW Pharmaceuticals Fourth Quarter and Year-End 2017 results conference call. At this time all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. I’d now like to turn the conference over to Stephen Schultz, Vice President of Investor Relations. Please go ahead.

[Stephen Schultz:]

Welcome all of our and thank you for joining us today for our fourth quarter and year-end 2017 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; 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 20-F annual 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 of our product and product candidates. 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 including our Annual Report on 20-F, filing with the SEC this morning. These forward-looking statements speak only as of today’s date, December 4, 2017. 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. We are pleased to be conducting this call from Washington D.C. where the American Epilepsy Society's Annual Meeting is being held. On today’s call following my introduction, our Chief Medical Officer Dr. Volker Knappertz will provide a research and development update and review some of the highlights of the data being presented at the AES Meeting. Julian Gangolli will provide an update on our preparations for the potential U.S. launch of Epidiolex 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 October, GW achieved the important milestone of completing its Epidiolex NDA submission to the FDA. We expect to hear from the FDA at day 60, around the end of December, regarding whether the agency will accept the filing. At this time, we would expect to receive confirmation of an expedited review of the NDA. If so, this would lead to an expected PDUFA date in mid 2018. I want to again thank all of those patients, clinicians and employees that have made such a significant commitment to achieve this development milestone. At just 3.5 years from IND to completion of the NDA submission, the Epidiolex program has been rapid by any measure and one that demonstrates our response to the serious unmet need in patients with Lennox-Gastaut Syndrome and Dravet syndrome. I’m also proud of this year, our first Phase 3 trial of Epidiolex in patients with uncontrolled seizures associated with Dravet syndrome was published in the New England Journal of Medicine. The first of our Lennox-Gastaut Phase 3 results has recently been accepted for publication in a top tier journal and you should expect to see this paper early in the New Year. Looking back at 2017, this has been an exceptionally busy year across the GW organization. Our team has not only submitted the Epidiolex NDA to the FDA, but also achieved significant scale up in manufacture, made significant progress in preparations for the potential U.S. launch of Epidiolex and began to build a European commercial presence. At the same time, the Company has continued to progress its pipeline of clinical stage product candidates. Looking ahead, we expect 2018 to be a transformational year in which we are planning for the potential approval and launch of Epidiolex in the United States. We are well aware that the epilepsy community has been eagerly anticipating these potential events as Lennox-Gastaut and Dravet Syndrome represents some of the most difficult types of epilepsy to treat with nearly all patients continuing to have uncontrolled seizures and other medical challenges throughout their lifetimes. As a company, we feel it is an important responsibility and a privilege to be developing a much needed treatment option for patients and their families. Let me now hand the call to Volker Knappertz for his update.

[Volker Knappertz:]

