GW Pharmaceuticals plc
Q4 2014 Earnings Call Transcript

Published: 2 Dec 2014

[Operator:]

Greetings and welcome to the GW Pharmaceuticals’ Fourth Quarter 2014 Financial Results. At this time, all participants are in a 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 would now like to turn the conference over to your host Steve Schultz, Vice President of Investor Relations. Thank you, Mr. Schultz. You may begin.

[Steve Schultz:]

Welcome and thank you for joining us on the call today. Again, my name is Steve Schultz and I’m the Vice President of Investor Relations for GW and I'm based in the United States. Today, I am joined by Justin Gover, GW’s Chief Executive Officer; Chris Tovey, our Chief Operating Officer; Dr. Stephen Wright, our Director of Research & Development; and Adam George, our Chief Financial Officer. We hope you’ve had a chance to review our regulatory filings from earlier today. These documents including a full MD&A provide additional details of the Company’s fourth quarter and year-end financial and operating results. As a reminder, during today’s call we will 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, including the regulatory clearance of our products, timing of product launches and statements related 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, uncertainties and other risks associated with investment in GW can be found in GW’s filings with the U.S. Securities and Exchange Commission. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today’s date December 2nd, 2014. In addition, we will be discussing data on this call that is generated from expanded access studies. Expanded access studies are uncontrolled carried out by individual investigators and not typically conducted in strict compliance with big clinical practices, all of which can lead to a treatment effect which may differ from that in placebo controlled trials. 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 of those who are able to join us on the call today. On this call, I will briefly review our progress over the past year, Dr. Stephen Wright will review our research and development activities and Adam George will provide an overview of our financial results for the year. At the conclusion of our prepared remarks, we will open the line to questions. It is no exaggeration to say that GW’s business has transformed over the last year, principally as a result of the rapid advancement of our Epidiolex program to treat orphan syndromes in the field of childhood epilepsy. During 2014, we have raised significant capital from U.S. invested in support of this program commenced treatment to approximately 200 children, obtained encouraging clinical data and commenced formal clinical development of Epidiolex in the United States. This program falls into three areas; company sponsored development, FDA authorized expanded access IND to independent investigators and collaborations with various U.S. states. First, with respect to company sponsored activities. We’re focusing our efforts on Dravet syndrome and Lennox-Gastaut syndrome for which we have received orphan drug designations from the FDA. During the last year, we have held meetings with the FDA, finalized clinical trial protocols, set up clinical trial sites for participation in our trials. Most recently, the first Phase 2/3 Dravet syndrome trial has commenced and we remain on track to commence additional Phase 3 trials in the first quarter of 2015. Second, with respect to the expanded access program, we have seen a significant expansion of the number of patients authorized by FDA for treatment, which now totals approximately 410 patients. Of these about 200 children and young adults are now receiving Epidiolex at 11 clinical trial sites in the United States and new patients continue to be enrolled on a weekly basis. And third, two U.S. states, Georgia and New York announced initiatives this year to collaborate with GW on separate Epidiolex clinical trials in epilepsy and progress toward the start of these programs is advancing. Underpinning all of this activity, is the support we have received from investors this past year, including our successful offerings in January and June raising net proceeds after expenses of $212 million, and which has resulted in a cash balance of approximately $267 million at the end of our financial year. This funding allowed GW to continue to accelerate its epilepsy program as we enter 2015 and begin to prepare for future commercial launch. Beyond Epidiolex, GW’s Sativex program which has received Fast Track Designation from the FDA for the treatment of chronic cancer pain also continued to progress in 2014. Recruitment is now complete in the first of our two pivotal Phase 3 trials. And we are on course to report top-line results from this first trial in early 2015. The second Phase 3 trial is expected to complete recruitment in the first quarter of 2015 with data expected to follow in the second quarter. I know that many of you attended our October R&D Day in New York City or listen to the webcast, an archive of which is still available on GW’s website. With that said I thought it would be helpful to briefly touch on that Epidiolex data from the physician led expanded access program that was presented at that mixing. Let me ask Dr. Stephen Wright to provide some high level observations and to review the other pipeline progress we have made in 2014 and expectations for next year. Stephen?

