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Edited Transcript of GWPH.O earnings conference call or presentation 6-May-19 8:30pm GMT

Q1 2019 GW Pharmaceuticals PLC Earnings Call

Wiltshire May 14, 2019 (Thomson StreetEvents) -- Edited Transcript of GW Pharmaceuticals PLC earnings conference call or presentation Monday, May 6, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher John Tovey

GW Pharmaceuticals plc - COO

* Darren S. Cline

GW Pharmaceuticals plc - U.S. Chief Commercial Officer

* Julian Gangolli

* Justin D. Gover

GW Pharmaceuticals plc - CEO & Executive Director

* Scott M. Giacobello

GW Pharmaceuticals plc - CFO

* Stephen D. Schultz

GW Pharmaceuticals plc - VP of IR

* Volker Knappertz

GW Pharmaceuticals plc - Chief Medical Officer

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Conference Call Participants

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* Cory William Kasimov

JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst

* David M. Kideckel

AltaCorp Capital Inc., Research Division - MD & Senior Equity Research Analyst of Healthcare and Life Sciences

* David Neil Lebowitz

Morgan Stanley, Research Division - VP

* Esther P. Rajavelu

Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst

* Joshua Elliott Schimmer

Evercore ISI Institutional Equities, Research Division - Senior MD & Equity Analyst

* Marc Harold Goodman

SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst

* Nirav Y. Shelat

Piper Jaffray Companies, Research Division - Research Analyst

* Paul Andrew Matteis

Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst

* Philip M. Nadeau

Cowen and Company, LLC, Research Division - MD and Senior Research Analyst

* Salveen Jaswal Richter

Goldman Sachs Group Inc., Research Division - VP

* Tazeen Ahmad

BofA Merrill Lynch, Research Division - VP

* Yatin Suneja

Guggenheim Securities, LLC, Research Division - MD and Senior Biotechnology Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the GW Pharmaceuticals First Quarter 2019 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Steve Schultz. Thank you, Mr. Schultz. You may begin.

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Stephen D. Schultz, GW Pharmaceuticals plc - VP of IR [2]

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Welcome, all of you, and thank you for joining us today for our first quarter results call. Again, I'm Steve Schultz, Vice President of Investor Relations at GW. Today, I'm joined by Justin Gover, GW's Chief Executive Officer; Julian Gangolli, President of North America; Darren Cline, GW's new U.S. Chief Commercial Officer; Chris Tovey, our Chief Operating Officer; Dr. Volker Knappertz, our Chief Medical Officer; and Scott Giacobello, our Chief Financial Officer.

We hope you've had a chance to review our press release issued a short while ago, and we expect to file our Form 10-Q tomorrow.

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, May 6, 2019. And finally, an archive of today's call will be posted to the GW website in the Investor Relations section.

I now turn the call over to Justin Gover, GW's Chief Executive Officer.

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [3]

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Thank you, Steve, and welcome to all those who have joined us today. We are coming to you today from the American Academy of Neurology Annual Meeting in Philadelphia, where numerous Epidiolex poster presentations are occurring, including the presentation of the second Phase III pivotal study in Dravet syndrome. We are excited to have released today positive results from our Phase III trial in tuberous sclerosis complex. This puts GW on track to file a sNDA submission in the fourth quarter of this year with the goal of expanding the market for Epidiolex into this high-need patient population in 2020.

Volker Knappertz, our CMO, will provide more detail on these TSC results on this call.

I also want to welcome our new U.S. Chief Commercial Officer, Darren Cline, to the call. As announced last month, Darren is succeeding Julian Gangolli in the role of heading the U.S. commercial team. Darren joined our team officially on April 22 and is completing a brief transition period with Julian before Julian officially retires at the end of this week. I will ask Darren to give you a brief introduction later on this call.

As we now report on the first full quarter of Epidiolex sales, I am pleased to report strong receptivity to the product introduction. Overall, we are very satisfied with the launch to date and continued momentum looks to be leading towards an exciting year commercially. In a moment, Julian will offer additional perspectives on the Epidiolex market dynamics and some thoughts behind the strong Q1 results.

Beyond the United States, the European regulatory procedures for Epidiolex continues to advance, and we are preparing for launch in the major 5 European countries later this year. Chris Tovey will provide more detail later on this call. And finally, on this call, Scott Giacobello, our CFO, will review our financial results.

Let me begin by asking Darren to provide a brief introduction. Darren?

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Darren S. Cline, GW Pharmaceuticals plc - U.S. Chief Commercial Officer [4]

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Thank you, Justin, and let me say that I am thrilled to have this opportunity to continue with the work that Julian has done to build such a world-class U.S. commercial organization. From my perspective, the organization is well suited to achieve the objectives ahead. My immediate goal is to transition into the role as quickly as possible. Julian and the senior commercial team have been great support over the last couple weeks, and I am now looking forward to shape a long-term strategy and execution to maximize the Epidiolex commercial opportunity.

My background is in rare disease, where most recently I oversaw all commercial functions at Seattle Genetics and where I was directly involved in the commercial buildout for the U.S. launch and continued growth of ADCETRIS. Prior to Seattle Genetics, I was at Alexion Pharmaceuticals in a critical commercial leadership role that prepared the company for the Soliris launch, helping to build out and lead key sales functions that are instrumental in Soliris becoming a very successful brand. This type of success is what we expect from Epidiolex. So I feel my experience is ideally suited to the opportunity at hand. I look forward to interacting with our investors and analysts in the coming months. Now let me hand the call back over to Justin. Justin?

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [5]

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Thanks, Darren, and welcome again to the team. Let me now hand the call over to Julian for his update. Julian?

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Julian Gangolli, [6]

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Thank you, Justin. Let me also welcome Darren to the team. Having got to know Darren, I am confident that Darren is absolutely the right person to take the U.S. commercial organization to the next horizon of its success, and I believe he is an excellent fit culturally for the commercial operation we have built here in the U.S.

