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Edited Transcript of GWPH.O earnings conference call or presentation 5-Nov-19 9:30pm GMT

Q3 2019 GW Pharmaceuticals PLC Earnings Call

Wiltshire Nov 10, 2019 (Thomson StreetEvents) -- Edited Transcript of GW Pharmaceuticals PLC earnings conference call or presentation Tuesday, November 5, 2019 at 9:30:00pm 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

* 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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* Charles Cliff Duncan

Cantor Fitzgerald & Co., Research Division - Senior Analyst

* Danielle Catherine Brill

Piper Jaffray Companies, Research Division - VP & Senior Research Analyst

* David M. Kideckel

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

* Derek Spencer Johnson

Guggenheim Securities, LLC, Research Division - Associate

* Esther P. Rajavelu

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

* Ishmael Izakiel Gyimah Asante

Morgan Stanley, Research Division - Research Associate

* Marc Harold Goodman

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

* Neena Marie Bitritto-Garg

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

* Salveen Jaswal Richter

Goldman Sachs Group Inc., Research Division - VP

* Serge D. Belanger

Needham & Company, LLC, Research Division - Senior Analyst

* Tazeen Ahmad

BofA Merrill Lynch, Research Division - VP

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for your patience. The conference has now resumed. Please go ahead.

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

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Yes, welcome all of you. This is Steve Schultz, Vice President of Investor Relations. Thank you for joining us for this third quarter results call. I apologize for what you just heard, which was actually a recording of our last quarter conference call, which for some reason they started playing versus us providing this quarter's results. So, we'll reset and begin right now with the third quarter results conference call. Today, I'm joined by Justin Gover, GW's Chief Executive Officer; Darren Cline, 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. 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 within an investment in GW can be found in the company's filings with the U.S. Securities and Exchange Commission. These forward-looking statements speak only as of today's date, November 5, 2019. 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've joined us today. We're once again pleased to report continued Epidiolex growth in the U.S., with sales in the first 3 quarters of the year totaling $188 million, including $86 million in this most recent quarter. We are proud of the success of the launch to date, and our experience suggests that Epidiolex has all the characteristics necessary to be a blockbuster brand. We see a medicine that is in high demand by patients, warmly welcomed by physicians, and that payers recognize as providing meaningful value.

Beyond the U.S., we are now starting to commercialize Epidiolex in selected major European countries, and looking into 2020, we look forward to adding a new indication of tuberous sclerosis complex around mid-next year. In a moment, Darren will provide more details on the U.S. commercial opportunity as it moves into its second year. I've also asked Chris Tovey to review the European launch status.

Understandably, in the Epidiolex launch year, there has been focus on commercial performance, but it is important to remind investors that GW is a platform company with an exciting pipeline, which is going to be the subject of investment in 2020. Volker Knappertz will review the pipeline with you later on this call. Finally, on this call, Scott Giacobello, CFO, will review our financial results.

Let me begin by asking Darren to provide a U.S. commercial update. Darren?

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

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Thank you, Justin. Epidiolex U.S. net sales were $86 million in the third quarter and $188 million year to date. We continue to be very pleased with the progress of this launch and the impact Epidiolex is having in patients and caregiver lives, and their prescribing physicians. We feel very confident in the future direction of the brand as we complete our first year of commercialization and believe that the fundamentals to make Epidiolex a highly successful brand continue to demonstrate themselves. These fundamentals include strong conviction among prescribers in the clinical benefits in both LGS and DS, an increasing interest in the potential for Epidiolex to treat other rare and refractory epilepsies, and confidence in prescribing, a very positive patient experience being shared through very active and vocal patient and caregiver groups, physician feedback of positive clinical benefit and tolerability in these patients, and lastly, positive payer coverage, which we expect to continue to widen. Our market research as well as key KOL interactions reinforce our long-term data, safety profile, and our novel approach to treating seizures are key differentiators for the brand.

Highlights for the quarter are as follows. Since launch, over 15,000 patients have received Epidiolex, up from 12,000 through the end of last quarter. Reflecting on our comments last quarter, when factoring in the Q2 impact of pent-up demand and EAP transition on the Q2 numbers, we believe that the underlying rate of new patient acquisition in Q3 remains very healthy. Over 3,000 physicians have prescribed Epidiolex, up from 2,500 through the end of the second quarter, a trend which we also see as highly positive. Patient retention remains high, as physicians continue to see the clinical benefit, while maintaining the tolerability as they seek to gain seizure control.

Patient dosing during the quarter continued to rise, as more physicians gain experience with the therapy. Our pediatric-to-adult mix remained roughly 60%, 40% respectively. The time to fill a prescription remains very stable, as our specialty pharmacy and payer partners adjudicate claims and ship product.

On previous calls, we've discussed the positive impact of significant prelaunch awareness and pent-up demand on the initial wave of new patients and sales in the first half of the year. As we evaluate the epilepsy market and other AEDs that have preceded Epidiolex, such as ONFI, I believe this provides useful context for the next phase of this launch and how we think about the next wave of prescribers and patients. Early in this launch, most of the new patients came through a concentrated number of specialists and institutions, and our initial targeting and deployment appropriately ensured that we spent our time in these top-tier centers. Virtually all of the healthcare providers, or HCPs, in this top tier prescribed Epidiolex in Q3. We are encouraged by the market share penetration in this group of physicians. We expect to continue to see these top-tier HCPs introduce new patients to Epidiolex, evidenced both by internal and external physician market research.

Looking forward, we see an additional next wave of significant opportunity and increased prescribing from our middle tier of our HCP targets, which represent just over 1,000 prescribers. In this 1,000-prescriber universe, we've also experienced a high level of early adoption, with over 80% having prescribed in Q3. As is to be expected, however, in year one of the launch of a new AED, this group of physicians have generally prescribed to a small number of patients each, while just beginning to gain experience with the product, and have not yet moved to adoption in a wider group of patients. A priority moving forward will now be to spend more time, effort, and resources with these physicians, which we are confident represents a large pool of potential new patient growth in 2020.