Thank you, Justin, and good day everyone. My first priority after arriving at GW was the full review of the Epidiolex NDA, ensuring the completeness of the file and that the case for Epidiolex's benefit and risk as well as its safety and efficacy profile was compellingly represented in a robust application. Although, this is an orphan drug filing, I consider the submission to be comprehensive and robust including three Phase 3 safety and efficacy trials with safety data on nearly 1,400 patients and information from nearly 400 patients with more than one year of exposure to Epidiolex. The safety data is buttressed by what we believe is a comprehensive clinical pharmacology, preclinical and toxicology package, which is supported by open label data. There are numerous steps in the NDA review process, and I’m confident that the team we have in place which includes a combination of our internal team and expert guidance from external regulatory consultants many of whom have had decades of experience at the FDA, will handle the process and the ensuing interactions skillfully. We expect the FDA to make its decision with respect to the acceptance of the NDA's filing by the end of December 2017, two months after completion of the rolling submission. This will be the first opportunity for FDA to indicate whether they intend to request an advisory committee meeting, but they’re under no obligation to make this determination at that stage. As I stated on our last quarterly call, I would say there still remains a 50-50 chance of an AdCom and as you would expect we believe, we are already prepared for such an eventuality. I also would like to remind you that Epidiolex was awarded rare pediatric disease designation conditionally granted by FDA. This conditional designation is a precursor for the potential award of a rare pediatric disease priority review voucher, which, if awarded would be granted at the time of approval. Outside the U.S., we continue to progress plans for centralized European regulatory submission, which is expected in late 2017. We have held a formal pre-submission meeting with the EMA as well as a follow-up meeting with the designated rapporteur regulatory authority. As a reminder, all of our Phase 3 trials included European sites and this application heavily draws on the content of the NDAs submitted to the FDA. The European regulatory process is expected to take just over one year which would take us to an expected first quarter 2019 decision point. Moving onto the American Epilepsy Society Meeting in Washington D.C. which has been the center of our activities this weekend, Epidiolex is well represented with over 25 poster presentations with data from the pivotal trials, the expanded access program and our pre-clinical research 22 of which were authored by the Company. Additionally, we are hosting a scientific exhibit this morning that covers all of the data presented over the course of the meeting and even more. Our press release on November 20th provided the full list of these presentations. We’ve also filed a 6-K with the SEC this morning which contains the GW Greenwich-authored posters presented at the meeting. Looking at several highlights from these posters let me begin with an update on the expanded access program. The last time we saw an update on this program, Dr. Devinsky of NYU presented a poster on patients with 36 weeks of Epidiolex exposure. At AES this year, treatment effects are presented on patients with 96 week of exposure. These data were obtained from patients with a range of treatment-resistant epilepsies as well as in patients with Lennox-Gastaut syndrome and Dravet syndrome. In both cases, the authors observed long-term durability of convulsive and total seizure reductions compared to the baseline seizure activity across this extended period of open-label treatment with CBD. Interestingly, this long-term maintenance of effect was achieved during this 96-week period when the treating physician also saw around 50% of patients reduce doses of clobazam and valproate. Overall CBD was generally well tolerated and the treatment-emergent adverse events were consistent with those reported previously. Turning now to the drug-drug interaction with clobazam, there were three poster presentations pertaining to this topic; one from the pooled analysis of Lennox-Gastaut syndrome Phase 3 data and two from clinicians reporting on the expanded access program experience. These posters all suggest that patients on Epidiolex are able to achieve clinically meaningful responses both on and off clobazam. Of course as stated in the poster, the pooled LGS data is a post hoc analysis of non-randomized groups and hence needs to be interpreted with appropriate caution. This meeting also showcased pre-clinical data for the first time that suggest that the pharmacokinetic CBD clobazam interaction is by directional, not only do we see an increase in the clobazam metabolite and desmethylclobazam, but we also see an increase in CBD and its active metabolite 7-hydroxy-CBD. We believe that this is important since it suggests that the reason for any potentially enhanced response to CBD on clobazam, may in fact, be do partly to increase levels of CBD and this key CBD metabolite. The final data I wish to highlight on this call is the human abuse liability study. These data are being presented for the first time in our scientific exhibit being held this morning. We believe this study confirms that CBD has a low potential for abuse when compared with a Schedule III and Schedule IV drug and provides us with confidence in reaffirming our expectation that Epidiolex will likely be placed into at least Schedule IV by the DEA, if it’s not approved by the -- if it is approved by the FDA. I’d remind you here that at this point of NDA approval, Epidiolex will be moved out of Schedule I and the FDA will recommend the appropriate new schedule level dependent on its assessment of the abuse liability data. Of course, these are only a few of the Epidiolex with presentations at AES and I hope that you are able to take the time to review the significant body of evidence in science. 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 Phase 3 trial for our third target disease state of tuberous sclerosis complex, data from which are expected in the second half of 2018. We have also commenced the first part of a two part Phase 2/3 study in infantile spasms with results available in Q1, which will allow us to determine whether to proceed into the pivotal phase of this study. Beyond Epidiolex, we are evaluating cannabidivarin or CBDV in a Phase 2 double-blind randomized placebo-controlled trial as add-on therapy in adult patients with inadequately controlled focal seizures. Recruitment is completed in this trial with a 162 patients randomized and we expect top line results from this trial to become available in Q1 2018. We have also observed promising preclinical data on the effects of CBDV on cognition and behavior. As such, we are enthusiastic about the upcoming development of this molecule in the field of autism spectrum related disorders. A small, investigator led expanded access program in 10 patients with autism is now underway in the U.S. while investigator-led placebo-controlled trial in 100 patients with autism is also expected to commence in 2018. In addition, we expect an investigator-sponsored open label trial as well as the Company-sponsored Phase 2 placebo-controlled trial for CBDV in the treatment of Rett syndrome, a condition for which GW has received orphan drug designation from the FDA, to commence in 2018. With respect to our CBD THC combination product, early in 2017 at the Chicago ASCO Meeting, we presented improved survival results from the Phase 2 placebo-controlled clinical study as adjunctive treatment to temozolomide in patients with recurrent glioblastoma. We have shared the details of this program along with our ongoing observations of the survival trend with the distinguished panel of glioblastoma treating expertise and their significant interest at the prospect of progressing in novel treatment option in this area of such high unmet medical need. Therefore, we expect pursue this promising pipeline opportunity and advance into a pivotal clinical development program. The final pipeline program I wish to highlight relates to Sativex, a product for which we have secured regulatory approval in 30 countries outside the U.S. You will note from today's press release that we expect in the near future to recover the U.S. development and commercialization rights Sativex. We believe GW's full ownership of U.S. rights to this asset would represent an exciting new late stage and de-risked pipeline opportunity for the U.S. market and something we would wish to progress during 2018. Thank you and I look forward to keeping you updated on our future programs. Let me now ask Julian to provide some comments on the commercial status.