I am pleased to report Epidiolex U.S. net sales in Q1 of $33.5 million. This performance reflects a strong launch, and I believe we have reason to be confident in Epidiolex' commercial prospects in the short, medium and long term here in the U.S.

As we look forward at this first full quarter of Epidiolex sales, we continue to be pleased with the strong level of support from patients, caregivers and health care professionals. During Q1 2019, we worked through the majority of the 4,500 Epidiolex new patient enrollments received in late 2018. And, as at the end of March, over 7,600 patients had received Epidiolex dispensed prescriptions since launch, written by over 1,900 prescribers. We continue to be highly encouraged by the level of early interest from, and penetration of, our customer base, and this places us exactly where we expected to be at this point in time.

Now there are some unique features to this first full calendar quarter of sales which I think are important to highlight and which have led to a bolus of prescription activity and an unusually high rate of new patient acquisition. Consistent to our narrative prior to launch and as we reported in our earnings call in February, there was considerable physician and patient pent-up demand in anticipation of the availability of Epidiolex. This initial wave of prescriptions from previously diagnosed-and-waiting patients resulted in a demand carryforward from December 2018 into this first quarter. This was further amplified by the fact that many commercial and state Medicaid carriers only made their coverage determination known in January, and finally, conversion of the some 900-plus patients in the EAP and OLE studies has proceeded faster than anticipated, with over 75% now having been transitioned to commercial product.

Also, as we communicated to you prior to launch and consistent with how new antiepileptic drugs are prescribed by physicians here in the U.S., our expectation was, and continues to be, that physicians will prescribe to gain experience with an initial set of patients and observe those patients over a 4- to 6-month period as to therapeutic effect, before determining how to utilize Epidiolex in a broader set of patients. We believe we are now in that evaluation period.

As a consequence of physicians in these early months, evaluating the therapeutic effect of Epidiolex and the unusually high awareness and pent-up demand for the product prior to launch, we believe, as we go forward, that the product will exhibit a more organic new patient acquisition growth consistent with the underlying dynamics of the market.

Our sales team is actively in the field meeting with prescribers, and to date, the sales organization has interacted with about 70% of the target universe of over 5,000 health care professionals. We also continue to host educational broadcasts and speaker programs to support the launch.

As we indicated on our last call, clinicians continue to focus on their young LGS and Dravet syndrome patients first. However, we are encouraged by an increasing number of adult patients now being prescribed Epidiolex. Indeed, the percentage of adult patients is somewhat ahead of where we thought we would be at this point in time. I am also pleased to report that our time to fill of the initial prescription is now down to an average of 2 weeks. Again, in line with our assumptions for where we are in the launch.

Physicians also continue to titrate Epidiolex in line with the label guidelines, and that is titrating to 10 milligrams per kilogram per day and remaining at that dose to observe the efficacy effect before determining whether to titrate up to a higher dose. We expect this observation period to likely last several months before clinicians determine if increasing the dose is the right strategy for the patient.

We continue to make significant progress on the payer side. As of now, over 90% of all lives, commercial, Medicaid and Medicare, in the U.S. have a coverage determination, of which 65% are PA to indication or indeed, a less restrictive PA. In addition to favorable coverage determination of the PA to indication or better at ESI, CVS, Cigna and Anthem, in the past quarter, 3 major commercial payers have removed their new-to-market blocks and implemented positive coverage decisions. These are: United HealthCare, Optum and Prime. That, plus favorable decisions with state Medicaid this quarter, has extended our favorable coverage this quarter by some 37 million lives. Also, as I mentioned earlier, most of the Medicare and Medicaid coverage came online in January. Currently, 99% of state fee-for-service Medicaid lives have a coverage determination, with 67% of these lives having a simple PA to indication or better than that. And in fact, 7 states, including Florida, Illinois and New Jersey, are now covering Epidiolex without restrictions.

In addition, approximately 90% of Managed Medicaid lives now have made a coverage determination, with 40% having a PA to indication or, indeed, a less restrictive prior authorization. We believe that given that we are less than 6 months into the launch that we have achieved favorable access for patients and HCPs alike.

Our highly experienced and extremely dedicated U.S. marketing, sales, market access and medical affairs teams are executing the launch plan extremely well and are incredibly motivated by the potential difference that Epidiolex can make in the lives of these patients. The whole team continues to be encouraged by the positive feedback and high level of interest from patients, caregivers and HCPs, as to the value of Epidiolex and by the favorable payer coverage determination that have been made to date.

Let me finish by expressing how gratifying these past 4 years have been at GW. As I stated at the time of announcing my planned retirement back in November of last year, now is the right time to hand the U.S. commercial responsibility to a new leader and to build on the considerable success that we have had to date. I am delighted that we have found that leader in Darren. I believe he has both the necessary experience as well a really good cultural fit with GW.

In Europe, we continue to make great progress, and let me now ask Chris Tovey to provide an update on European commercialization. Chris?

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Christopher John Tovey, GW Pharmaceuticals plc - COO [7]

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Thank you, Julian. In Europe, we look forward to the CHMP opinion midyear. Subject a positive opinion, formal EU commission approval would occur 2 months thereafter. The GW European Commercial Organization is now almost fully in play, in preparation for the early commercial launch markets of France, Germany and the U.K. Sales professionals have been recruited and are undergoing comprehensive training, with many of them having prior epilepsy and specialized disease experience. These neurology account managers, NAMs, will join the existing field-based team comprised of 17 MSLs that are already in play. This customer-facing staffing model reflects the concentrated specialist epilepsy prescribing base and our planned high science approach, similar to that deployed in the U.S.

Once we have EU approval and product in the supply chain in the respective countries, we expect to launch Epidiolex in France and Germany where we will have immediate pricing and reimbursement conditions and shortly thereafter in the U.K., assuming a positive nice outcome. We then expect to launch in the remaining 2 major European markets, with specific timing depending on securing appropriate pricing and reimbursement. We remain encouraged by the quality of our ongoing prelaunch pricing and reimbursement discussions with the authority.