Beyond this, there remain further waves of both prescribers and patients that we see. Our target prescriber universe numbers 6,000. Hence, we will, over time, focus on the remaining 3,000 prescribers in our call file, which consist of mainly adult neurologists, nurse practitioners, and physician assistants, who see a wide spectrum of epilepsy patients, including those with diagnosed and undiagnosed LGS and DS.

An additional area of opportunity as we prepare for 2020 is the long-term care segment. We know from our market research, feedback from customers, and other analogs, that this could be an important growth driver for Epidiolex. We will be deploying resources next year to ensure we capture the opportunity this segment provides.

Of course, 2020 is also expected to see the launch of a TSC indication. The prospect of the launch of this new indication in 2020 provides needed hope to patients with difficult to control TSC-associated seizures. The most prevalent neurology comorbidity in TSC is epilepsy, in which most are treatment resistant, and the primary seizure type are focal onset seizures, which are also the most common seizure type in all epilepsy patients. The effectiveness of Epidiolex in the TSC population greatly expands our understanding of the drug's potential to treat a broad spectrum of both focal and generalized seizure types, which we believe will be an important driver of Epidiolex peak sales potential.

Turning now to payer coverage, as a reminder, our current payer mix remains approximately 45% commercial, 40% Medicaid and/or managed Medicaid, and 15% Medicare and other. As to be expected, our priority for the first year has been to ensure smooth patient and physician access for Dravet and LGS patients to the labeled indication. This has been highly successful, and we see very little pushback in these patients. As we approach the end of 2019, it is important for investors to understand that payer coverage for the remainder of this year will remain as is, and that widening of coverage is being targeted for 2020.

Indeed, as we start to prepare for 2020, we are holding positive discussions with our commercial payers as they approach their first annual evaluations of Epidiolex utilization, and expect that these discussions will enable further broadening of access next year. We anticipate the utilization review will highlight several positive observations. First, physician utilization is contained within our epileptology and neurology targets, thereby reassuring payers that Epidiolex is being prescribed by appropriate physicians. Second, Epidiolex is being used in the appropriate patients with an LGS and a DS indication. Third, upon appeal, payers are ultimately approving Epidiolex for use in patients with other rare refractory epilepsies, and that there is a clear unmet need for such patients. Fourth, patient compliance is high, indicating a positive physician and patient experience and receptivity. And lastly, the average price of Epidiolex is considered reasonable and provides a positive value proposition for the plan and their patients. Overall, these factors, we believe, will position Epidiolex well for broader payer coverage in 2020 and beyond.

The other important payer segments are the state fee-for-service Medicaid and managed Medicaid. Medicaid prior authorization approval rates are in line with the commercial segment. One important difference in the commercial and Medicaid coverage landscape is the variability of initial coverages within each Medicaid agency and the subsequent county, counties, and managed Medicaid plans. Hence, we are aware that investors have noted changes in coverage conditions in certain states, for example in California and Colorado, and I'd like to emphasize that these kinds of changes are positive for Epidiolex. They represent statewide coverage decisions, which replace previous, inconsistent, county-by-county policies and procedures. We expect to see further progress with Medicaid plans in 2020.

Overall, with $188 million net sales in the first 9 months of the year, this launch continues to track extremely well. The prelaunch awareness dynamics have created an unusually steep uptake pattern, which has led to a large number of patients at an earlier stage than would normally be expected. Moving forward, as we stated on our last quarterly call, we are seeing a healthy rate of new patient starts, which is more consistent with other successful analog product launches. The potential market opportunity for this brand is very compelling. As a reminder, between the three target indications of DS, LGS, and TSC, we estimate there to be 70,000 addressable patients in the U.S. More broadly, looking at analogs, peak usage of branded ONVI, indicated only for LGS, approached 50,000 patients in its final year of exclusivity. Overall, one-third of patients with epilepsy have seizures that are not controlled. We are laser focused on continuing to expand the market opportunities for this product as we move through 2020.

Thank you, and I'll now turn the call over to Chris to discuss our progress in Europe. Chris?

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Christopher John Tovey, GW Pharmaceuticals plc - COO [5]

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Thanks, Darren. In Europe, our European Commission approval for Epidiolex came in late September, wonderful news for those European patients and families that have been waiting for access to a fully regulatory approved CBD medicine. In the months leading up to approval, our early-access program allowed us to provide Epidiolex to over 1,100 patients across the major five EU markets, including more than 400 key prescribers from more than 250 top specialist centers. We've now begun the formal launch phase in the EU five major markets, something that will occur market by market over the next 12 months as we secure national pricing and reimbursement.

The first market to launch was Germany, where a full commercial launch took place in mid-October. In France, we're also now active in the market through a sales team of neurology account managers, supported by a team of medical science liaisons. In France, we're in a relatively unusual position of having early reimbursed product available as part of the national ATU early-access scheme, which supports early patient access to important new medicines in serious diseases. In parallel with this early access, the formal reimbursement process has commenced, the outcome of which is expected later in 2020.

The third of the EU five countries where we're making major progress towards commercial launch is the U.K. We continue to work productively with NICE and remain confident of a positive recommendation in the near future that would lead to the NHS paying for Epidiolex. We plan on launching in the U.K. when the NICE process is complete.

Continuing on across the EU five, Spain and Italy launches are expected during 2020, once appropriate pricing and reimbursement negotiations are finalized. We remain encouraged by the quality of our ongoing prelaunch pricing and reimbursement discussions with those authorities in the markets.

Underpinning our activities in Europe is a highly experience team in both epilepsy and specialist disease product launches. The field-based team has been created to accommodate the specifics of the European medical environment, where typically, physicians have high patient workloads, and access to epilepsy physicians is limited, proving a challenge not only for GW, but even patients and families themselves. Consideration of what EU physicians need from GW has prompted a customer-facing team that is equal in numbers between neurology account managers and medical science liaisons. This staffing model is different in that aspect from in the U.S., and it is also relatively smaller, reflecting the opportunity of a much more concentrated epilepsy specialist prescribing base of about 1,600 key clinicians across the EU five.

What doesn't differ from the U.S., though, is that market research and all our market feedback suggests that we're launching into a very receptive environment. Research tells us that physicians are eager to have access to a new therapy to treat these difficult cases, and that there is a high level of awareness amongst patients, broadly equivalent to that of the U.S. at a similar point. This data is very reassuring, and along with the physician experience and patient base created by the early-access program, offers us a strong head start as we begin the formal launches.

