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GW Pharmaceuticals (GWPH) Q2 2019 Earnings Call Transcript

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GW Pharmaceuticals (NASDAQ: GWPH) Q2 2019 Earnings Conference Call

 August 06, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the GW Pharmaceuticals Second Quarter 2019 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I'll now turn the conference over to Mr. Stephen Schultz, VP of Investor Relations. Thank you. You may begin.

Stephen D. Schultz -- Vice President of Investor Relations

Welcome, all of you, and thank you for joining us today for our second 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; Darren Cline, U.S. Chief Commercial Officer; Chris Tovey, our Chief Operating Officer; Dr. Volker Knappertz, 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, August 6, 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.

Justin D. Gover -- Chief Executive Officer and Executive Director

Thank you, Steve, and welcome to all those who have joined us today. We are once again pleased to report strong sales of Epidiolex in the U.S. While we are still in the early stages of this product launch, our success continues to be fueled by strong market receptivity and demand by U.S. patients, increased prescribing by healthcare providers and ongoing progress in payer coverage determinations. Darren Cline will provide more detail on our U.S. commercial achievements in a moment.

We continue to see significant potential for the growth of Epidiolex. In May, we reported positive results in our Phase 3 trial in patients with seizures associated with tuberous sclerosis complex. We expect to file the sNDA for Epidiolex in TSC with the FDA in the fourth quarter, which should lead to a mid-2020 FDA decision, and if approved, expansion of the market for Epidiolex into this high need patient population of approximately 50,000 patients. Volker Knappertz will provide more color on this and other R&D progress on this call.

Outside the United States, we were very pleased that have reached a positive opinion from the Committee for Medicinal Products or CHMP in Europe recommending the approval of Epidiolex. This European approval is expected in early October and our commercial team is now readying for launch. Chris Tovey will provide an update on our European launch preparations later in this call. Finally on this call, Scott Giacobello, CFO will provide our financial results.

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

Darren S. Cline -- U.S. Chief Commercial Officer

Thank you, Justin. I am pleased to be presenting results to you for the first time as GW's U.S. Chief Commercial Officer. Epidiolex U.S. net sales were $68.4 million in the second quarter and $101.9 million in the first half of 2019. We are very pleased with these results and encouraged by the uptake in the first eight months since launch. The patients, caregivers and payers all continue to show strong support for Epidiolex, which is building a very solid foundation for the brand.

There were several drivers for the significant uplift in revenue in Q2. First, continued strength and new patients starts. Second, completion of the transitioning of the expanded access and open-label expansion patients to commercial status. Third, high patient retention and lastly, continued strong payer coverage. Since launch over 12,000 patients have received Epidiolex, up from over 7,600 through the end of March, over 2,500 physicians have written a prescription for Epidiolex, an increase from 1,900 at the end of March.

We continue to be impressed with patient and physician excitement for Epidiolex, and look forward to continued revenue growth through the second half of the year. The impressive early uptake seen in Q1, which was driven by pent-up demand and the EAP and OLE transition to commercial products, did extend further into the second quarter more than we had anticipated. The retention rate for these early patients is high, which also contributed to the strong Q2 numbers. With that said, during the quarter, we did see the beginning of a transition to more organic new patient identification and subsequent new patient starts. This is to be expected as physicians are in the phase of evaluating their experience with the product. Moving forward, we expect to see a healthy rate of new patients starts, which we think will be more consistent with other successful analog product launches.

Physicians continue to titrate Epidiolex in line with the label guidelines. They typically start at 10 milligrams per kilogram per day at the beginning of the dose window, and remain at that dose to assess efficacy and tolerability before determining whether to titrate up to a higher dose. While still early in the launch, we observed patient dosing increased slightly during the quarter. The average dose, however, remains at the lower end of the dose range, which is to be expected during early physician use of the product. As a broader set of physicians get more experience using Epidiolex, we expect doses to escalate as physicians aim to maximize efficacy while managing tolerability.