As I stated on our last call, market research suggest awareness is high amongst specialists and similar to the U.S. levels prior to launch. These clinicians report having patients in their clinics on a weekly basis asking for CBD. At this time, we are actively connecting with the key physician communities in all the major markets through a continued, high protocol exposure of Epidiolex data at key national and international medical congresses. In addition, the early access program for Dravet syndrome and Lennox-Gastaut Syndrome that we established in the major countries at the end of last year is providing important Epidiolex clinical management experience for specialist epilepsy physicians in key centers, along with much-needed access for appropriate patients prior to anticipated approval.

Finally, looking now at manufacturing, which also falls under my responsibility, our commercial, manufacturing and supply chain continues to run smoothly. We are confident that our capacity is more than sufficient to meet requirements in both the U.S. and Europe, and our manufacturing expansions 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.

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Volker Knappertz, GW Pharmaceuticals plc - Chief Medical Officer [8]

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Thank you, Chris, and good day, everyone. I am pleased to report to you today the successful outcome of our Phase III pivotal trial of Epidiolex in tuberous sclerosis complex, which we announced in a press release today. TSC affects over 40,000 to 80,000 individuals in the United States and over 1 million individuals worldwide, both children and adults. Epilepsy is present in greater than 90% of patients with TSC, and more than 60% of these individuals do not achieve seizure control with existing medications. It is in these treatment-resistant patients that our study was carried out.

In this trial, we randomized 224 patients into 3 arms, where Epidiolex 25 milligrams per kilogram per day, 50 milligrams per kilogram per day, or placebo was added to current antiepileptic drug regimens. The average age of trial participants was 14 years. On average, patients were taking 3 AEDs, having previously tried and discontinued on average, 4 other AEDs. The most common concomitant AEDs in this trial were: valproic acid with 45% usage, vigabatrin, 33%; levetiracetam, 29%; and clobazam with 27% usage.

The primary efficacy measure in this trial was the change in the frequency of seizures associated with tuberous sclerosis complex over the 16-week treatment period compared to baseline. These seizures differed from the previous Dravet and LGS Phase III trials. The most common seizure types were focal onset seizures or generalized seizures that were countable. Patients in this trial were highly treatment-resistant, with a median of 57 TSC-associated seizures per month in the baseline period.

Patients taking Epidiolex 25 milligrams per kilogram per day demonstrated a 48.6% reduction in seizures, while patients taking Epidiolex 50 milligrams per kilogram per day achieved a reduction of 47.5% compared to a 26.5% reduction in patients taking placebo. The p values were p equals 0.0009 and p equals 0.0018, respectively.

All key secondary endpoints were supportive of the effects on the primary endpoint.

The most common adverse event in patients receiving Epidiolex in this study were generally consistent with the previous 4 pivotal studies. The majority of adverse events reported were mild to moderate. Consistent with the U.S. prescribing information, patients on concomitant valproic acid and of the higher dose experienced a higher rate of ALT elevations. There were no cases of high SLA observed and there were no deaths in the study. These data represent the first Phase III trial safety data of the 25 and 50 milligrams per kilogram per day dosages which are higher than those tested in the Dravet and LGS trials, providing useful additional information on both efficacy and safety at these different dose levels.

Our early conclusions regarding this trial are: that both Epidiolex doses studied here have been shown to be equally effective. There's a lower incidence of known adverse event and laboratory changes with the 25 milligrams per kilogram per day group compared with the 50 milligrams per kilogram per day group. As a result, we expect to focus our label expansion discussions with the FDA on the lower dose, which is close to the dose range already included in the U.S. prescribing information for Epidiolex.

Further detail from this clinical trial will be reported at a future medical conference and subsequently published in a medical journal.

With these data, we look forward to submitting a supplemental New Drug Application to the FDA in the fourth quarter with the goal of expanding the product label in 2020 to help the lives of patients suffering with TSC-related seizures.

Beyond Epidiolex for seizures, we have opened the IND for a pivotal placebo-controlled trial in Rett Syndrome, which is expected to commence this quarter. We are also excited about the Sativex program in the U.S. as it represents an exciting late-stage pipeline opportunity for GW. We believe the most rapid path to FDA approval for Sativex is for an indication of spasticity in multiple sclerosis.

Based on our December 2018 meeting with the FDA, we expect to conduct an additional pivotal clinical trial to buttress the wealth of existing clinical trial data, underpinning the product European approvals. We expect this trial to commence in the fourth quarter of this year.

Regarding cannabidivarin, or CBDV, we are pursuing development of this molecule in the field of autism spectrum-related disorders. This program includes a company-sponsored, open-label study in autism which we expect will include approximately 30 patients and an investigator-led 100-patient placebo-controlled trial in autism spectrum disorders which began recruitment last month.

An open-label study in Rett Syndrome with seizures has also recently commenced.

Thank you, and I look forward to updating you regarding our progress over the course of the year. Let me now hand the call to Scott Giacobello to provide the financial review.

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Scott M. Giacobello, GW Pharmaceuticals plc - CFO [9]

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Thank you, Volker, and good afternoon. I'll now provide some high level comments on financial results for the quarter ended March 31, 2019.

This is the first quarter under our new calendar year end. A more detailed discussion of our results will be provided in our 10-Q to be filed with the SEC later this week.

Starting with revenue. Total revenue for the quarter was $39.2 million, an increase of $36.2 million from the prior year quarter. This increase is due primarily to Epidiolex U.S. net sales of $33.5 million in the quarter, following the November 2018 launch. Sativex net sales for the quarter was $4.3 million, up from $2.8 million in the same period of 2018. Cost of sales amounted to $5.1 million for the quarter or 13% of net product sales, compared to $1.6 million or 58% of net product sales in the prior year quarter. In the prior year, net product sales consisted only of Sativex sales outside of the U.S. through licensed partners. We anticipate continued improvement in the cost of sales percentage as Epidiolex sales grow as a proportion of total net product sales.