Moving away from European commercialization, our global commercial manufacturing and supply chain, which also falls under my responsibility, continues to run smoothly. In addition, our longer-term future capacity manufacturing expansion plans are on track to service what expect to be robust long-term demand for Epidiolex.

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 [6]

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Thank you, Chris, and good day, everyone. Looking first at Epidiolex, we look forward to presenting at the upcoming annual meeting of the American Epilepsy Society our positive Phase III trial data in the treatment of seizures associated with tuberous sclerosis complex, or TSC. We are in the final stages of preparation for submission of a supplemental application to the FDA for this new indication. While this application timing has shifted into early January, we still expect approval of this indication in mid-2020. The European submission of the TSC data is due to be filed in Q1 2020. The addition of TSC and its associated seizure types, which are predominantly focal in onset, will be important new features in the prescribing information.

Beyond Epidiolex for seizure syndromes, we are now actively recruiting patients into a placebo-controlled Phase III trial in Rett syndrome. In this 252-patient trial, we have focused our investigations on the non-seizure aspects of the disease. We see this trial serving as an important source of information on the potential for Epidiolex to address many of the symptom complexes that are commonly seen in patients with autism spectrum disorders, and are also common in several severe neurodevelopmental disorders outside of epilepsy. Success in children with Rett syndrome would corroborate the many anecdotal reports we continue to hear from clinicians and parents relating to improvements in social interactivity and in cognitive and behavioral functioning.

Before moving on, let me address comments we have heard from some investors regarding Epidiolex and its safety profile. Since launch, the safety information we have seen is consistent with the labelled safety profile in the U.S. prescribing information and is as expected.

Beyond Epidiolex, we are advancing plans for Sativex in the U.S. and see this product as a major late-stage pipeline opportunity with potential for extended exclusivity. We have spent the last several months evaluating the development strategy and commercial potential for Sativex across a range of neurological and psychiatric indications. This work has reinforced our view of the significant market potential in the U.S. for Sativex, a botanically derived product containing THC and CBD, as well as other cannabinoid and non-cannabinoid components. We look forward to sharing further insights into the extent of this opportunity early next year.

The fastest route to market for Sativex in the U.S. is via the indication already approved in Europe, and for which we have reported three positive Phase III trials, namely, the treatment of spasticity due to multiple sclerosis. Over 35% of MS patients have moderate-to-severe spasticity and represent candidates for this treatment. In discussions with MS experts in the U.S., it is clear that Sativex would bring a welcome, novel mechanism of action to the spasticity space, where there continues to be a substantial need for new therapies, as there have been no new oral anti-spasticity treatments introduced to this field for over 20 years. Based on an ongoing dialogue with the FDA, our plan is to perform one additional Phase III placebo-controlled trial of approximately 450 patients to supplement positive data from three European Phase III trials, and is intended to address FDA's preference for a primary endpoint that focuses directly on the physical manifestations of spasticity.

To complement this trial, we are also initiating two mechanistic studies of about 35 patients each. This clinical program is expected to commence in the first quarter of 2020. As a reminder, with this product already commercialized in Europe, we have a comprehensive CMC data package in place, together with over 80,000 patient years of safety data. In parallel with the Phase III MS trial, we anticipate during 2020 and 2021 initiating clinical programs in additional follow-on indications for Sativex and see a truly exciting opportunity for this product to address market needs in several indications over the coming years.

Beyond Sativex, we are particularly excited about the prospect for the treatment of autism, as we have seen a potential beneficial effect for both Epidiolex and CBDV in several symptom complexes associated with autism spectrum disorder. This is of particular interest, as there are currently only a few options to treat these symptoms. These are largely antipsychotic agents, which are especially challenging to use in children. The effects of CBDV and CBD in autism have been explored through a range of genetic, phenotypic, and environmental insult-based animal models. These demonstrate efficacy in social impairment, visual recognition memory, which is a key component of social recognition, as well as repetitive behaviors and hyperactivity. A small expanded access program study with CBDV and ASD reported beneficial effects on social engagement and communication in five patients. We are following this initial experience in ASD with a 30-patient open-label study, which is about to commence, and we expect the first set of data from this study to be available by the end of next year. In addition, an investigator-led, 100-patient placebo-controlled trial in autism spectrum disorder has been actively recruiting since earlier this year. Finally, an open-label, investigator-led study in Rett syndrome with seizures in ongoing.

Looking at our program in neonatal hypoxic ischemic encephalopathy, or NHIE, we have open trial sites and expect shortly to treat the first patient in this initial safety study of our intravenous CBD formulation for neonates. There are currently no FDA approved medicines indicated for NHIE. Clearly a product to address this patient population would represent a major breakthrough, and we look forward to advancing this program.

Finally, I am pleased to announce today that we are now moving forward a clinical development program for schizophrenia. This is an area which GW has been researching for approximately a decade. CBD has demonstrated efficacy in multiple preclinical models for schizophrenia, and there have been two randomized, controlled clinical trials evaluating the efficacy of CBD in the treatment of schizophrenia, one of which was a placebo-controlled, GW-sponsored study. In this study in 88 subjects with schizophrenia who experienced partial response to antipsychotic therapy, GW's investigational CBD containing product was superior to placebo on positive symptoms, as well as on the clinical global impression of improvement, which were both statistically significant. Having reviewed this data package with experts in schizophrenia, we are now moving forward with a follow-on Phase IIb study. This study will involve patients who, despite receiving a stable dose of antipsychotic therapy, continue to experience psychotic symptoms. The study aims to further estimate the magnitude of treatment effect of an investigation of CBD-containing product on positive, negative, and general symptoms of schizophrenia, as well as to evaluate effect on quality of life, cannabis use, and cognitive function in a well-characterized population. We expect to initiate enrollment into this study in mid-2020.

Thank you, and 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 [7]

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Thanks, Volker, and good afternoon. I will now provide high-level comments on financial results for the quarter and 9 months ended September 30, 2019. More detailed discussion of results will be provided in our 10-Q, to be filed with the SEC tomorrow. I'll start with revenue.