As we mentioned in the previous quarter, we'd observed higher adult utilization than anticipated. This remained true during the quarter with an approximate 60% pediatric and 40% adult utilization mix. We believe this higher than expected adult utilization bodes well for the longer-term. Market research conducted during the quarter was very positive. Epidiolex aided awareness for LGS and Dravet is nearly 100%, while unaided awareness is roughly 75%. Three quarters of the physicians expect to increase their usage in the future, while Epidiolex caregiver satisfaction is outpacing other products in the LGS and Dravet syndrome class. These market research metrics provide us confidence in the brand and as long-term performance.

During the launch period as our sales team has been engaging with customers, we have continued to update our healthcare and prescriber targets. As a result, the target prescriber universe has increased from 5,000 at the time of launch to approximately 6,000. We think this increased number of targets adds to the potential for the brand with 2,500 prescribers already having patients on product just eight months into the launch, representing 40% of the new 6,000 target number. We are excited by the prospect of both those existing prescribers increasing utilization, as well as by the opportunity for the remaining 3,500 to start gaining experience with the product.

Our commercial execution continues to be a major focus in building Epidiolex into a leading brand in the field of epilepsy. Our sales and marketing teams launch several new resources around disease education and patient identification. The resources focus on how the diseases evolve, including the seizure types and how they present to the healthcare professional as the patients age and enter adulthood. Our sales force continues to reach key epilepsy centers and targeted healthcare professionals. We continue to see high interest in our speaker programs and other customer focused initiatives. As I mentioned earlier, I believe these programs are all having a positive influence on our launch dynamic.

Turning now to payer coverage in the U.S. One of the early catalysts for the strong launch results has been our payer execution. Our current payer mix is approximately 45% commercial, 40% Medicaid and managed Medicaid and 15% Medicare and other. Approximately 93% of all commercial Medicaid and Medicare lives in the U.S. now have a coverage determination, of which, 65% are prior authorization to indication or less restrictive. As to be expected, our priority for the first year has been to ensure smooth patient and physician access for Dravet and LGS to the labeled indication. And we believe that these efforts have been highly successful.

We do of course understand that there are patients with other rare and refractory epilepsy types, many of which were studied in our EA program with serious unmet medical needs that are interested in accessing Epidiolex. We are educating working with payers to assist in their assessment for appropriate patient access, but this one evidently takes time. Overall eight months into the launch of a new branded treatment, we consider the current payer approach to be as constructive as can be reasonably be expected and increasing access further will of course continue to be an area focus in the months and years ahead.

Our specialty pharmacy and distribution partners are an important component of our launch. Our medium time to fill a prescription was approximately two weeks during the quarter and we expect this to hold steady moving forward. I am pleased with how our specialty pharmacy network is delivering. This network continues to serve our physician and their patients and families in an expedited fashion.

In closing, having settled into GW over these last three months, I'm very impressed with the company, the commercial team and this brand. As I've gotten out in the field to speak with physicians, patients, caregivers and the wider epilepsy community, I'm struck by the level of excitement and conviction that access for Epidiolex. The patient's stories that have been communicated to me and my team invigorate us all and keep the focus and passion for assisting as many patients as possible that can benefit from what we all believe is an exciting breakthrough treatment within the field of epilepsy.

Now I'll turn the call over to Chris to discuss our progress in Europe. Chris?

Christopher John Tovey -- Chief Operating Officer

Thank you, Darren. In Europe, we were very pleased to have received the positive opinion from the CHMP just over one week ago. Formal EU approval is expected to occur in early October. This is wonderful news for those European patients and families across Europe that had been waiting for access to a fully regulatory approved CBD medicine, one that has all the elements of a modern medicine and they and prescribing physicians can have confidence in.

Similar to the U.S. pre-launch awareness of Epidiolex is very high in both the physician and patient communities. Clinicians have reported that patients in their clinics frequently ask for CBD. These European clinicians are of course very familiar with the experiences of their U.S. colleagues since the U.S. launch and excited about the imminent arrival of Epidiolex into their practices. Once we have EU approval and product in the supply chain, we expect the first two launches to take place in France and Germany. The U.K. launch is expected once NICE is completed the health economic assessment, a process that is already well advanced and for which we expect a conclusion soon after approval. Continuing on, 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 pre-launch pricing and reimbursement discussions with the authorities in all the major markets.