Moving to R&D spend. Total research and development expense for the quarter was in line with the previous quarter at $30.4 million. This represents a decrease of $13.1 million from the prior year quarter. This decrease is mainly due to costs related to the scale up of Epidiolex growing and inventory build, which were expensed as incurred in the prior year quarter. Following approval, these costs are now capitalized in inventory.

Turning to SG&A. Selling, general and administrative expenses increased to $55.1 million in the quarter from $26.2 million in the same period in 2018. This substantial increase is primarily the result of the buildout of our commercial operations in both the U.S. and Europe and costs related to the launch of Epidiolex in the U.S. The current quarter spend represents an increase of $6 million over the previous quarter spend of $49.1 million. This has all resulted in a net loss for the quarter of $50.1 million compared to $69.5 million in the prior year quarter.

Moving to cash flow. Net cash used in operating activities for the quarter amounted to $58.4 million compared to $65.4 million for the prior year quarter. Capital expenditure for the quarter was $12.3 million, up from $6.4 million in the comparable period in 2018, reflecting the continued investments in the expansion of our cannabinoid production facilities. The resulting net decrease in cash and cash equivalents for the quarter amounted to $69.8 million. At March 31, we held closing cash of $521.7 million. Following the end of the quarter, on April 5, we closed on the sale of our Priority Review Voucher for $105 million. This sale and related cash inflow will be reflected in our Q2 2019 results.

Turning to guidance. There is no change to our previous guidance. We continue to expect operating expenses for the year-end December 31, 2019, in the range of $395 million to $425 million, reflecting the ramp-up of the Epidiolex launch in the U.S., launch preparations in Europe and continued investment in our R&D portfolio. We also continue to anticipate capital expenditure in the range of $30 million to $40 million related mainly to manufacturing expansion.

Thank you, and I'll now hand the call back to Justin.

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [10]

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Thank you, Scott. As this is his last quarterly call, I should like to take this opportunity to thank Julian for his highly valued contributions to GW over the last 4 years. In this time, Julian has set up from scratch a world-class U.S. commercial organization that is now delivering a successful launch of Epidiolex. More than this, he has instilled a culture in our U.S. organization that truly puts patients at the center, and that acts as a close and trusted partner to the epilepsy community. He leaves GW with our sincere gratitude and appreciation for all he has accomplished.

Looking ahead through 2019, we look forward to continuing commercial execution of the Epidiolex program, both in the U.S. and in Europe, and progressing on our primary goal of maximizing the Epidiolex opportunity through expansion of the product label, enhancing formulation and continuing to broaden exclusivity protection beyond our granted patents and other approaches to life cycle management.

In parallel with Epidiolex, we believe that GW is well placed to deliver on the value of our cannabinoid platform, leveraging our 20-year history of cannabinoid experience, a strong and growing intellectual property portfolio, industry-leading manufacturing expertise, comprehensive understanding of cannabinoid pharmacology as well as dozens of completed clinical trials. This platform creates a unique and world-leading position for GW in cannabinoid science and the ability to create meaningful near-term and long-term value for investors.

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.

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Questions and Answers

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Operator [1]

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Our first question comes from the line of Tazeen Ahmad of Bank of America.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [2]

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One for Justin and one for Julian. Julian, I'll start with you. On the prepared remarks where you talked about the factors that led to the results you got this quarter, pent-up demand and all of that and the conversion of patients from EAP and OLE, you talked specifically about going forward, you expect to see more organic growth. I'm just wondering if you could give us a little bit more color on what might that mean. Is it just based on expectation that you think this will be the case? Or are you actually seeing it resulting in the quarter thus far?

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Julian Gangolli, [3]

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Thank you, Tazeen. Yes, I think we're all aware of the fact that when Epidiolex was about to get approved, there was -- there were lists being generated by physicians as to patients that were going to be put on therapy. So I think when you look at the sort of totality of November, December and Q1, we were sort of the beneficiaries of a huge influx of patients. So all I'm cautioning really, Tazeen, is, if one was to look on quarter-on-quarter growth given the huge number of patients that have come in, that, that probably isn't a fair way of looking at the overall growth of the product into the marketplace. We are obviously continuing to see good adoption with new patients coming on board and of course, refill prescriptions, but with that bolus effect and not quite the linear sort of approach that perhaps other product launches exhibit, I just wanted to temper people in looking at a very significant Q1 and then extrapolating that for the balance of the year. Does that answer your question, Tazeen?

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [4]

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Sorry about that, I was on mute. And then on TSC, I just wanted to get your thoughts about why will you wait until 4Q for the application to be submitted? Is that a process that's simply about manpower and how much people you have available for it? And also, can you remind us what the average dose in that study was and how that compares to the doses that are being used for Dravet and LGS?

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Volker Knappertz, GW Pharmaceuticals plc - Chief Medical Officer [5]

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Yes, Tazeen, we are -- we were using the 25 and the 50-milligram dose, which is outside of the doses that we currently are labeled for, which is the 10- and 20-milligram dose for LGS and Dravet. So it will take some integration of the data as we are contemplating now the results of the context of the existing U.S. label. So this will be submitted in the fourth quarter, and we will have been -- await the discussion with that FDA on how we will label TSC in the context of the current label.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [6]

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So does that mean that the average price for the TSC indication will end up being higher than for the other indications, using a higher dose?

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [7]

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Thank you, Tazeen. What I'm going to do is have Volker actually sort of just walk you through the likely titration schedule that we're recommending. Go ahead.