Total revenue for the quarter was $91 million, compared to $2.4 million in the prior-year quarter. This increase is due primarily to Epidiolex U.S. net sales of $86.1 million in the quarter. Net sales of Epidiolex outside of the U.S. amounted to $1.9 million, consisting largely of sales to early-access programs in Europe. Total deductions from gross sales for allowances were $18.6 million for the quarter, related mainly to Epidiolex. Gross to net is in line with our expectations at this point in the launch. For the 9 months ended September 30, total revenue was $202.3 million, driven mainly by Epidiolex U.S. net sales of $188 million.

Cost of sales for the quarter amounted to $8.2 million, or 9% of net product sales, compared to $1.4 million, or 60% of net product sales in the prior-year quarter. This improvement is due to the launch of Epidiolex in the U.S. In the prior year, net product sales consisted of Sativex sales outside of the U.S. through licensed partners. Cost of sales continues to be favorably impacted by Epidiolex inventory produced prior to approval, which was expensed in accordance with U.S. accounting guidelines.

Moving to R&D spend, total research and development expense for the quarter was $36.3 million, compared to $28.9 million in the prior-year quarter. This increase reflects expenses related to the ongoing Epidiolex development program, including preparation of the supplemental NDA for TSC, as well as advancing the Sativex clinical program and our other pipeline programs.

Turning to SG&A, selling, general, and administrative expenses for the quarter increased to $64.2 million, from $52.7 million in the same period in 2018. This increase is primarily the result of costs related to the launch of Epidiolex in the U.S. and the buildout of our commercial operations in Europe in preparation for upcoming launches. The third quarter spend was in line with the previous quarter's spend of $62.3 million. This has all resulted in a net loss for the quarter of $13.8 million, compared to a net loss of $79.9 million in the prior-year quarter.

Moving to cashflow, net cash used in operating activities for the 9 months ended September 30 amounted to $107.5 million, compared to $180.3 million for the prior-year period. Net cash provided by investing activities for the 9-month period was $73 million, compared to net cash used in investing activities of $24.1 million for the prior-year period. The current-year amount includes $104.1 million in net proceeds from the sale of our priority review voucher in the previous quarter.

Capital expenditure for the 9-month period was $31.1 million, compared to $24.7 million for the prior-year period, reflecting continued investments in the expansion of our cannabinoid production facility. Resulting net decrease in cash and cash equivalents for the 9-month period amounted to $36.8 million. For the quarter ended September 30, the net decrease in cash and cash equivalents was $29 million. At September 30, we held cash and cash equivalents of $554.7 million.

Turning to guidance, regarding operating expenses for 2019, we are narrowing our guidance range to $415 million to $430 million from our previous guidance range of $395 million to $425 million. This spend reflects the continued ramp-up of the Epidiolex launch in the U.S., launch preparations in Europe, and continued investments in our R&D portfolio. As previously guided, we continue to anticipate capital expenditure in the range of $35 million to $45 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 [8]

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Thank you, Scott. Before closing the call, I just want to comment on intellectual property, which remains an area of great focus at GW. First, in respect of Epidiolex, there are nine granted patents in the Orange Book that run through 2035. Further, we are developing novel formulations with IP potential that have yielded promising PK data this year, and which are moving into additional studies in 2020. In addition, we have been exploring whether Epidiolex is different from synthetic CBD, and recently, a patent application was published that indicates Epidiolex is more efficacious than synthetic CBD in animal models of seizures, based on the key difference that Epidiolex comprises up to 2% of other cannabinoids. The patent, if granted, would be a useful addition to our portfolio, and we continue to produce more data to support new patent applications and our understanding of the mechanism of action of Epidiolex. With respect to our pipeline, we believe that Sativex, CBDV, and a number of other pipeline products will benefit from strong IP protection, given their complexity and novel application.

Overall, I believe that GW is at the most exciting point in its history. As we move into the second year of Epidiolex commercial availability, we have established an enviable base of patients and see major growth opportunities in 2020, as more and more patients gain access to the medication. Beyond Epidiolex, we believe that our pipeline will start to emerge as a major value driver as we advance multiple late-stage opportunities and consolidate our leadership in cannabinoid science.

Before I hand this call over to questions, let me highlight an upcoming GW-hosted KOL dinner at the upcoming American Epilepsy Society Annual Meeting in Baltimore on December 9th. If you're interested in attending, please reach out to Steve Schultz.

Thank you for your time today and for your interest in GW, and I would now like to open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Phil Nadeau Cowen and Co.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [2]

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First, just a quick question on the Epidiolex revenue. The press release mentions $86.1 million in U.S. revenue. In your prepared remarks, you mentioned $1.9 million from x-U. S. So is total Epidiolex revenue for the quarter $88 million, or was that $1.9 million not actually booked because it's early-access payments?

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Scott M. Giacobello, GW Pharmaceuticals plc - CFO [3]

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No, no, no, the total revenue wouldn't -- the total Epidiolex revenue globally would include the $1.9 million.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [4]

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So the total global revenue is $88 million.

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Scott M. Giacobello, GW Pharmaceuticals plc - CFO [5]

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No, no, U.S. revenue for Epidiolex was $86.1 million, and then there was $1.9 million of Epidiolex revenue outside of the U.S., related mainly to the early-access programs.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [6]

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Got it, okay. That's very helpful, thanks. And then, second question on the Epidiolex launch in the U.S., now that it's been on the market for approximately a year, do you have any quantitative understanding of what persistence and compliance is for patients on therapy? In particular, do you have a sense of what the current drop-out rate is?

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Darren S. Cline, GW Pharmaceuticals plc - U.S. Chief Commercial Officer [7]

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Phil, it's Darren. I'll take the question. You know, we're not providing specific metrics on this, but if you're thinking about modeling retention, I think it's helpful to remind everyone the data that's already published. You know, across our four Phase III trials, the withdrawal rate for patients on Epidiolex was, on average, 10% over the 14-week trial period. And for those patients that completed the trial then entered the long-term open-label expansion, and this was presented at AES in 2019, over a 1-year period, we saw retention rates of 80% for LGS and 70% for Dravet. So, again, this is of course in the context of a clinical trial environment, and worth noting that these numbers are those typically seen, or above what we see in the AED class, so I think that's how you probably should consider modeling retention.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [8]

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Great, and then, last question from me is just on toxicity. In your prepared remarks, you mentioned that it was -- that thus far, it's been consistent with the label. I think the concerns investors had were around perhaps the death rate. Can you discuss deaths specifically? Anything surprising there or different than what you'd expect from the natural history of these diseases.