[Stephen Wright:]

Thank you Justin and good day everyone. In disclosing the data from the Epidiolex expanded access program, it was our objective to provide investors with an understanding of how a broad range of epilepsy patients were responding to Epidiolex and then to concentrate on looking specifically at the two forms of epilepsy that GW is primarily targeting for FDA approval, Dravet syndrome and Lennox-Gastaut syndrome or LGS. As background, FDA has granted a series of INDs to physicians in the U.S. to address a substantial unmet need of patients with treatment-resistant epilepsy. These patients have a range of epilepsy syndrome not limited to Dravet and LGS. You’ve heard from Justin that over 400 patients that have been included in this program at about 20 clinical sites across the United States. We have developed a standardized treatment plan and protocol to ensure that data from these programs are as consistent and manageable as possible. The data that we reported in October included clinical effectiveness data on 58 patients could reach 12 weeks of continuous treatment with Epidiolex at three sites; the University of California at San Francisco, New York University and Massachusetts General Hospital. We also reported data on a number of patients that had 16 weeks of Epidiolex treatment, many of whom were from the initial patients group that we reported in June. Safety data we reported on 151 patients representing all those that have been exposed to Epidiolex treatment at that time. Now the data from this group of patients was have covered in GW’s R&D Day in October and is summarized in the press release we issued earlier today. So I will not restate the result on today’s call, however based on this data let me offer the following conclusions. Overall we interpret this data as showing promising signals of efficacy specifically in Dravet syndrome. Dravet syndrome is notoriously one of the most treatment-resistant childhood epilepsies. We believe that the data show a high proportion of patients exhibiting a meaningful greater than 50% reduction in seizure frequency. In an important minority of patients, Epidiolex produced complete or near complete seizure freedom which we feel is especially meaningful given Epidiolex was on average the fourth line treatment. Importantly the data shown in October is similar to the data we disclosed on an earlier patient cohort in June. And this similarity demonstrates the pleasing consistency of response, even as the patient numbers increased by over two fold. Epidiolex treatment is associated with the reduction in drop seizure, the seizure time considered as the primary efficacy endpoint in Lennox-Gastaut syndrome trial. And also the low withdrawal rate from these studies which suggest that Epidiolex is being well tolerated and we've seen improvements in behavior and cognition, suggesting also that the benefits of Epidiolex may go beyond seizure frequency reduction. Therefore in summary we are very encouraged by what we have seen from Epidiolex and feel confident in continuing to move through formal clinical development towards FDA approval as rapidly as possible. As Justin mentioned earlier, we have already begun recruiting for the first part of the Phase 2/3 trial in Dravet syndrome and pleased to report that the 30 patients part A segmented the first study is recruiting well and on track to complete recruitment this month. Upon completion of this part of the study the safety and the pharmacokinetic data will be analyzed by an independent safety data monitoring board and that those selected for part B, the Phase 3 part of the study. We expect part B to commence in the first quarter of next year. This Epidiolex Phase 3 clinical program overall includes two Phase 3 pivotal Phase 3 and efficacy studies in Dravet syndrome, two Phase 3 pivotal studies in Lennox-Gastaut syndrome and additional studies as required by FDA. This program takes an enormous amount of set-up work including the selection of approximately 70 clinical trial sites in the U.S. and Europe, providing expert support to those sites in order to obtain the necessary DEA licenses and to develop into a rapidly growing U.S. clinical and regulatory team to fully support the Epidiolex program. I am pleased to say that this program is progressing according to plan, it’s important to note that it’s managed and executed by GW staff, the fact that we are -- of which we are especially proud and which we believe contributes to our efficiency. Later this week GW will be participating in the American Epilepsy Society annual meeting in Seattle. This is the Epilepsy community’s premier meeting of the year. At this meeting seven Epidiolex related posters will be presented covering various aspects of pre-clinical and clinical data. The data being presented at AES is largely that, which has already been issued within GW press releases during the course of the year. There are