The GW European commercial organization is now in place and ready to support these launches with country and medical leads and a team of 17 MSLs having been in place now for some time in the major five European markets. Newly recruited sales professionals in Germany and France, many of them with prior epilepsy and specialized disease experience are now undergoing comprehensive training. Whilst the staffing model is different from that in the U.S., it reflects the opportunity of a more concentrated specialist epilepsy prescribing base of about 1,600 key clinicians. We continue to connect with the key physician communities in all the major markets through high profile exposure of Epidiolex data, key national and international medical congresses and through other medical meeting opportunities.

As was the case in the U.S., we initiated an early access program for Dravet syndrome and Lennox-Gastaut syndrome, so that appropriate patients could obtain access prior to anticipated approval. This program was only initiated at the end of 2018 and now numbers an impressive 800 plus patients registered across the five major European countries. As a result, we're launching into an environment where a large number of clinicians have already developed important clinical management experience with Epidiolex. We have confident that this experience will prove to be a strong starting point and will aid in support sharing among the practitioners, as they learn to introduce this new medicine into their clinics.

Moving away from European commercialization, our global commercial, manufacturing and supply chain, which also falls under my responsibility continues to run smoothly and we're confident that our capacity is more than sufficient to meet requirements in both the U.S. and Europe. In addition, our longer term future capacity manufacturing expansion plans are on track to service what we expect to be robust long term demand.

Thank you. And let me now hand the call to Volker for his update.

Volker Knappertz -- Chief Medical Officer

Thank you, Chris, and good day everyone. As Chris reported on July 25th, the CHMP adopted a positive opinion recommending the granting of a marketing authorization for Epidiolex in Europe. I would like to thank and congratulate my colleagues for achieving another important regulatory success.

In May, we reported positive Phase 3 trial data for Epidiolex and the treatment of seizures associated with tuberous sclerosis complex. We are excited about expanding the Epidiolex label to TSC and remain on track to submit supplemental applications to the FDA by the end of this year with the EMA submission to follow soon after. We believe that the TSC indication will be important for the evolution of Epidiolex in the market, because it will add a third childhood-onset drug resistant form of epilepsy to the label that involves seizure syndromes and types associated with TSC that are not typically associated with LGS and Dravet syndrome.

Beyond our Epidiolex program for seizures associated with syndromes, we have recently begun recruiting patients into a placebo-controlled Phase 3 trial in Rett syndrome, while some Rett patients also experience seizures in this trial, we have focused our investigation on the non-seizure aspects of the disease. Children with Rett syndrome exhibit a broad range of symptoms ranging from mood and behavioral symptoms to movement disorders, breathing problems, communication loss and deficits in cognitive development. Therefore, we see this trial not only as assessing the efficacy and safety of Epidiolex for the treatment of Rett syndrome specifically, but it will also serve as an important source of information on the potential for CBD and indeed other related cannabinoids on many of the symptom complexes that are common to several severe neurodevelopmental disorders outside of epilepsy and are also commonly seen in patients with autism spectrum disorders.

Beyond Epidiolex, the next pipeline asset for which we are advancing plans for U.S. approval and launch of Sativex. As a reminder, Sativex is a standardized botanical extract, including both CBD and THC as well as other cannabinoids and non-cannabinoid plant components. The product is already approved in over 25 countries outside the United States in the treatment of spasticity due to multiple sclerosis. Following our meeting with the FDA several months ago, we are preparing to initiate an additional Phase 3 placebo-controlled trial later this year, which is expected to enroll approximately 450 patients. This trial will supplement positive data from three European Phase 3 trials and is intended to address FDA's preference for primary endpoint that focuses directly on the physical manifestations of spasticity. To compliment this trial, we are also initiating two small mechanistic studies of about 35 patients each in this indication.