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Volker Knappertz, GW Pharmaceuticals plc - Chief Medical Officer [9]

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Well, thank you, this is Volker, Chief Medical Officer, for the question. Just to refer back to my prepared remarks, we have carefully looked at the post-market surveillance. We do this on an ongoing basis. We're aware of all the data that's out there, and there's really no change from what is on the label, and it is consistent with what we've seen so far in the clinical trial program and what is known from the epidemiology of those diseases.

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Operator [10]

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Thank you. Your next question comes from Salveen Richter with Goldman Sachs.

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

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On the (inaudible), can you just put the -- or elaborate on the healthy rate of new patient starts you mentioned in the context of the third quarter trajectory? And then secondly, with regard to the payer process, when we think about the refractory epilepsy patients, how are these patients -- you know, in terms of them going through appeals process or being able to get drug through the first pass, you know, how does that, I guess rate of success play out here?

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Unidentified Company Representative, [12]

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So regarding the new patient adds, you know, as we've stated, with the large uptake early on in the launch, and now kind of the settling out in the third quarter, we still -- you know, the patient adds for the quarter remain very healthy, in our view, as we kind of move and transition into 2020 and beyond.

Regarding the payer front and the rare and other refractor epilepsies, as I alluded to on the call, we feel very good about the LGS Dravet. What we have found are those physicians that want to prescribe in these other areas that have an unmet need, once they go through the appeal process and/or a peer-to-peer conversation with a payer, we're seeing a very high number of these get through and get ultimately paid.

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Operator [13]

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Your next question comes from Dave Lebowitz with Morgan Stanley.

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Ishmael Izakiel Gyimah Asante, Morgan Stanley, Research Division - Research Associate [14]

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This is Ishmael on for David. Thank you for taking our questions. Can you remind us of your expectations for the European ramp in 2020 and the dynamic that may differ it from what you experienced in the U.S. launch?

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Christopher John Tovey, GW Pharmaceuticals plc - COO [15]

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Chris Tovey. I think it's fair to say that the European launch hasn't really started in earnest. The German launch started sort of mid-October, and the French launch is really only just starting, so I think 2020 is best thought of as the first real launch year for Europe, and similar in some ways to the way the U.S. launch timing worked. And as I've said, it's all about pricing and reimbursement, so we will be looking, obviously, for an outcome from NICE, and then we've got a complete pricing reimbursement in Spain and Italy. So you're going to have this sequential introduction of countries through 2020, which means it's not really easy to compare with the U.S., which is obviously one country, one population in one go. So, it will look very different, but typically, we expect the European market overall, when it matures into the launch, to be about a quarter to a third of the size of the U.S. market. The patient availability in DS and LGS is pretty similar across Europe to the U.S., so we remain really optimistic about the opportunity for the European launch. But 2020 is going to be a case of achieving pricing reimbursement in the major EU five markets, and then dialing them on and bringing them through into real sort of commercial launch phase.

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Operator [16]

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Your next question comes from Corey Kasimov with JPMorgan.

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Neena Marie Bitritto-Garg, JP Morgan Chase & Co, Research Division - Analyst [17]

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This is Neena on for Corey. Could you kind of go back to the underlying rate of new patient acquisitions? Can you just help us understand how we should really think about that rate moving forward? Should we kind of expect it to level off from here? Should we expect to see growth? Yeah, anything you can kind of guide us on that will be helpful.

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Darren S. Cline, GW Pharmaceuticals plc - U.S. Chief Commercial Officer [18]

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This is Darren. Through the end of 2019, I think we're on a really nice kind of steady state as we exit the year. But we, as I stated in my remarks, there are several growth drivers for us in 2020 and beyond. You know, if we look at the advocates that were early part of this launch and continue to prescribe Epidiolex and talk about the next 1,000 or so prescribers that we're going to spend time and effort on to increase that prescriber base, and that goes hand-in-hand with the opening access of the payers that, as I stated, doing their annual review now. So, I think that, you know, through the remainder of the year, we feel very good about the patient adds, but really look to 2020 to really capitalize on those dynamics that we're setting up for the future.

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Neena Marie Bitritto-Garg, JP Morgan Chase & Co, Research Division - Analyst [19]

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Okay. Great. And then, just one question around the TSC kind of timing. Is there any reason that that filing got pushed back up to first quarter versus fourth quarter?

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

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Thanks for the question. It's really just a few weeks of an extra administrative step, so it's just, these are important things to get right. It's actually a pretty comprehensive SMDA because it includes the second Dravet study as well. So, a lot is going into this, and it's straddling a quarter, but the timing shift is actually relatively inconsequential. Mid-year approval is still expected.

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Neena Marie Bitritto-Garg, JP Morgan Chase & Co, Research Division - Analyst [21]

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Okay. Great. And one more really quick question. You talked a little bit about just looking at getting some of these other rare and refractory epilepsy patients through on drug. So, at this point in the launch, can you tell us, or give us any sort of guidance on what the breakdown is between on-label and off-label use?

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Darren S. Cline, GW Pharmaceuticals plc - U.S. Chief Commercial Officer [22]

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It's Darren. Again, a majority of the scripts are LGS DS at this particular time, not really any insight into the broader, just hearing what we hear anecdotally through our payer interactions.

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Operator [23]

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Your next question comes from Marc Goodman with SVB Leerink.

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Marc Harold Goodman, SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst [24]

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Yes, first question, it sounds like you've made some decisions on additional indications for Sativex to start some studies next year. I was wondering if you could elaborate a little bit on that, and second, if you could talk about what else we're going to see at AES this year. I know you mentioned, obviously, the Phase III data, but what other studies are you planning to show us? Thanks.