also a number of workshops and educational sessions during the conference that will address rare epilepsy and cannabinoids. In addition there has been such a significant interest in Epidiolex program GW will also have a booth present at which we can provide medical information to interested attendees. Let me now move beyond Epidiolex by first reviewing our progress with Sativex, GW's product candidates for advanced cancer pain for which the clinical program is now nearing completion. Sativex trials in the U.S are being conducted under an IND and comprise three Phase 3 clinical trials, the first two of which are expected to enroll almost 800 patients in total with the U.S being the single largest recruiting country and which are intended to support the submission of an NDA. Patient recruitment in the first phase 3 trial has now completed and we expect the last patient that completes treatment this month keeping us on target for top line results from this trial in early 2015. Recruitment in the second pivotal phase 3 trial is expected to complete in the first quarter of 2015 and data should be available from that trail in the second quarter. Therefore and subject to positive results we expect to file GW's first NDA in the second half of 2015. This would represent GWs first regulatory filing with the FDA and we look forward to working with our U.S commercial partner Otsuka on this anticipated filing and in supporting their team in preparing for U.S commercial launch. Beyond cancer pain, we are developing Sativex for MS spasticity where we have submitted to the FDA and requested Special Protocol Assessment for a single Phase 3 pivotal trial. Subject to reaching agreement with the FDA we expect to commence this trial in 2015. We also expect continued progress in the clinical programs which comprise GW's other pipeline candidates including for our follow on epilepsy product candidates CBDV. We have completed a phase 1 clinical trial in 66 healthy subjects. The medicine was well tolerated even at the highest tested dose and there were no safety or toxicity signals, no serious or severe adverse events, nor any withdrawal from the study due to adverse event. GW expects to commence the Phase 2 study of CBDV in patients with epilepsy in the first half of 2015. We are currently testing a product candidate that includes a combination of CBD and THC in the treatment of recurrent Glioblastoma Multiforme or GBM. In pre-clinical models, GW has shown that this cannabinoids administered together worked better either of these two cannabinoids alone in the treatment of Glioma. In fact a recent study carried out in collaboration with GW by specialist Saint Georgia’s hospital at the University of London were the first to show a dramatic effect on brain tumors when combining cannabinoids with eradiation. This published research showed that tumor transplant in mouse brain were significantly slowed when a combination of THC and CBD were used with eradiation and tumor inhibition was higher than that observed with eradiation alone. In 2014 GW commenced a phase 1b/2a clinical trial in 30 patients with recurrent glioblastoma multiforme. The first phase of this trial was an open label safety evaluation which is now complete. Safety data from this first phase has been assessed by an independent safety monitoring board and their approval has been given to proceed into the phase 2A placebo control phase which has already began randomizing patients. In type two diabetes, GW started a phase 2B study as a cannabinoid THCV. THCV is distinct from THC and does not share its intoxicating psycho active effects. In this trail the safety tolerability and efficacy of THCV compared with placebo will be assessed. This study is expected to enroll 200 patients with an estimated completion date in 2016. In schizophrenia, cannabidiol has previously been repeated to be of value in the treatment of schizophrenia. We are recruiting a phase 2 study which aims to show what a pure CBD adds to the benefit risk of established first line anti-psychotic therapy. Results will be available in the second half of 2015. And finally in ulcerative colitis, GW recently reported preliminary top line results from an exploratory phase 2A study of an extract which features CBD as the primary cannabinoid. We believe that in patients who were able to maintain treatment, the results from this study provide good evidence for a therapeutic effect in the treatment of ulcerative colitis in patients who had previously failed to respond to first line therapy and that these results support further investigation of this CBD extract, albeit in a modified dosage form. In summary then 2015 is shaping up to be a very important year for GW's clinical development program and we are encouraged by our progress in 2014 especially the rapid progress in the Epidiolex program. With that I will hand the call over to Adam George for the financial review.