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Volker Knappertz, GW Pharmaceuticals plc - Chief Medical Officer [8]

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Yes, so we really now are looking, Tazeen, at the totality of evidence from 5 trials. We have 4 application doses, and there was equal efficacy between the 25- and 50-milligram dose in this trial. So we're now looking at equal efficacy. We're looking at a safety profile that is favorable for the 25-milligram, especially in comparison to the 50 milligram, which was also safely administered during the trial, but had a higher incidence of certain adverse events and a higher incidence of liver transaminase elevations. So going forward now, I mean we are looking here at an efficacious drug in 3 indications where there's no difference between the 25 and 50, and on a group level, there's little difference between the 10 and the 20. So we believe the dosing quota in our submission to the FDA will be preserved. We will be dosing -- proposing to dose the TSC patients through the 10 milligrams step that we have in the label where we ask physicians to titrate patients to 10 milligrams, then observe, obtain laboratory examinations and then consider if a further increase in dose is necessary. The nuance will likely be in our negotiations of the label, the new label with the agency, that will include the 25 milligrams for TSC patients in order to anchor the (inaudible) filed it. We see very little change from our perspective in the dosing quota that we have established with the patients. First pretrials which have now been indicated and confirmed, as we see it, but (inaudible) probably [2 30] and (inaudible)

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [9]

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So Tazeen, the consequence of that is that patients will still be titrated through the 10-milligram per kilogram, held there, evaluation of efficacy and safety, in particular, efficacy. So the difference between 20 and 25, we don't see as a major sort of change in our upper end of the maintenance dose. So in terms of calculating does TSC add a large milligram per kilogram increase, probably not, but it does obviously expand our ability to go into the TSC patient population with an approved indication.

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Operator [10]

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Our next question comes from the line of Salveen Richter of Goldman Sachs.

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Salveen Jaswal Richter, Goldman Sachs Group Inc., Research Division - VP [11]

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I'm just curious about use of Epidiolex outside of Dravet and LGS, and how that's progressing and playing out as you see the initial Dravet and LGS patients come on board. And then secondly, you mentioned that you're seeing adult use outpacing internal assumptions. Just curious there how it's affecting your gross pricing for the current year, given I think, you biased to the dosing towards children and used an initial dose of 10 mg per kg, and how that would also impact your gross pricing in year 2.

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Julian Gangolli, [12]

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Great. Thank you, Salveen. On the usage outside of Dravet and LGS, I think that question came up in last earnings release. We only have anecdotal information with regard to that. We do not have a line of sight on exactly how the prescription is written by that physician. So there is a lot of de-identified information required by HIPAA that we basically don't get hold of. So we're not in a position to actually say if there is, what sort of percentage of outside of Dravet and LGS. I will say that given some of the payer wins that we had, which talk to unrestricted use of the product , that does put a physician in a position to make a, perhaps a different determination for that patient. And also, we hear anecdotally from physicians that they've had success in getting patients who are not the stereotypical Dravet and LGS patient. So I think, overall, there are some successes out there, but as to a percentage, we're not in a position to guide on that. With regard to the adult p split, I just wanted to remark on the fact that there was -- we are seeing usage in the adult patient population, slightly ahead of where we thought we may be. This has probably been encouraged by some of those payer wins in which physicians don't have to be as -- go through the laborious nature of putting in an extensive PA for those. With regard to guidance on next year and whether or not that has pricing implications, what I would say is, is that, that is sort of attenuated by the fact that physicians are holding at the 10-milligram per kilogram level. So when you net it all through, I think our pricing, sort of thinking, is probably pretty much in line. I hope that answers your question, Salveen.

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Operator [13]

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Our next question comes from the line of Cory Kasimov of JPMorgan Chase & Co.

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Cory William Kasimov, JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst [14]

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Congrats to Julian on the retirement, to Darren on the new role. I guess 2 for you. First, now that you have a third indication for Epidiolex with highly compelling data behind it, can you talk about your clinical trial plans from here in other seizure disorders? Does it make sense to pursue other related syndromes to add to the label? Or do you expect you would get a significant amount or a significant uptick in spontaneous use, especially given the consistent safety profile that's been demonstrated to date? And then I have one follow up.

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [15]

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Cory, it's Justin here. I mean I think these were the 3 initial indications within the epilepsy field we focused on for Epidiolex. It's been the plan for a good couple of years now, to put the focus on the 3. And as you've all seen from the release, the plan next is really to look at Epidiolex outside of seizures specifically and into Rett syndrome, so the behavioral effects and cognitive effects of Epidiolex. So there is, obviously continues to be interest in the effects of Epidiolex in other seizure disorders. Investigators apply for -- to work with us on these things. In terms of the sponsor trials, at least for the time being, this is, to us, I think a satisfactory collection of different diagnosis and seizure types.

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Cory William Kasimov, JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst [16]

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Okay. Understood. And then, I was just curious about the commercial opportunity in TSC. I mean, I know this indication would roughly double the on-label market size, but can you talk about maybe how the unmet medical need perhaps compares between TSC and Dravet, LGS?

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Julian Gangolli, [17]

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Well, I think, Cory, the unmet medical need is pretty much the same as Dravet and LGS. These are refractory epilepsy patients, where the primary sort of causal element is because of these tubers. I think what it does from a commercial perspective, it allows us to go into these very dedicated TSC clinics that have large patient populations, which frankly, we're not in a position to go into now, because we don't have that indication. So I think from an access perspective, this indication does very much allow us to get to those clinics. I have to say, in full disclosure, many of those physicians, however, are the same physicians that are treating the other refractory epilepsies, but it will allow us to go there. And obviously, from a label perspective, with a PA to indication that would increase the number of patients that would fall within that category.

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Operator [18]

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Our next question comes from the line of Josh Schimmer of Evercore ISI.

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Joshua Elliott Schimmer, Evercore ISI Institutional Equities, Research Division - Senior MD & Equity Analyst [19]

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I have 3. First, with international pricing index proposals, how are you thinking about a European pricing strategy, recognizing that it could affect your U.S. price? And number two, you talked about a bolus. Can you describe the cadence of patient additions, ex the expanded access and open-label extension studies over the quarter? Did you see the start of a waning of new patient additions over the 3 months? And then third, how are you thinking about the titration from the 10 to 20 milligrams? How consistent will it be amongst treated patients? Why would or would not physicians move to that 20 milligrams? And if they don't see an incremental benefit, should we expect that they would titrate back down to 10?