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [25]

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Marc, it's Justin. I'll do the Sativex question. I think we're obviously focusing on the call today on the lead indication in terms of the fastest route to the market. I think we're signaling strongly that you can expect a series of indications. We do see it as a sort of pipeline and a product opportunity. We kind of are being a little judicious about how we lay that out, but you can expect early next year for us to kind of lay that out for you in terms of the series of indications that we will be investigating. And they're a mix of sort of natural follow-ons from the MS spasticity indication to some broader, less-related indications as well. And the market research we're doing is really coming out to be very interesting with that, but I -- we decided today to limit the comments to the kind of route to NDA, but stay tuned.

I think on AES, obviously the main focus is the TSD indication. There will be additional long-term data from Epidiolex use and sort of selected other (inaudible), but the primary sort of focus at AES is definitely TSC.

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Operator [26]

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Your next question comes from Tazeen Ahmad with BAM.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [27]

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I think BAM is Bank of America, so that must be me. I did want to ask a couple of follow-ups maybe to questions that were asked earlier in the queue. And in case I missed it, did you give what your current mix of adult to pediatric use is this quarter and if it changed at all from what you've been seeing in the first two quarters of the launch?

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

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Tazeen, it's Darren. It's remained about 60-40.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [29]

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Okay. And then can you give us an idea of what the gross to net was during the quarter?

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Scott M. Giacobello, GW Pharmaceuticals plc - CFO [30]

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Tazeen, it's Scott. We said that we had total deductions from gross sales of $18.6 million. We didn't give the specific percent, but it's running at under 20%, and we don't split that out by product or by region. It's just in total, but we're running where we expected to be.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [31]

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It's running under 20%. But can you say directionally if that's changed from your first couple quarters?

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Scott M. Giacobello, GW Pharmaceuticals plc - CFO [32]

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It's changed very little, but what is happening is, obviously, Medicaid is a large portion of our business. So Medicaid, I think Darren mentioned, is up to 40%, and as Medicaid ticks up -- I think we initially thought it would be somewhere around 40% to 45% -- it's the biggest piece, so it does drive it, so it's ticked up slightly.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [33]

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Okay. And maybe the last question from me, I know you're a little bit constrained in being able to answer these types of questions, but just for our understanding and being able to model this better going forward, can you give us a sense -- you talked about retention, but without knowing what your patient count was this quarter, how do we get a better sense of this continuation beyond, let's say, the comments that Justin has made about the launch going as planned so far?

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Scott M. Giacobello, GW Pharmaceuticals plc - CFO [34]

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I think what I stated previously, Tazeen, I think that you think about the AED class, two different things. I mean, think about our clinical trials and the open label and the retention rates there, and then just the general antiepileptic drug class. Between the two, from the clinical trials down to the AED class, is the range that -- how you should model it.

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [35]

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Yes, and I think it's important investors understand this antiepileptic drug phenomenon, and I think we should also emphasize that we see Epidiolex as a top performer when it comes to within that class. But, you know, epilepsy has a cadence to it, and we just are trying to make sure investors understand that dynamic. But, you know, I think that's as far as we can go.

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Operator [36]

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Your next question comes from Esther Rajavelu with Oppenheimer.

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Esther P. Rajavelu, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [37]

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Can you talk about the EU market dynamic with dispensary-grade CBD, where doctors are maybe prescribing these in some markets? How does that impact your pricing discussions and use update?

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Christopher John Tovey, GW Pharmaceuticals plc - COO [38]

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Chris Tovey. It doesn't, actually, to be frank. The reality is, all the market research we've done, all the engagement we've had through our KOL ad boards and all the congresses we've been at have made it very, very clear that specialists -- and remember, these are treating really, seriously ill kids, particularly, especially [Section 1 or] regulatory approved CBD medicines. So essentially, it really doesn't have any impact on the way that specialist physicians are thinking about prescribing. And additionally, the health technology assessments that go on that support pricing reimbursement in Europe are evidence-based, and there is no evidence for these other products. So, essentially, it's sort of business as usual for pharmaceutical products, and obviously, the data that we have around Epidiolex, in a highly unmet medical need area, makes us -- puts us in a really strong position. And, you know, I think we've seen that come through in our conversations with NICE, for instance.

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Esther P. Rajavelu, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [39]

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Okay, and then really quickly, on the EAP patient pool, what -- how quickly do you see that uptake into revenue? You said about $2 million this quarter.

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Christopher John Tovey, GW Pharmaceuticals plc - COO [40]

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So, in Europe? Sorry, just…

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Esther P. Rajavelu, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [41]

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Right, in Europe.

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Christopher John Tovey, GW Pharmaceuticals plc - COO [42]

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Yes, I think the real answer again is, and this is the -- I sound like a broken record. Every country in Europe is very different, and you know, we're in a fabulous position to be sitting on 1,100 patients' worth of experience in just over a year in the early access program. But each country's scheme is slightly different. Some of them are paid for; some of them are not paid for, and the transition process will have to be managed individually, and the transition can only occur when pricing and reimbursement is agreed. So, for instance, the process in Germany will take upwards of three to four months because of prescription lengths given in the early access program.

And so, what we'll have is the benefits of these early access patients transitioning into commercial pack through 2020, as we bring on new countries with pricing and reimbursement. But it's just a brilliant place to be starting from because it means that at least a quarter of the prescribing base have got experience of Epidiolex, and the vast majority of the key centers have also seen Epidiolex on the shelves of their pharmacy.

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Operator [43]

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Your next question comes from Paul Matteis with Stifel.

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Paul Andrew Matteis, Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst [44]

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If you look at patient numbers that you guys reported this quarter and last quarter from 1Q, it looked like patients who'd tried Epidiolex from 1Q to 2Q and then 2Q to 3Q was about 4,000, or over 4,000, and then 3,000. I was wondering if those numbers, the 4,000 and 3,000, also matched the underlying net patient add rate, roughly, when you control for discontinuation?

And then, secondarily, on IMS right now, it looks like NRX are continuing to increase into this quarter, and they were increasing from 2Q to 3Q, but new patient starts look like they were down this quarter. Can you help kind of clarify what's going on with IMS and whether or not we should be paying attention to that data every Friday into November and December? Thanks a lot.