Our recent work with experts from the MS field highlighted that there is significant interest in a novel cannabinoid treatment option as there have been no new oral anti-spasticity treatments developed in the field for over 20 years. Moderate to severe spasticity is a common feature effecting over 35% of MS patients. The goal for MS spasticity management are to sufficiently relieve spasticity in order to increase mobility, ensure comfort, and prevent complications without weakening the muscles, while maintaining adequate tone to support activities of daily living.

Additionally, important treatment goals are the reduction of muscle spasms, which are often painful, as well as improving bladder and bowel function. Sativex brings a novel mechanism of action to the spasticity space, where there continues to be a real need for new therapies. We see potential for Sativex to be a pipeline in a product representing a potentially very valuable asset in the portfolio.There's the opportunity to expand its use over time, not only within the field of spasticity but to other neurological and psychiatric conditions. In parallel, but advancing the MS spasticity program, we are actively developing plans for subsequent indications and look forward to sharing those with you in due course.

Our CBDV program continues to progress in the field of autism spectrum-related disorders. A company-sponsored, open-label study in autism, which will include approximately 30 patients is due to begin enrolling patients toward the end of the year. Another investigator led 100 patients placebo-controlled trial in autism spectrum-disorder has been actively recruiting since earlier this year and in addition, an open-label study in Rett syndrome with seizures has recently commenced.

Separately, we are also advancing our program in Neonatal Hypoxic-Ischemic Encephalopathy. NHIE is acute or sub-acute brain injury resulting from deprivation of oxygen during birth or hypoxia. GW estimates 6,500 to 12,000 cases of NHIE to occur in the United States each year. Of these 35% are expected to die in early life and 30% are expected to develop persistent neurologic disability. There are currently no FDA approved medicines specifically indicated for NHIE and GW has received Orphan Drug Designation and Fast Track Designation from the FDA for CBD for the treatment of this condition. We have completed a Phase 1 trial under an IND of the intravenous CBD formulation of healthy volunteers and GW now expects to commence a safety study in neonates in the fourth quarter this year. They are multiple additional pipeline programs in development and we expect to provide more information regarding the pipeline to you later this year.

Thank you. And let me now hand the call to Scott Giacobello to provide the financial review. Scott?

Scott M. Giacobello -- Chief Financial Officer

Thank you, Volker, and good afternoon. I'll provide some high level comments on financial results for the quarter and six months ended June 30th, 2019. A more detailed discussion of results will be provided in our 10-Q to be filed with the SEC later this week. I'll start with revenue. Total revenue for the quarter was $72 million, an increase of $68.8 million from the prior year quarter. This increase is due primarily to Epidiolex U.S. net sales of $68.4 million in the quarter. Cost of sales amounted to $6.6 million or 9% of net product sales, compared to $1.8 million or 58% 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 is 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 broadly in line with the previous quarter at $32.5 million. This represents a decrease of $12.6 million from the same period in 2018. This decrease is mainly due to cost-related Epidiolex growing and inventory build prior to approval, which were expensed as incurred in the prior year. Following approval, these costs are now capitalized in inventory.

Turning to SG&A. Selling, general and administrative expenses for the quarter increased to $62.3 million from $37.8 million in the same period in 2018. This significant increase is primarily the result of the build out of our commercial operations in both the U.S. and Europe and cost-related to the launch of Epidiolex in the U.S. The second quarter spend represents an increase $7.2 million over the previous quarter. During the second quarter, we closed on the sale of our Priority Review Voucher for $105 million. The net proceeds from this one-off transaction of $104.1 million, where recognized as a gain on the sale of an intangible asset within other non-operating income. This is all resulted in net income for the quarter of $79.7 million, compared to a net loss of $84 million in the prior year quarter. Excluding the sale of the Priority Review Voucher, net loss for the quarter would've been $24.4 million.

Moving to cash flow. Net cash used in operating activities for the six months ended June 30th amounts in $89.9 million, compared to $98.3 million for the prior year period. Net cash provided by investing activities for the six month period was $80.6 million, reflecting the proceeds from the sale of the Priority Review Voucher. Capital expenditure for the period amounted $23.5 million, compared to $15.7 million for the prior year period, reflecting continued investments in the expansion of our cannabinoid production facilities. The resulting net decrease in cash and cash equivalents for the six-month period amounted to $7.8 million. At June 30th, we held cash and cash equivalents of $583.7 million.