[Julian Gangolli:]

Thank you, Volker. With our NDA now submitted to the FDA, the commercial and medical affairs teams are actively preparing for the potential U.S. approval and launch in 2018. Looking out through 2018, our key priorities include continued visibility at major U.S. medical congresses, and AES being one of the best examples of this initiative. Our company has a major presence at the AES meeting including the scientific exhibit this morning where we are showcasing 22 posters on CBD, a considerable body of clinical and scientific work. Another top priority of the team is to continue reinforcing awareness of GW's U.S. operating company named Greenwich Biosciences, within the physician and caregiver community as we move through 2018. During the coming months, we'll continue our medical affairs and medical science liaison on team build out. There is a significant interest from key stakeholders in being educated on cannabinoids and the unique advantages of a prescription CBD medicine for the treatment of seizures associated with LGS and Dravet syndrome. We will continue to roll out programs in and intensify interaction with key epilepsy opinion leaders to collect their insights related to the science emerging from the Epidiolex program. We are also establishing relationships with the major epilepsy centers of excellence here in the United States. Our U.S. Medical Science Liaison team now numbers 15; this team has extensive epilepsy rare disease and other neurology experience, and has enabled us to establish scientific and consultative communications with key stakeholders and decision makers. As we move closer to the potential approval of Epidiolex, a major focus is on pair education and readiness. We continue to hold a number of individual one-on-one and advisory board interactions with a wide variety of payers including some of the larger commercial and state federal payers in the United States. These discussions are open and highly interactive offering a transparent view of our expectations for market interest in Epidiolex, if approved. We have an experienced team of professionals now in place focused on the development of a comprehensive pharmacoeconomic dossier including burden of illness and economic cost offset data, some of which was presented in posters at the AES meeting this weekend. We believe that this work in addition to clinical data for compendium support will assist and inform payer and formulary access and reimbursement decision making. We continue to focus on patient advocacy initiatives providing support for and outreach to the major epilepsy patient advice advocacy groups. These initiatives include relationship building, advocacy and education. Finally, with respect to the U.S. team, we expect to deploy a Greenwich Biosciences dedicated sales force of approximately 70 sales professionals to target the approximate 4,000 to 5,000 physicians that treat the majority of patients within the expected indication of Epidiolex, if approved. Outside of the United States, we continue to advance organizational preparations for the potential commercialization of Epidiolex in Europe. Chris Tovey, our Chief Operating Officer is leading this initiative. Chris has a wealth of experience commercializing and launching products in the field of epilepsy. We now have in place key staff and medical affairs, market access and marketing disciplines as well as a contracted commercial organization in the five major European markets. We continue to see higher awareness enthusiasm from physicians on both sides of Atlantic for new therapeutic alternative for the treatment of these child onset epilepsies and that if approved Epidiolex would represent a new class of anti-seizure medication for specific epilepsy conditions with a differentiated mechanism of action. I’m very pleased with the talent and experience that we have in our growing commercial team and I have great confidence in their ability to achieve our commercial goals. I thank you for your time, and I now hand over to Scott Giacobello to provide the financial review.