[Adam George:]

Thank you Steven. I intend to provide some very high level comments on today’s year-end results, more details can be found in the press release that we issued earlier today. As you know GW reports in accordance with international financial reporting standards in British pounds sterling but for convenience purposes I will give U.S. dollar equivalents for key numbers. Today we’re reporting on a three months and the year ended September 30, 2014. And on this call I will focus my comments exclusively on the results for the year as a whole. Starting with the income statement, you will have seen that we are reporting a loss before tax for 2014 of £19.6 million or $31.7 million, compared to the prior year that’s an increase to our reported loss of £9.2 million. As you would expect the driver for the increased loss, the growth in R&D spend primarily associated with our epilepsy program. Total R&D spend increased by £10.8 million to £43.5 million, equivalent to $70.5 million. This consisted two elements, firstly Otsuka funded R&D spend linked to our Sativex U.S. development program which remained consistent with last year and totaled £24.3 million roughly $39 million. And second the GW funded R&D where we’re using our own cash to advance the epilepsy and other wholly owned enhanced pipeline programs, this increased by £10.1 million to £19.3 million just over $31 million with most of the increase being cost of setting up our epilepsy Phase 3 trials plus all of the activities associated with scaling up growing an in-house manufacturing Epidiolex, supplier studies and the growing population of children with season products via investigator led INDs. The other highlights of the full year income statement of the Sativex sales revenue grew to £4.4 million driven by 60% growth in in-market sales by our European partner Almirall. Management and admin spend increased by £3.8 million to £7.3 million equivalent to $11.9 million, £1.6 million of this increase is a direct result of accounting for GW's liability for employer payroll taxes and staff share option gains at the GW share prices increased during the year. The remaining £2.2 million of increase is into staff and travel cost plus the cost of being a NASDAQ listed company throughout the whole of 2014. At the end of Q3 we’ve reported a cumulative foreign exchange loss on the value of our dollar cash deposit when translated into sterling of £2.2 million. Since then sterling has weakened substantially against the dollar resulting in a £5.4 million retranslation gain in Q4. We therefore reported a £3.2 million foreign exchange gain for the year as a whole. Moving to cash flow, net cash outflow from operating activities for the year was £12.6 million or $20.5 million, we then spent £7.1 million or $11.5 million on capital projects mainly on the ongoing upgrade to our Sativex manufacturing facilities in readiness for future U.S. launch with some expansion of growing facilities for Epidiolex. During the year we raised net new funds of $212 million to approximately £126 million from our two offerings plus we had various other financing receipts primarily from exercise of options of warrants resulting in a total financing inflow for the year of £144.3 million equating to $234 million. We ended the year with £164.5 million, equivalent to $256.8 million in the bank. Finally let me give you some guidance for 2015, we expect to continue in-market sales volume growth by our partners to result in steady growth of GW Sativex revenues in 2015. In terms of cash flow consistent with the use of proceeds, commitments made at the time of our 2014 equity offerings, GW expects cash expenditure to increase significantly in 2015. There are a number of drivers for this. We expect to complete recruitment into the Epidiolex Phase 3 clinical trials in Dravet Lennox-Gastaut syndromes by the end of 2015. We also expect to increase the scale of growth in our manufacturing activities in preparation for future anticipated launch of Epidiolex. In addition we plan to increase spend on U.S. commercial operations in preparation for future commercialization of Epidiolex. We therefore expect our net cash outflow from operating activities to increase approximately £50 million or $78 million. In addition, capital expenditure is expected to increase to around £22 million or $35 million. As we complete construction of our Sativex manufacturing facility in preparation for anticipated U.S. launch and expand Epidiolex growing and manufacturing capacity. It should be noticed that in the event of the four Epidiolex clinical trials recruit as anticipated in 2015, Epidiolex related clinical trial expenditure would then be expected to decrease in 2016. With year-end cash of £164.5 million equivalent to $266.8 million, we’re well positioned to execute all the company’s plans. I’ll now hand the call back to Justin.

[Justin Gover:]

Thank you, Adam. As I reflect back on 2014, this has been by any measure a year of significant achievement for GW. We believe that 2015 has the potential to be an equally exciting year for GW and expect this pace of progress to continue, if not accelerate as we complete much of the Epidiolex clinical development program as well as begin to establish U.S. commercial presence in anticipation of future launch. Beyond Epidiolex, we expect to report Phase 3 data from the Sativex cancer pain trial which is positive, would enable the filing of an NDA in the U.S. during next year. We also look forward to progressing clinical trials for various additional cannabinoid pipeline products. Thank you for your time today and for your interest in GW, and I would now like to open the call for questions.

[Operator:]

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Paul Matteis with Leerink. Please go ahead with your question.

[Paul Matteis:]

Thanks a lot for taking my questions. I appreciate it. I have a few. First, I was wondering at ADS there is an abstract online with Dr. Debinski as the lead author on the Epidiolex IND program. So on that note, I was wondering at this point, how many patients have completed 12 weeks of treatment and could we see any efficacy data on individuals outside of the 58 patients that we saw at the R&D Day in October? Thanks.

[Stephen Wright:]

Yes, the post that Dr. Debinski is presenting actually summarizes the position at the effectively the database lock which was during October. So there’ll be a reasonably full update from him on the 58 patients who had reached a three month exposure period at that time. It also includes, as I understand a summary of the 151 patients who had been exposed at all Sativex Epidiolex update. So what that means is the online abstract that you may see on the website of the ADS is actually out of date. The presentation and the poster that Dr. Debinski is presenting includes all the patients who are subject to our disclosure in October.

[Paul Matteis:]

And then, I was wondering a little bit on how the data has been cut so far versus how it’s going to be cut in the Phase 3, so we talked about this at the R&D Day, but essentially the efficacy data that was presented were medians of mean seizure reductions which is a little bit counter intuitive but makes sense, given that there is a lot of outliers. I’m wondering, is this exactly how the data will be cut in the Phase 3 for the primary efficacy analysis? And is this how the FDA wants data to be cut in epilepsy trials in general?