Turning to guidance. We continued to expect operating expenses for the year ended December 31st, 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 investments in our R&D portfolio. We anticipate capital expenditure in the range of $35 million to $45 million related mainly to manufacturing expansion.

Thank you. And I'll now turn the call back to Justin.

Justin D. Gover -- Chief Executive Officer and Executive Director

Thank you, Scott. In closing, we continue to be very excited about the U.S. launch experience with Epidiolex to date. With all key growth drivers evolving as planned and we look forward to launching in Europe later this year. In parallel, with commercial execution, we continue to invest in order to maximize the Epidiolex opportunity, these investments into new indications as well as additional formulations and other measures to broaden exclusivity protection.

Beyond Epidiolex, we believe that GW is uniquely positioned to continue on a 20-year leadership in the development and commercialization of cannabinoid medicines. It is clear that the potential of cannabinoids as therapeutics is not widely appreciated across the world by patients, the medical and scientific community and by governments. We are committed to advancing our pipeline to bring to market a series of additional novel prescription cannabinoid medicines that make a positive difference to patient lives and believe that this can result in continued 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.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Tazeen Ahmad with Bank of America.

Tazeen Ahmad -- Bank of America Merrill Lynch -- Analyst

Hi, good afternoon. Thanks for taking my questions. So Justin, one question from me. You've now completed your second quarter of sales -- full quarter of sales for Epidiolex, you've got north of 100% upside from what you reported in the first quarter. I guess, what prevents us from thinking that this trend would continue, why wouldn't you have another quarter on 3Q where you haven't another 100% upside, for example, from here, given that you're in the early innings of a launch? And maybe tied to that, how are you thinking about potentially providing sales guidance for Epidiolex to help Analysts kind of get a sense of what a realistic ramp might be? Thanks.

Justin D. Gover -- Chief Executive Officer and Executive Director

Hi, Tazeen. Thank you for that invitation to comment on expectations. I mean, I think clearly, obviously, Q1 and Q2 has been reflects a great launch experience and I think, as Darren said in his remarks. We recognize that a lot of this great start has come from the high level of awareness, and early demand coming from patients. But as we move into the second half of this year and beyond, we enter into a more normalized state when it comes to the development of commercialized assets. And I think it's really important that -- we see that and we would ask you and investors to recognize that, that has to happen at some point in time.

And so, as you can tell from the remarks, we're confident about the future. But I think we do need to make sure that investors understand that, that we're entering into a different phase, which I think is only inevitable now that we're eight months into the launch. With regard to guidance, there's no expectation of setting guidance at this point. We're still getting a feel for this market ourselves. And then with TSC coming on board as well, I think at this point and even looking into that TSC indication, it would be unwise in all of you to be predicting today when we're going to guide.

Tazeen Ahmad -- Bank of America Merrill Lynch -- Analyst

Okay. Thanks for that color. And then maybe a question on the dosing. You talked about how most patients are still on the lower dose, but for those who have been moved up to the higher dose on average, are you getting a sense for how long doctors wants to keep patients on that lower dose before moving them up?

Darren S. Cline -- U.S. Chief Commercial Officer

Hey, Tazeen, it's Darren. Thanks for the question. I think it's still early. In the eight months, since launch, doctors are prescribing Epidiolex, they're trying to understand the dose, managing tolerability, understanding efficacy. And my experience is, we need a little bit more time away from launch before we start to see it settle out, but what we see are encouraging. I think it's encouraging on a couple of fronts. One, for the patient and physician experience, kind of that -- lower kind of understanding of the product, and also two, I think from payer coverage perspective from our LGS and Dravet. They understand the benefit of this. So I think we're pleased with what we're seeing, but it's a little too early to comment.

Tazeen Ahmad -- Bank of America Merrill Lynch -- Analyst

Okay. Thanks guys.