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Scott M. Giacobello, GW Pharmaceuticals plc - CFO [45]

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Hey, Paul, it's Scott. Let me take the first one on the patient, and you mentioned the 4,000, 3,000. Actually, when you exclude the impact of EAP transitions in Q2, the new patient add rate has actually been pretty consistent across the quarters. From the net patient add point, I don't think I can really comment on -- we don't really know exactly how that's playing out underneath with the discontinuations coming off and on. And, I'm sorry, your third question?

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Paul Andrew Matteis, Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst [46]

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That was about -- well, actually, Scott, just as a follow-up, I thought 75% of the EAP was converted in 1Q, and then 25% in 2Q. Is that wrong? Because then it should only impact about 300 or so patients in 2Q

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Scott M. Giacobello, GW Pharmaceuticals plc - CFO [47]

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I don't think we gave the actual split of that. I think we just said it was largely -- it's true that there was more of it completed in 1Q than in 2Q, but there was still a decent amount in the second quarter. But there wasn't -- for me, there wasn't a drastic difference when you excluded those items of new patient adds between Q2 and Q3.

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [48]

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Paul, this is Justin. When I look back at our Q2 comments, which we were I think pretty clear that what we felt was the -- I think you would have agreed that the significant growth we saw in Q2 was a combination of that transition, but also the extension of that sort of prelaunch phenomenon extending into the Q2 time period. So I think we feel very comfortable that when you look at the sort of cadence underlying the 3,000 adds is something we're very comfortable with. We don't see it as a downturn at all, and I think just to emphasize that, for all the reasons Darren said on this call, but I think in particular I'd point to the kind of prescriber targeting, and also the payer access change that we expect to see in 2020, that we are not worried at all about the potential pool of patients and the opportunities for new patient adds growing in 2020. I just want to be clear on that. We're in an interesting year because of the -- we brought forward so many patients in the launch year, but there's nothing we're seeing which kind of causes concern around new patient growth moving forward.

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Paul Andrew Matteis, Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst [49]

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Okay, that's helpful. My other question was just on IMS because IMS into this quarter is conveying that new patient starts are at least flat, or maybe actually even up. It sounded like, Justin, that you were saying that this 3,000 add rate on a go-forward basis feels sustainable. What about IMS? Should we be paying attention to that? And what's been happening with the capture rate? I was just wondering if you can clarify at all.

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Scott M. Giacobello, GW Pharmaceuticals plc - CFO [50]

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Paul, Scott again. I mean, again, as we have said consistently, you should use caution around the IMS numbers because it's not the full picture. Over a longer period of time, it should be directionally correct, but it clearly is not the full picture. But I would say as far as capture rate, we haven't seen any meaningful movement in capture rate over the last couple quarters.

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Operator [51]

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Your next question comes from Charles Duncan with Cantor Fitzgerald.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [52]

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First of all, congrats on the progress to Justin and team. Thanks for taking my questions. I just have two questions; one's commercial, one's pipeline. On the commercial question, you mentioned the long-term care segment, and I'm wondering if you could provide some additional color on the kind of patient population that you're looking at there, or numbers of patients, and then other dynamics and whether or not that may impact the sizing of your salesforce going into 2020.

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Darren S. Cline, GW Pharmaceuticals plc - U.S. Chief Commercial Officer [53]

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It's Darren; I'll take the question. You know, we always had this long-term care segment on our radar as a potential opportunity to the factors that I talked about, interactions with our physicians, market research, and other analogs how other companies have handled it. And the patient side, if you think about patients that are in a long-term care facility, these are the most, you know, probably sickest of the sick within LGS and other kind of these rare epilepsies, and there's a great need for this product.

As it relates to kind of a resource (inaudible), we're actually -- it won't impact our sales organization. If anything, this will help our sales organization focus in our target prescribers. We're going to have a separate small group of account executives that will be -- with long-term care backgrounds who will be deployed into this segment. So, we actually think that we'll be able to capitalize on the opportunity in 2020 and beyond.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [54]

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That's helpful added color. With regard to the pipeline, this may be way ahead of our skis or whatever, but I wondered if you could provide some additional color on the Rett study as well as the schizophrenia study. Specifically with regard to Rett, are you tracking the patients that have been enrolled, and how do you feel about the characteristics in terms of being able to show signal to noise for the neuropsych symptoms versus certainly the seizures? And then, for schizophrenia, could you just let us know whether or not that's a 4- or 6-week study, and if it's for U.S. patients or more broader?

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Volker Knappertz, GW Pharmaceuticals plc - Chief Medical Officer [55]

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So with regard to your question on Rett, and I appreciate your concern about signal to noise, we're using a validated scale called the RSBQ. It's the Rett Syndrome Behavioral Questionnaire. And we don't have, you know, ongoing monitoring of that scale in the moment, so I can't give you data on this. We will be looking at the behavior of those scales, and we'll be looking at -- we're looking at this in real time in the trials, but this is nothing we actually report. So, I'm afraid I have to ask you to be patient until the trial completes for results.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [56]

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That's okay.

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

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And with regard to your question on schizophrenia, the duration of the trial, we haven't announced the precise trial design yet, but I anticipate this to be longer than a 4- to 6-week study. I anticipate this to be a 3-month study.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [58]

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And U.S. or global?

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Volker Knappertz, GW Pharmaceuticals plc - Chief Medical Officer [59]

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The study will be recruiting in various geographies, including the U.S.

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Operator [60]

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Your next question is from Yatin Suneja with Guggenheim.

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Derek Spencer Johnson, Guggenheim Securities, LLC, Research Division - Associate [61]

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This is Derek on for Yatin. I just wanted to get a little more clarification on the question Paul asked earlier on the sort of lack of a relationship with the IMS script numbers and what we're seeing in terms of total revenue. I know that you guys have made very clear that we shouldn't really look at these scripts as being a direct one-to-one, but is there any other, you know, just color that you can add in terms of the patient adds that came through the quarter? Were they smaller, which would perhaps have lower dosages that could have -- that [wouldn't] be reflected in TRX numbers? Were specialty pharmacies a lower percentage of the dispensaries, which may not have been reflected as well in all of those numbers? Is there any additional information you can provide, just to kind of clear that up a little bit?