[Scott Giacobello:]

Thank you, Julian, and good morning. I will now provide some high level comments on GW's financial results for the three months and fiscal year ending September 30, 2017. In more detail discussion of our results is provided with the 20-F, we filed with the SEC earlier today. 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 equivalence using the rate of September 30, 2017 of £0.7486 to $1. Starting with revenue, total revenue for the quarter was $2.9 million, an increase of $0.7 million from $2.2 million in the fourth quarter of 2016. For the year-ended September 30, 2017, revenue amounted to $11 million compared to $13.8 million for the year ended September 30, 2016. This decrease as previously guided is primarily due to reduced R&D fee recharges following the end of apartment funded Sativex cancer pain studies during the 2016 financial year. Moving to R&D spend, total research and development expense for the fourth quarter increased to $41.7 million compared to $32.5 million in the fourth quarter of 2016. R&D spend for the year amounted to $148.6 million compared to $133.3 million for the year-ended September 30, 2016. This increase reflects the ongoing Epidiolex development program and cost-related to the recent NDA submission as well as our other pipeline programs and additional costs-related to scale up of Epidiolex growing and inventory build were anticipate launch all of which are expensed as incurred. Turning to SG&A, sales, general and administrative expenses increased to $18.7 million in the quarter from $10 million in the fourth quarter of 2016. For the year, SG&A spend totaled $55.7 million, compared to $26.6 million for the year ended September 30, 2016; consistent with previous quarters, this substantial increase as a result of continued investment in our commercial operations and pre-launch activities. Foreign exchange volatility continues to have a significant impact on our results. During the fourth quarter, continued weakening of the U.S. dollar against the pound sterling has resulted in recognition of a net foreign exchange loss of $6 million. This loss is primarily due to the revaluation of the Company’s dollar denominated cash balances at the closing sterling exchange rate. For the year ended September 30, 2017, the cumulative net foreign exchange loss amounted to $6.7 million. This is all resulted in a loss before tax for the fourth quarter was $64.4 million. For the year ended September 30, 2017, a loss before tax amounted to $203.6 million offset in part by $27.7 million tax benefit to provide a loss after tax of $175.9 million. Moving to cash flow, capital expenditure for the year ended September 30, 2017, was $21.5 million compared to $11.6 million for the year ended September 30, 2016. This increase reflects planned upgrades to our cannabinoid production and growing facilities, including build-out of the new 45-acre glasshouse growing facility, which became operational earlier in the year. Net cash outflow from operating activities for the ended September 30, 2017, was $147.3 million compared to $113 million for the year ended September 30, 2016, reflecting the increases in R&D expenditure and pre-launch costs, already mentioned. Total net cash outflow for the year ended September 30, 2017 amounted to $177.9 million. At September 30th, we held closing cash equivalent to $322.2 million. Turning to guidance, looking ahead 2018 will be a pivotal year for the Company with the progression of the Epidiolex NDA and the continued investments in our pre-launch activities and manufacturing scale-up. Net cash outflow for the quarter ended September 30, 2017 was $51 million. We expect spending to continue at a similar rate for the first six months of fiscal year 2018 and therefore anticipate total cash outflows for the first half of the year in the range of 75 million to 95 million pound sterling 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. And I will now hand the call back to Justin.