[Stephen Wright:]

Yes, it does. The exact analysis depends as you very wisely pointed out on the distribution of the data. So, if the data are normally distributed then we will use parametric statistics. If the data meaning the monthly reduction in seizures in each patient, if those data are not normally distributed then we use a non-parametric method which is normal practice. The ideal position of course is that the non-parametric method of analysis, which generally will involve medians come down with the same result as a parametric, that’s when it’s most powerful. But in the end, the way you described the data depends upon the distribution. If you look at the prescribing information from most approved anti-epileptic drugs in childhood epilepsy, they will fight the median, which I think indicates exactly what you said which is that you normally find a skewed distribution of responses.

[Paul Matteis:]

And then one more, I’m wondering if you finalized anything about the CBDV study and what type of epilepsy you’re going to be looking at in that trial? Thanks.

[Stephen Wright:]

We are aiming to identify a proof-of-concept for CBDV, because as you know, so far, it’s only healthy human volunteer subjects who have been exposed to that. So we are -- at least for the first study adopting a relatively conventional and conservative approach and looking at partial onset seizures in young adults. And that, we hope will give us a good human proof-of-concept with CBDV. I should emphasize, that proof of concept of course is not necessarily likely, in fact it’s fairly unlike to be the ultimate target indication for CBDV.

[Operator:]

Thank you. [Operator Instructions] Your next question is from the line of Phil Nadeau with Cowen. Please go ahead with your question.

[Phil Nadeau:]

First, on the Epidiolex’s branch that you’re accumulating, just give us some sense of when you next plan to release data from a compassionate use?

[Justin Gover:]

I think the approach will evolve will evolve in the course of next year, such that the data disclosures will be focused more around investigated themselves presenting the data at meetings as opposed to what has been occurring for us twice this year, which is just GW press releases. So I think we will move to a more if you will conventional approach next year, and there are meetings which we are identifying at various points through 2015 where we will be working with to supply data to investigators for them to present clearly and ultimately it is the investigated data and it is their decisions as to which meetings they will present and so on. But we are hoping to identify some meetings in the first half of next year and in the second half of next year in which additional data can be presented.

[Phil Nadeau:]

Okay, can you give us some sense of what those meetings might be? What are some of the more important epilepsy meetings in the first half of the year?

[Justin Gover:]

I don’t want to give you a precise list today but clearly there are meetings which either revolve around neurology and epilepsy.

[Phil Nadeau:]

Okay, great. And then second what are your updated thoughts on releasing data from the first part of the first Dravet pivotal trial the Phase 2 portion. Are we likely to see even a topline release out of that data or will it simply be an announcement that you are moving to the Phase 3 portion of the trial?

[Stephen Wright:]

Phill, hi, Stephen Wright here, It’s much more likely to be an announcement that we have been given the all clear but the independent monitoring board to move into the pivotal safety and efficacy part of the study. I think it’s very unlikely that we are going to give any precise information about pharmacokinetics et cetera but you can assume from that announcement of the safety would have been found satisfactory at that time and that the pharmacokinetics will have been found satisfactory. The first part of the study is not aimed at defining the efficacy of Epidiolex. That’s really for the second part of the study.

[Phil Nadeau:]

Okay, great. And then last quarter for me then on manufacturing, you mentioned that you are expanding the Epidiolex and Sativex manufacturing capabilities, can you give us some sense of the capacity that you will have after all the expansions are completed?

[Adam George:]

Sure, hi this is Adam George. Well in 2014 we have expanded capacity to service all the neat-term demands than what you see from the sponsored studies investigator INDs and the planned state studies, the CapEx that I outlined for 2015 should give us sufficient capacity or sufficient run rate of production by the end of ’15 to be able to service the Dravet and LGS patients in the U.S.. Thereafter further expansion in 2016 will depend on the ultimate size of the target patient population. Similarly we have Sativex facilities that we have been building for some time those will be completed in 2015 and will have capacity for U.S. near-term demand post launch.

[Phil Nadeau:]

Okay, we need another expansion for the ex-US cancer pain launch?

[Adam George:]

No that's it.

[Operator:]

At this time I will turn the floor back to management for closing comments.

[Steve Schultz:]

Great, thank you very much for your attention. As you can see from our remarks today it’s been a very exciting year for GW and we have equal expectations for next year as well. So we look forward to updating you on next release will be the first quarter which will be releasing as customary in early February. Many thanks. Bye, Bye.