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [20]

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Thanks, Josh. Chris, you want to deal with the European price?

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Christopher John Tovey, GW Pharmaceuticals plc - COO [21]

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Yes. Thank you, Justin. Josh, from a European pricing perspective, we're optimistic on the back of the engagement we've had with the payers, HDAs, the organizations in Europe. So we're pretty optimistic that we're going to able to hit a price point sort of at or around 70% of the U.S. price. So again, pretty confident that we can get a good price in Europe given the unmet medical need here as well in Europe as in the U.S.

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [22]

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Okay, and Julian?

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Julian Gangolli, [23]

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So Josh, on your 2 questions. First, the bolus, I think I just wanted, as I mentioned in previous response to a question, I just wanted to make sure that when we look forward to quarter-on-quarter comparisons or indeed, if you get IQVIA or Symphony data month-on-month comparisons versus Q1, we are still seeing very solid patient acquisition growth, but we were the beneficiaries of a large number of patients who tipped into Q1 and got their prescriptions filled. And the components of that, Josh, are twofold. First of all, the number of new patient starts that we registered in the first 2 months, which is about 4,500 new patient starts, and the fact that many of the plans had not made a coverage decision until January, that's both commercially and from a Medicaid perspective. So the month of January and February really benefited from prior 2-month rollover, obviously the EAP and then underlying growth from naturally acquired, organically acquired patient acquisition. So I think my observation is more around there was an unusually high patient acquisition number in Q1. But as I look at April going forward, the underlying growth of the brand from a new RX perspective remains solid, but it is, and in all full disclosure, it is at a lesser level than what we have benefited from due to those 2 factors or 3 factors in Q1. With regard to titration -- did that answer your question, Josh?

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Joshua Elliott Schimmer, Evercore ISI Institutional Equities, Research Division - Senior MD & Equity Analyst [24]

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Yes.

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Julian Gangolli, [25]

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Okay. In terms of titration, obviously, we have very experienced investigators who are probably more comfortable with a more rapid titration, but frankly, as a percentage of our prescriber base which is now close to 2,000 discrete physicians, they represent a small contribution to that overall prescriber number. And what I would say is that very much true to form in the United States and neurologists and epileptologists, they're going to make a determination of 10 milligrams per kg. And if that patient is getting good seizure control, then they are likely to titrate a little slower. If they're not seeing the seizure control that they wish to see, then they will migrate up that, but they are going to have a period of observation there. I think the likelihood of us getting anywhere close to 20 milligrams per kilogram in 2019 is relatively remote.

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Operator [26]

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Our next question comes from the line of Esther Rajavelu of Oppenheimer & Co.

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Esther P. Rajavelu, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [27]

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Darren, congrats on the role. Would you please give us your thoughts on your initial take on the commercial infrastructure in the U.S. and what your priorities will be over the course of the year? And then I have a follow up on Epidiolex.

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Darren S. Cline, GW Pharmaceuticals plc - U.S. Chief Commercial Officer [28]

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Yes, thanks for the question. I'm very excited for the role. As I've come in here over the last couple of weeks, as I stated in my prepared remarks, Julian's built a fantastic organization. A lot of seasoned professionals, across both the commercial and medical affairs teams that really know this business. And when you have a therapy like Epidiolex, which brings tremendous value to patients and their families, I couldn't be more excited. I think my priorities are, really come in, understand the business. And I've been in rare disease, hematology, oncology, my last couple of companies with some pretty successful products, and I think all the ingredients are here. And for me, it's just coming up to speed on the business and contributing to the executive leadership team and build Epidiolex into the brand we think it can become.

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Esther P. Rajavelu, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [29]

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Great. And then, maybe on Epidiolex. Can you talk a little bit about the life cycle management efforts that you mentioned in the press release? What's driving these efforts so quickly post launch? And what are some of the pushes and pulls of how quickly these would be developed and maybe what formulations could be prioritized?

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [30]

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Yes, it's Justin here. So I mean, firstly, obviously, with the news like today, life cycle management has been -- it's been a focus for years and as it relates to indication expansion, so TSC becomes Rett syndrome as being the next focus. And then with regard to formulations, it's important, as Julian referred earlier in his remarks to adult use, having a capsule formulation is something that we think is going to be helpful to patient adoption in the life cycle of the drug. There are improvements to the solution. We have an IV formulation as well, and of course, there are intellectual property considerations as well. So even ahead of launch, we were advanced in our thinking about this and there are several steps to go as we go through this life cycle. Not all the life cycle steps will happen at this early stage in the life, but it's pretty been pretty well thought through.

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Operator [31]

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Our next question comes from the line of Marc Goodman of SVB Leerink.

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Marc Harold Goodman, SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst [32]

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Given Julian's previous comments, should we be thinking that 2Q sales will be flat to down from first quarter? Or is the message up, but not up much? I guess that's question 1. Second question is, can you give us the number of patients on the EAP program in Europe so far? And then third, with respect to TSC, I heard your comments, Volker, about the 25 milligrams. I'm just curious, are you basically saying that you're fully expecting that the label is going to be 10 milligrams, continue to ramp-up to 20, maybe some patients get to 25, but you're really saying we may not get to 25 for TSC? And on the side effect profile of TSC at the 25, was that basically the same as what you're seeing in the 20 milligram for on-label?