[Justin Gover:]

Thank you, Scott. In closing, as I reflect on the extent of the Epidiolex data presented this week’s AES Annual Meeting in the level of interest in this program, I’m keenly aware of the enthusiasm and desire from physicians and patients for access to an FDA-approved prescription CBD medicine. With our NDA submitted and our European filing expected soon, GW is now focused on ensuring that we deliver highly successful launches in both United States and Europe, if Epidiolex is approved in these indications through a world-class team that has extensive epilepsy, neurology and rare disease experience. In the near-term, we look forward to working closely with the FDA on the NDA review and you should expect series of announcements over the coming months is that review progresses. We also look forward to the 60-day lesser from the FDA with respect to the NDA, which will lend additional clarity to the Epidiolex time line. Additionally having operated to commercial GMP for over a decade, we will be ready to host a pre-approval FDA inception. We also took continue to place great focus on maximizing the value of the Epidiolex opportunity beyond the orphan protection by actively prosecuting our current patent application, filing new patent applications as we develop additional novel findings some of which are related to the data presented at this AES meeting and investing and developing additional formulations of CBD as part of the life cycle management plan. These efforts could result in patent issuances that could represent a meaningful extension of exclusivity. The U.S. PTO should reach a determination on whether to allow a number of our pending patent applications in the first half of 2018. Beyond Epidiolex, our development platform is that one has taken decades to establish and should enable GW to remain at the forefront of cannabinoids drug discovery worldwide by generating important and valuable product candidates well into the future. I expect 2018 will be an exciting and pivotal year for GW and 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. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Phil Nadeau with Cowen & Company. Please proceed with your question.

[Phil Nadeau:]

I guess first just one question on the data presented over the weekend and that specifically on the TL paper looking at the pooled data from the two LGS Phase 3 trials. It looks like you show both the clobazam subset as well as the valproate subset and that the response rate is so much higher in patients on Epidiolex for both groups. I was wondering, if you could give management’s perspectives of this data? How convincing do you find that there is efficacy for patients on Epidiolex without regards to background clobazam and valproate?

[Volker Knappertz:]

The data on the on and off clobazam was quite well received during the conference, so we had of course several discussion with our investigators and the epilepsy community at large. As you apparently have had a chance to review the data and the poster, I think what the data clearly shows that for the 10 milligram ARM, there is no interaction with clobazam. And then if you compare the on and off clobazam data, you will find that the enhancement you get in the reduction seizure frequency is approximately the same either on or off clobazam. For the 20 milligram, there seems to be a minor interaction, meaning that on clobazam, there is a slightly higher reduction in seizure frequency, but between on and off Clobazam that difference is as I just said minor. So I think there is ample evidence for good efficacy that is clinically meaningful off clobazam for both dose groups in that pooled analysis.

[Phil Nadeau:]

And then second -- did want to just ask on the DEA scheduling process. Can you remind us, how long it takes both by statute and maybe typically does the DEA -- can the DEA act faster than the recommended guidelines? And then second, how often does the DEA follow the FDA’s recommendation?

[Justin Gover:]

Hi Phil, it's Justin. So, the legal requirement is for the DEA to reschedule within 90 days of the FDA approval, I think that limited experience so far, but expectations from all our discussion with the DEA as that is a very comfortable time frame. However, expectation of meeting it as to whether they will beat it, obviously, we'd rather not set that expectation at this point or I think it’s in their hands, but certainly the discussions with DEA at this point and our understanding of their expectation is -- they are ready and expecting this, and that we don’t see any problems with the meeting the timeline.

[Phil Nadeau:]

Great. Thanks for taking my questions and congratulations on the progress.

[Operator:]

Our next question is from the line of Paul Matteis with Leerink Partners. Please proceed with your question.

[Jeffrey Lin:]

Hi, this is Jeffrey Lin on for Paul Matteis. Thanks for taking our question. I have a few. First one is more on the, can you remind me how prepared you are for the FDA inspection to occur for the manufacturing sites and what are the still the gating factor for the MAA application? And for the Phase 2 CBD data, how do you define the go and no-go decisions?