Operator

Our next question is from Salveen Richter with Goldman Sachs.

Mariana Brightman -- Goldman Sachs -- Analyst

Yes. Hi. Thank you for taking the question. This is Mariana Brightman on for Salveen, and congrats on all the progress. I had a quick question on -- you're talking about very high compliance rates and I was wondering if you could provide some more color on that and how it compares to the clinical trials? And another question that I had is, do you expect the similar sort of mix between the adults and the pediatric patients in new European launches. Thank you.

Justin D. Gover -- Chief Executive Officer and Executive Director

Yeah. Regarding the compliance rate, again, I think it's a little bit too early, we'll understand a little bit more as we get farther away. But we're pleased with what we hear anecdotally from the field. And again, I think this kind of measured approach to dosing is providing good outcomes for patients. I think the second part of the adult pediatric mix, while we -- it's better than we anticipated. I think at farther, we get away post launch, we may see a more equivalent around adult pediatric, but it's too early to tell right now. Chris, do you want to comment on Europe?

Christopher John Tovey -- Chief Operating Officer

Yeah, thank you, Justin. I think in Europe, we're more likely to see a higher pediatric adult split. So I think particularly in the early days of the launches in Europe, the children will be prioritized. So I think we'll see a higher pediatric adult split in Europe.

Mariana Brightman -- Goldman Sachs -- Analyst

Got it. Thanks a lot.

Operator

Our next question is from Cory Kasimov with JPMorgan.

Cory William Kasimov -- JP Morgan -- Analyst

Hey, good afternoon guys. Thanks for taking the question, and congrats on the continued great launch. I wanted to follow-up with this first question in the AED, this bolus effect, I mean you talked about this in your last quarterly call, which was in May. So I mean pretty far into 2Q, and but now you're thinking this continued into 2Q. So I'm not full -- I'm not sure I fully understand the dynamics here and how we should be thinking about this in the context of the prints you put up today. Are you currently seeing more of a steady run rate in terms of patient, or is this something you're expecting to start to see?

Darren S. Cline -- U.S. Chief Commercial Officer

Hey, Cory, it's Darren. Yeah, I think that we are starting to see a more -- if you look at other AED launches, this bolus impact with such high awareness, as Justin pointed out, the pin up demand, the tremendous interest in the OLE and the EAP and those patients transitioning to commercial. If you kind of look at those through 2Q and then you look at other kind of that starting point. And look at saying on Onfi launch, I think we're starting to see more this organic patient identification and our acquisition and patients starts. So we are starting to see that. But I still thrilled and pleased with what the uptake, the interest in the product, our prescriber base expanding. So we're very pleased with the start and but you'll start to see this kind of organic growth moving forward.

Cory William Kasimov -- JP Morgan -- Analyst

Okay. And then...

Justin D. Gover -- Chief Executive Officer and Executive Director

Cory, I'll just add. I think by definition and you can only have launch bolus once, and I think it probably extended a little longer than we expected in Q2. But at some point, right, it just has -- we have to normalize.

Cory William Kasimov -- JP Morgan -- Analyst

Right, no, totally understand that. Do you have any qualitative commentary on how much that positive TSC data may have impacted the back half of the quarter in terms of some potential initial spontaneous use if at all?

Justin D. Gover -- Chief Executive Officer and Executive Director

No. I don't think, we've not -- at least, we're not aware that the TSC data has impacted the current quarter.

Cory William Kasimov -- JP Morgan -- Analyst

Okay. And then one question on Europe, if I can. Can you just talk about a little bit on that CHMP opinion, the characterization of Epidiolex as an adjunctive therapy to clobazam over there? I mean, what kind of -- what drove that differential label versus what you have in the U.S.?

Volker Knappertz -- Chief Medical Officer

Yeah. Hi, this is Volker, Cory. Thank you for the question. As a practice, we really don't want to wish to comment in public on the details of all regulatory interactions. But it's important for you to know that we think that the FDA interpretation of the data, which is essentially the same data that was reviewed there and the improved indication in the United States is the correct one. So that said, different labels are not uncommon between the U.S. and Europe. And we believe that we have a very good opportunity with the TSC application in Europe to obtain an indication statement, which does not reference clobazam. So we will be keeping our eye on moving toward the end of the year toward fighting than around years in TSC also in Europe. And I think that will move us into an opportunity to have that labeling there.