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Justin D. Gover, GW Pharmaceuticals plc - CEO & Executive Director [62]

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I'm sorry, we would like to be helpful, but I'm not sure we can be. I mean, it's an imperfect dataset because it's incomplete, and that's why, ever since this launch, we've just been urging an element of caution. We realize it's the most you have, and that's -- maybe partial data is frustrating, but we can't, because the data's not ours and I don't think we can get inside it enough to start to explain to you the differences. The results are the results, and obviously, I think what we're giving you is the actual metrics, and IMS is obviously there, and we realize it's a guide, but it remains only a guide.

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Derek Spencer Johnson, Guggenheim Securities, LLC, Research Division - Associate [63]

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Okay, that's helpful. And can you just remind us real quick on how you view the size of the adult population you could be targeting with Epidiolex and LGS and just -- just across all the indications, once (inaudible)?

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Darren S. Cline, GW Pharmaceuticals plc - U.S. Chief Commercial Officer [64]

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This is Darren. You know, our addressable patient population is about 70,000 if you look at the LGS and eventual TSC. And the breakdown, you know, is probably roughly 50/50, ultimately, is where we think it will shake out.

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Derek Spencer Johnson, Guggenheim Securities, LLC, Research Division - Associate [65]

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All right, that's helpful. Congrats on the quarter.

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Operator [66]

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Your next question comes from Danielle Brill with Piper Jaffray.

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Danielle Catherine Brill, Piper Jaffray Companies, Research Division - VP & Senior Research Analyst [67]

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So, you mentioned that the current mix of adults and pediatrics is stable. I'm curious, are you expecting that to skew more towards adults as you increase focus on the middle-tier providers? And then, also, you mentioned that the average dose increased in the third quarter. Can you comment on revenue-per-patient dynamics and how we should think about this shifting moving forward? Thanks.

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Darren S. Cline, GW Pharmaceuticals plc - U.S. Chief Commercial Officer [68]

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Yes, it's Darren. I think over time, we do anticipate more adults being treated, as I noted in my remarks, driven by more broad neurology treating the disease. And the second question around dose, no, we just said it increased during the quarter, but I think it's about midpoint of the dosing range currently.

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Operator [69]

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Your next question comes from Serge Belanger Needham & Company.

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Serge D. Belanger, Needham & Company, LLC, Research Division - Senior Analyst [70]

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A couple questions for Darren. What should we expect in terms of changes to payer coverage in 2020? I think you're already at the mid-90 range in terms of covered commercial lives. And then, related to that, you also mentioned that some plans wanted to go review their Epidiolex coverage after -- in 2020, so any expected changes from that review process?

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Darren S. Cline, GW Pharmaceuticals plc - U.S. Chief Commercial Officer [71]

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Thanks for the question. Regarding the covered lives, we've said we're about 93%, 94% of all covered lives in the U.S., which you know, we feel very good, and we'll chip away at the remainder. You know, I think if you think about 2020 and payer coverage, and I alluded to this in my prepared remarks, one year -- as we approach one year of approval now, or just slightly past, you know, the commercial payers in particular are doing their kind of annual review of Epidiolex utilization. And I think the takeaway that I highlighted, that the utilization's been contained within the target set of physicians, within the targeted set of patients. And then, you know, those with the rare refractory, upon appeal or peer-to-peer, are ultimately getting through. And I think our discussions with the payers, as we dialogue around this utilization, is, what's the PA accomplishing it? How do they think about broader coverage? And it all anchors around what I heard recently in an advisory board that the managed markets team had with about a dozen commercial payers and Medicaid was that there's a tremendous value proposition for Epidiolex in this patient segment, these patients with uncontrolled epilepsy. So, I think that it's a winning proposition for all parties, as we look to 2020.

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Serge D. Belanger, Needham & Company, LLC, Research Division - Senior Analyst [72]

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Okay. And then, I think in your prepared comments you talked about the TSC Phase III dataset kind of establishing a broad usage role for Epidiolex. You know, by mid '20, you should have the label expanded to the -- will include DS, LGS, and TSC. How do you go beyond those three indications to a broader role? Is there a regulatory strategy to get there, or is it going to be driven by payer coverage?

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Darren S. Cline, GW Pharmaceuticals plc - U.S. Chief Commercial Officer [73]

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Well I think from a commercial perspective, having that TSC label expansion will be as tremendous for the brand as the addressable patient population. You know, commercially we won't promote outside of that label, but you know, if you look at ONFI, and I talked about this in my remarks, in the last year of their exclusivity, you know, there are a lot of patients on that drug. And I think if you look at Epidiolex and the profile of this within the epilepsy community, it bodes very well for us. And I won't comment on the additional regulatory -- you know, we talked about the Rett later, but I think just these three and these uncontrolled rare epilepsies provide us, again, a very compelling proposition for this brand long term.

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Operator [74]

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Your next question comes from the line of David Kideckel with Alta Capital.

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David M. Kideckel, AltaCorp Capital Inc., Research Division - MD of Institutional Equity Research for Life Sciences & Senior Analyst [75]

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Thank you for taking my questions, and congratulations on the quarter. Just wanting to go back to a comment that was made earlier, with now you're moving on to the mid-tier position, about 1,000 physicians to target for Epidiolex. I'm just wondering, from a revenue standpoint and how we should be thinking about that moving into Q4, compared to your top-tier physicians, is this going to require an extensive amount of effort to train and educate these physicians now, given that they're mid-tier, as compared to where the top-tier physicians sit?

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Darren S. Cline, GW Pharmaceuticals plc - U.S. Chief Commercial Officer [76]

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It's Darren, thanks for the question. I think you should think about, again, the dynamic of the launch. We had this tremendous uptake early on by those centers, and even these 1,000 prescribers that are in kind of this next tier, 80% have written. But what they really haven't done now is gone from just the one or two scripts per physician to a broader set of prescribing across their practice, and that's really the focus. So it's not -- it's just additional -- it's not any additional, it's just continued effort of our tremendous sales force around continuing call frequency. And really, it's around education, experience, and access. We continue to educate physicians around Epidiolex and these LGS, Dravet patients. It's getting the experience within their practices, coupled with improved access over time. So the fundamentals in really delivering on this mid-tier are set up for us, we just have to continue to execute.

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Operator [77]

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Thank you, this concludes today's conference, and you may now disconnect your lines at this time. Thank you for your participation.