[Justin Gover:]

Hey Jeffrey, it’s Justin here. So manufacturing, I mean we’re inspection ready and there the -- we’ve been inspected by many authorities over the last decade or so, most recently in December by the UK authorities. So, we are in good shape for the FDA inspection as and when they walk through the door. And your next question was?

[Jeffrey Lin:]

The gating factor for the MAA?

[Justin Gover:]

It’s just procedural; the EMA filing is on track for the end of this year. It’s really just ensuring that there’s appropriate sequencing between the NDA and the European processes. So, the MAA reflects the NDA. So there is no new work ongoing. It’s a documentation process and it’s really about staging the two processes in terms of the workload and managing the two together. So, it will be about a two months gap which is ideal. And finally for CBDV, difficult ahead of the data to give you a definitive view. I think it’s sort of Phase 2 proof-of-concept study. It doesn’t need a P-value to move forward, but clearly we'll be interested in the separation in terms of magnitude of the drug between - and seizure reduction between drug and placebo. But at this point, I don’t think I would like to pre-specify the hurdle. We will see the data when we will let you know what we think of it.

[Jeffrey Lin:]

Okay. Cool. Mind if I ask one more follow-up question for the -- I guess what's your discussions along with the payers? Could you provide maybe some more I guess color and granularity of how receptive they are in terms of more broader use for Epidiolex?

[Justin Gover:]

Thank you, Jeffrey. Yes, we have had a number of interactions both individually and in more sort of advisory settings with some of larger payers cover the vast majority of lives in the United States. I think the best way of addressing your question Jeffrey is to provide the analogy, all of the payers are extremely aware of the two reference products that are commonly used in these refractive type of epilepsies. And we've mentioned before on previous calls that Onfi and Banzel, they do understand that in -- when a physician is treating a child or an adult, the syndrome is important, but what they're really treating is the seizure. And they understand that in these highly refractory cases that there're not many options left for the physician to use. What has been striking in those discussions has been the fact that for the direct on-label indications that -- they have indicated that that they absolutely understand the need for this product, and will I think not impose any onerous prior authorization requirements on the product. But for these other indications that are highly refractory, they have made it clear that it -- that discussion is between the provider and the payer. And the severity of the situation that that individual is facing, that patient is facing. So, I think that's probably the best way of trying to address this. We're still a little bit of ways away from product introduction, but I think the most important thing is they have a keen understanding of how these products are used in this patient population.

[Operator:]

The next question is from the line of Tazeen Ahmad with Bank of America Merrill Lynch. Please proceed with your question.

[Tazeen Ahmad:]

The first question is on your view of the AdCom, so in your prepared remarks you've said that you continue to believe that there is a 50% chance that you will have one. And I guess, what's your thought process on that? So, you've got three highly statistically significant studies here for refractory setting, it's for kids, it's an orphan indication. So what areas you think the agency would have questions on that could warrant an AdCom? And then I have a follow-up.

[Volker Knappertz:]

Yes, so thank you for the question on the AdCom. It is really not for us to speculate at this point, I mean we believe we filed a robust filing as I said in my prepared remarks. And as you just reiterated, we have three positive primary endpoints in a high unmet need population. So, we believe that we have a robust package pre-clinically from a clinical pharmacology perspective and from our clinical trials and the data therein. So it is very difficult for us to speculate on what the agency might want to do regarding an AdCom and if so, what the topics would be for those discussions. So we would really -- if you allow me I would defer the question and say at this point, we would still guide towards the 50-50 chance and we may gain clarity over the next few months on this if the agency will communicate.

[Tazeen Ahmad:]

And maybe one question onto follow up with that. Do you believe that, if this wasn't a cannabinoid safe product that the chances of having an AdCom would be lower than 50-50?

[Volker Knappertz:]

Yes, I really can't speculate on that again. We don't know what the thought process is at the review division level is. I do want to say though that at the review division this is really, really going to be about the pharmaceutical properties and the properties of our clinical trials rather than the nature of where that pharmaceutical compound is derived from.