Cory William Kasimov -- JP Morgan -- Analyst

Okay. It makes sense. I appreciate you taking the questions.

Operator

Thank you. Our next question is from David Lebowitz with Morgan Stanley.

David Neil Lebowitz -- Morgan Stanley -- Analyst

Thank you very much for taking my question. I guess given the higher proportion of adults than you had initially expected coming onto therapy. Has that, I guess changed the way you're marketing the product to physicians going forward?

Justin D. Gover -- Chief Executive Officer and Executive Director

Yeah, thanks for the question. At launch, we were focused on both pediatric and adult epileptologist as well as child neurologist. They were key physicians that treat these LGS and Dravet patients. But we are -- there is interest with general neurologist and I think if you look at these diseases, as patients' transition from young -- from children to young adults. We're starting to experience that phenomenon. So it doesn't really change our messaging other than we launched a few initiatives in the quarter just around diagnosis. What it looks like for these patients that to grow into adulthood.

And then again, that toppled with a broader neurology target physician expansion. I think just organically our messages will stay the same around the efficacy and tolerability of Epidiolex to benefit the needs of our patients.

David Neil Lebowitz -- Morgan Stanley -- Analyst

Thank you for that. And additionally, on the distribution network, clearly, it seems a lion's share is coming from the specialty pharmacies. How does -- how is the breakdown now between the specialty pharmacies and the Epidiolex Engage Hub?

Justin D. Gover -- Chief Executive Officer and Executive Director

Well, we -- yeah, I think we're pleased with our distribution network the way that we haven't set it up, specialty pharmacies playing a key role. We've expanded it since launch to meet the needs of the patients and physicians in their community. And we're really very pleased with how we're operating.

David Neil Lebowitz -- Morgan Stanley -- Analyst

Thanks for taking my questions.

Operator

Our next question comes from Paul Matteis with Stifel.

Paul Andrew Matteis -- Stifel, Nicolaus and Company -- Analyst

Great. Thanks so much and congratulations on all the progress. I wanted to ask a one question about patient adds in the quarter, and one question on pricing going forward. On patient adds from our back of the envelope map, it looks like patient adds may have accelerated last quarter, even go less of the -- a smaller proportion came from the EAP. Is that correct? And maybe you could comment on what you've been seeing into delay, where IMS scripts look very good.

And then secondarily, on pricing, you had commented on $32,500 as your expectation for this year later, you commented that the average dose had been lower, but now it looks like, there's a greater proportion of adults, what should we expect there going forward? Thanks so much.

Justin D. Gover -- Chief Executive Officer and Executive Director

Yeah, I think on the patient adds, I wouldn't breakout EAP allow the new adds at this point. Just know that, we have healthy robust patient adds. Pricing, we don't think it will exceed the $32,500 average price, granted, we did comment that the dose is at the lower end. And we do see a slight movement upward. But again, we view this as positive for patients and physicians. And they're having favorable outcomes, they're able to understand the efficacy and tolerability. And again, on the payer side, having honest kind of dialogue around what the utilization is and pricing, we feel we're in a good spot as it relates to price.

Paul Andrew Matteis -- Stifel, Nicolaus and Company -- Analyst

Okay. Thanks. If I could ask one more quick question on reimbursement. I think you said 65% of what are mostly covered lives are either prior off to indication or even less lenient. Can you breakout? I don't know, if you're willing to subset that are more lenient than the label at this stage and how that's been tracking in your payer conversations?

Justin D. Gover -- Chief Executive Officer and Executive Director

Yeah, again, we're pleased with the payer coverage. There's kind of this escalation if you will from more restrictive to a little bit more open. We're not breaking out what that looks like at this point. But I think if you look at the execution around Dravet, LGS, we find the payer community to be very, very favorable to those -- to that utilization there. So we're very pleased with it.