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Volker Knappertz, GW Pharmaceuticals plc - Chief Medical Officer [33]

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I'm going to take that last part of your question first. Yes. So we believe, from our perspective, that we'll be approaching regulators by adding TSC to the existing dosing quota with an option of going to 25 to anchor it to dose reaction tested for efficacy and safety. With regards to safety, the 25 is behaving very similarly to what we see with the 20-milligram doses, in our safety experience -- large safety experience, in the -- throughout the trial. So I think, overall, we'll be trying to guide towards, going to 10, following the current titration of dosing guidelines, with the option of going to 25. And the safety is fully in line with the expectations that we have already in the U.S. (inaudible) currently that we saw with particular (inaudible)

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [34]

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And Marc, this is Justin here. So on Europe, the early access program is gettings towards 500 patients or so now. And on -- so with regards to your first question, we don't give guidance on sales. So I think Julian's trying to paint a picture of patient acquisition and new prescriptions, but as it relates a pattern over -- given the unusual launch dynamics, that we are, and it's at that level of caution that we're focusing on, but we're not giving guidance on sales other than we, as you've heard, we believe this is a strong launch.

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Operator [35]

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Our next question comes from the line of Paul Matteis of Stifel.

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Paul Andrew Matteis, Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst [36]

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Guys, congrats on the quarter and all the progress. Two questions on the Epidiolex launch. One, I was wondering if you could speak to the over half of the epileptologists in the U.S. that haven't yet written up Epidiolex, why you think that, that might be the case? And how confident are you that you can penetrate those customers over the next couple of quarters? And then secondarily, Julian, I was wondering if you could kind of review the spectrum of prior auths that you're seeing, from restrictive to the most lax, and where do you think kind of the average payer is settling at?

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Julian Gangolli, [37]

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Okay, Paul. On the penetration into the physician target universe. So we've taken a very measured approach as to how we want to deploy our selling organization. The 5,000 physicians that we have in our target universe are obviously deciled by potential. And what we are focused on, on these inner months of launch are obviously those individuals that are situated in major epilepsy centers or have basically a high potential to see a disproportionately larger number of patients, Dravet and LGS patients. So in these inner months, we've really focused and prioritized our selling organization to focus on those individuals. As we go out over time, one of the areas of growth that we have, in addition to the underlying organic growth that we continue to experience, is obviously getting to this broader group of patients and physicians. So that as we go through 2019, I think you're going to find the number of prescribers from that 2,000 base is going to increase as we expand the reach and frequency of our selling organization to those lower deciles, but still important epileptologists and neurologists in the United States.

So that is -- and the prior auths. Thank you, yes, Paul. On the prior auth, we have a number of plans that actually have no restrictions. The PA is unrestricted and a number of lives fall in that category. So if I was to say, where is, where has the 270 plus million lives that have some sort of insurance either through state, federal or commercial, I think I would be comfortable in saying that 65% of those covered lives at this present moment in time have a PA to indication or something that is less restricted than that, all the way to unrestricted. So I think for being on the market for the first 5 or 6 months, that's a reasonably good place to be. There are some plans that we are working with that are sort of in the top 10 commercial plans in the United States that still have a slightly more onerous requirement than simply a PA to indication, which I'll remind everyone is seizures associated with Dravet and LGS. And we -- to our account executive market access team, we are focusing on those. But I think, to answer your question directly, Paul, I would say it's 65% of the covered patients in the United States have a relatively easy PA requirement.

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Paul Andrew Matteis, Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst [38]

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When you say no restriction, do you mean the patient just has to have a diagnosis of epilepsy?

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Julian Gangolli, [39]

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And they have to have -- it has to be a neurologist.

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Operator [40]

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Our next question comes from the line of David Lebowitz of Morgan Stanley.

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David Neil Lebowitz, Morgan Stanley, Research Division - VP [41]

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Given that the usage in adults has been higher, has there been any change or modification to the, I guess your communications with doctors?

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [42]

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David, no. There's really no difference in our deployment of our sales plan. We haven't deliberately gone after the adult patient population in a prioritized way. We really focus primarily in a month in those centers that have a high pediatric patient population, just because of the obviously, the huge unmet medical need. It was purely an observation that we are obviously calling if we're in the pediatric side, we're going to be calling on the adult epilepsy clinic. And that our penetration there, it's still heavily skewed to the patient -- the pediatric patient population. But we are seeing now good penetration in the adult patient population.

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Operator [43]

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Our next question comes from line of Yatin Suneja of Guggenheim Partners.

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Yatin Suneja, Guggenheim Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [44]

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Congrats on a good performance. Just a couple of question. Maybe on the, first, on the TSC side. Could you maybe talk about the cognitive or behavioral-related benefit? Is that something that we might see later? Or maybe if you could give some commentary around those.

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Volker Knappertz, GW Pharmaceuticals plc - Chief Medical Officer [45]

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So at this moment in time -- thank you for the question, it's important. At this moment in time, we have only access to the top-level results and some of the scales, such as the Vineland scale and some of the other scales that can be, giving us an inclination on the effect on cognition, are still not analyzed, but it's still early days. And with regards to our complete understanding of all the data, we are sharing the top level results today.

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Yatin Suneja, Guggenheim Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [46]

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Got it. And then in terms of adding a focal seizure, could you just give us or maybe talk a little bit about the significance of adding that on the label? I mean, beside TSC, could adding focal give you access to another pool of patient population which, maybe we are not thinking about or where you think you can leverage?

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Volker Knappertz, GW Pharmaceuticals plc - Chief Medical Officer [47]

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So TSC will be what we'll be -- what we're seeking in the SND to get approved on the label. The nature of the seizures are focal in many patients, but they do also have generalized seizures. This doesn't substantially differ, probably you've seen already in (inaudible). However, the amount of focal seizures, and as Julian has mentioned, due to the pathology of the cortical tumors since the, this genesis of the cortex as part of the disease are prominent in tuberous sclerosis. I think time will tell, and the way we're going to be able to talk about the seizures in more detailed analysis on how much read through on focal onset seizures, in general, the epilepsy community can actually see in this very specific genetic encephalopathic epilepsy of tuberous sclerosis complex.