[Tazeen Ahmad:]

And then one question as we try to look to tighten up our model. If you could give us an indication of what cost of production is going to be now? Obviously, we think it'll be higher than simple small molecule, but would it be as high as biologics. What are you thinking about that you’ve obviously spent a lot of time scaling up capacity? And so how should we be thinking about COGS as a percent of sales that we model out?

[Scott Giacobello:]

Hey, Tazeen. This is Scott. I mean from a long-term perspective, when we get to as scale manufacturing we’re looking at this to have pharma margins. So, we would say from a cost to sales perspective in the 10% range or so.

[Tazeen Ahmad:]

And then initially?

[Scott Giacobello:]

Yes. Initially, I would just reiterate I think the long-term is what we have a better view toward right now.

[Operator:]

Thank you. [Operator Instructions] Our next question is from the line of Salveen Richter with Goldman Sachs. Please proceed with your question.

[Salveen Richter:]

So, firstly as you do prepared for potential FDA panel, what do you see as key topics for discussion?

[Volker Knappertz:]

If I may I would refer to my answer to the question of your colleague earlier on. It’s really not possible for us to speculate on what the initial you may want to discuss. I would like to remind you the review division really looks at the file, they look at the studies, they look at the clinical pharmacology to preclinical data and that’s really what is going to be dependent on if they were to decide to convenient an AdCom, comp but it’s really not for us to speculate we have a robust filing what we believe that all these data are provided in a comprehensive way.

[Justin Gover:]

Yes. Salvin, this is Justin. Just to add because obviously we had a -- no, it’s a great and interested, it’s very hard for us the FDA and NDA is now in. So, I think for us to speculate on their review as is ongoing, it’s just a very difficult thing for us to do at this time. But of course, the key as you would expect Volker and his team are already preparing for this. And if there is such an AdCom, we will ready and well prepared.

[Salveen Richter:]

Great and then just recognizing that you’re looking at poly-pharmacy market, what was the physician feedback at AES around using your drag as well as Zogenix compound?

[Volker Knappertz:]

I think as you rightly put in into the way you’ve raised the question. There is no either or concept within the concept of this treatment resistance patients. If additional therapy can be added, then that is something that physicians are keen to do. And so, I think the general feeling in the meeting is it’s great to have the option with the new differentiated anti-epilepsy drugs and they hasn’t win, the epilepsy communities is not been announced in that position for quite some time. So, I think it’s been a very good meeting with respect to the receptivity of the product and the new entrants into the marketplace. And these kind of patients populations that we’re dealing with, we’re in 90% treatment resistant in terms of the sort of proportions, so a new therapy is something to be welcome.

[Salveen Richter:]

And then, Justin, just one last question. As we look to the CBD data and adult of focal seizure, could you just comment on the dose optimization work that’s been as you headed into the Phase 2? And whether you think there is more necessary here?

[Justin Gover:]

For the dose of the CBDV study was -- we’ve done Phase 1 studies looking at the CBDV dose, and so from a tolerability perspective, we’ve got a good understanding of that. The dosing was selected on the basis, as we did with Epidiolex actually, of looking at preclinical and translating that into the clinical setting. So as was the case with Epidiolex, we’ve had to make some assumptions with this proof-of-concept so -- but this is the first human efficacy study that we’ve done. It isn’t a dose-ranging study. It is providing a dose versus placebo. But I think we got it right for Epidiolex. So I think we’ll work on the basis that having done that, that we’ve applied the same principals to CBDV.

[Operator:]

There are no additional questions at this time. I would turn the floor back to management for closing remarks.

[Justin Gover:]

Wonderful, thank you very much for your time and it’s a busy morning for us here at the AES meeting. For those of you that are in DC, we’ll be at our scientific exhibit from 8 to 11 this morning and look forward to seeing many of you there. Thank you again for your time and we’ll update you of course on progress, as we move through this NDA process. Thank you again.

[Operator:]

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