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Yatin Suneja, Guggenheim Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [48]

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Got it. Just final question, and I apologize if it missed it. Have you commented on the channel inventory on any stocking that happened during the quarter?

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [49]

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Yes, no, we're not commenting on that.

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Operator [50]

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Our next question comes from the line of Phil Nadeau of Cowen and Company.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [51]

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Julian, congrats on a well-earned retirement. First question on the Epidiolex launch, I appreciate it's early days. Do you have any sense for the persistence on therapy? What proportion of patients are dropping off? Or based on the experience you've seen in the EAP, what do you think the long-term persistence is likely to be?

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Julian Gangolli, [52]

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Thank you, Phil. With -- obviously, it's early days. Patients are just getting into their stride of getting their refill prescriptions now. We are not seeing any high levels of disbandment, and from the data that we have, and it's very, very early days to make any assessments around long-term persistence and compliance, but we're certainly not hearing of people going on therapy and coming off in any great numbers. And I think we felt that, that was a reasonable assumption going in based exactly on the observation you made around the expanded access program. Where we did see persistence unusually high, even with some of the difficulty of distance to the clinical trial site, and they weren't actually in the clinical trial, this is an open-label study, that patients actually stayed on therapy. So we do believe when coming through it, we do believe that the normal persistence that you see in the antiepileptic category, which is 9 to 10 months, unfortunately, before a change may take place, I think we believe that from everything we've seen, and what we have heard anecdotally to date that we are probably going to be north of that number. And obviously as time unfolds, we'll be able to have some greater clarity, but I think we're encouraged by the fact that both in the real world EAP and what we're seeing now, we probably will be a little heavier than 9 months.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [53]

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Got it. And then one question on TSC, congrats on the data. Is there any risk that the FDA wants you to define the lowest effective dose in TSC? It sounds like, from your comments that you're going to recommend the same dosing quota that we've seen before, is largely on the efficacy from the other trials and in other indications. So do you have data on 10 milligrams in TSC? And I guess is there any risk that the FDA may want to see more of that data?

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Volker Knappertz, GW Pharmaceuticals plc - Chief Medical Officer [54]

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Yes, we don't have data on 10 milligrams in TSC. And when we got the original approval last June, we also didn't have 10 milligram data in Dravet syndrome which was included in the labels. So we believe that the extension, between the encephalopathic epilepsy from childhood-onset or catastrophic to childhood-onset encephalopathic epilepsy will continue, in our really very good relations and discussions with their review division. So yes, we believe there will be an extension in the evidence between all 5 trials, and refer to my earlier remarks that we think the dosing quota will be preserved, maybe with the addition of 25 milligrams for TSC patients to anchor the trial data to (inaudible).

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Operator [55]

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Our next question comes from the line of Danielle Brill of Piper Jaffray.

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Nirav Y. Shelat, Piper Jaffray Companies, Research Division - Research Analyst [56]

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This is Nirav Shelat on for Danielle Brill. I just had one quick one. For the TSC data, I was just wondering if there was any analysis done on subgroups to see if there were differences in seizure frequencies for patients with different concomitant AED?

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Volker Knappertz, GW Pharmaceuticals plc - Chief Medical Officer [57]

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Yes, to your questions point to our data there -- any modification of the effect by subgroups, by different AEDs. Just to remind you, the AED profile is quite different from that, from Dravet syndrome and Lennox-Gastaut syndrome, where, for example, one of the mainstay, or most frequently used AEDs, clobazam, is actually used quite infrequently, in only about a quarter of the patients in this patient population. So 3/4 of the patients, are for example, on clobazam, majority is on valproic acid, as co-medication. So really a different picture and the drug works in -- across the entire spectrum of the co-medication.

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Operator [58]

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Our next question comes from line of David Kideckel of AltaCorp Capital.

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David M. Kideckel, AltaCorp Capital Inc., Research Division - MD & Senior Equity Research Analyst of Healthcare and Life Sciences [59]

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Congratulations on your really strong quarter. Darren, congrats as well for your new appointment. For what it's worth, I also used to work at Alexion Pharmaceuticals, directly in the Soliris franchise.

My first question, I have a couple of them. I'm just trying to wrap my head around, I think Justin, you mentioned the number of adult patients treated exceeded your expectations. Can you maybe comment a little bit about, were these new starts on commercial drug use or were these patients coming from your clinical trial program that were transitioned from, as pediatrics into adults? That's number one. And number two, I was just looking for, maybe just some overall guidance moving beyond what some of the other folks had mentioned on the call today, with respect to glioblastoma and Rett syndrome?

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Julian Gangolli, [60]

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David, this is Julian. I'll address that first question on the adult patient split. It isn't a consequence of a larger number of adult patients from the OLE or EAP data coming over. This is underlying de novo patients with -- from Epidiolex that we're seeing an increase on over and above where we anticipated us to be. And we just mentioned that because I think it's important that this product be positioned as a product for Dravet and LGS. And thankfully, many of the LGS patients do get into adulthood, and that this is just not a pediatric product, but it has utility in the adult patient population. So we just wanted to make that observation and share that with you on this call. And I'll hand over to Justin on the (inaudible).

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [61]

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Yes, thanks. With regards to the pipeline, I mean, clearly, Epidiolex in Rett, in the 4 life cycles that we've been talking about is the highest priority, followed by the Sativex program, which Volker highlighted, and then CBDV, with respect to autism. There are several other programs, glioblastoma, which we've been doing some further data analysis, and we're talking about next steps on that later this year, schizophrenia and others. So for today, we're focusing on the core Epidiolex opportunity, and we'll update on some of these other pipeline programs as the year moves on.

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Operator [62]

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There are no further questions on the audio portion of the conference. I would now like to turn the conference back over to management for closing remarks.

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [63]

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Great. Well, thank you all, for your time and further questions on today's call. We look forward to updating you on our Q2 results in the summer. Thank you very much for your time today.

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Operator [64]

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This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time, have a wonderful rest of your day.