Paul Andrew Matteis -- Stifel, Nicolaus and Company -- Analyst

Okay. Thanks a lot. Congrats, again.

Operator

Our next question is from Phil Nadeau with Cowen and Company.

Philip M. Nadeau -- Cowen and Company -- Analyst

Good afternoon. Thanks for taking my questions and congratulations on the launch. First question is on, just follow-up on the IQVIA data. Do you have a sense of how accurate it is? It does look like, for example, NRX don't show any signs of a bolus going through July. So I'm curious what you think of the IQVIA trends and quantitative data.

Justin D. Gover -- Chief Executive Officer and Executive Director

Yeah, thanks for the question. As we said on our remarks, we saw a big influx of patients in the first six months of launch, but it's inevitable that the growth pattern in new patients will evolve to a rate that's more consistent with other successful launches in the category. And we're not concerned with this and indeed it happened later in the launch than we originally expected. But I do think having this bolus occur immediately at launch has created a very solid patient base for us. Well beyond, what we've seen in other successful AED launches. There's clearly considerable room to grow the brand in the future, highly valuable medicine that Epidiolex had and we're very much at the beginning of the commercial journey.

I think that if you look at the revenue that the launch bolus can't last forever. You'll start to see as we get farther away that data, while you can't predict it on a month-to-month basis, but over time, depicts a pretty good picture of demand and total non-prescriptions.

Philip M. Nadeau -- Cowen and Company -- Analyst

Perfect. That's helpful. Second, on inventory, do you know where channel inventory stands today?And was there any inventory built during Q2?

Scott M. Giacobello -- Chief Financial Officer

Yeah, Phil. It's Scott. We don't comment on channel inventory. So I don't really have any, but I would say no significant build from quarter-to-quarter.

Philip M. Nadeau -- Cowen and Company -- Analyst

Got it. Okay. And then last question for me is on persistence. In your prepared remarks, you suggested that it's trekking somewhat ahead of where you thought it was going to be. Can you give us some sense of where persistence is today and where do you think it'll normalize to over time?

Darren S. Cline -- U.S. Chief Commercial Officer

Yes. We're not -- again, not providing any color on that, just a little too early for us to provide any metric around that.

Philip M. Nadeau -- Cowen and Company -- Analyst

Great. Thanks for take my questions.

Operator

Our next question is from Marc Goodman with SVB Leerink.

Marc Harold Goodman -- SVB Leerink LLC -- Analyst

Yeah, a few, first of all, on Epidiolex. Can you give us a sense of what the gross to nets are? And second, you talked about some market research, obviously there's some anecdotal information from the field that you can just give us a sense of, what percent of the business those patients are Dravet versus LGS versus other if you have any sense of that? I know that you don't get that information, but maybe from the market research that you're doing now, you might have that. And then secondly on Sativex, can you tell us what exactly is the primary endpoint in the key study here and are there any secondary end points that are key to FDA or for commercializing the product? And you mentioned these other trials, the smaller trials. Can you just give us more color with the purpose of those are? Thanks.

Scott M. Giacobello -- Chief Financial Officer

Hey, Marc, it's Scott. I'll take the first one on gross to net. And thanks for the question by the way. We have not disclosed the gross to net percent at this point. What I can say is, eight months into the launch and overall we're where we expect it to be from a gross to net perspective at this point. As Darren mentioned, 93% of commercial Medicaid and Medicare lives have a coverage determination and we've been able to achieve this through a limited number of contracts. The channel mix is still settling as we're eight months in. But I would reiterate that we're where you're expected to be at this point from a gross to net perspective.

Darren S. Cline -- U.S. Chief Commercial Officer

Hey, Marc, it's Darren. Regarding the market research and the breakdown, it's just not something we're providing at this point. And Volker, I think you have it.

Volker Knappertz -- Chief Medical Officer

Yeah. So regarding Sativex -- thank you Marc for your interest in this. So we are initiating in the ensuing weeks and months, three studies, as we said in the prepared remarks, two of them are mechanistic studies. They're smallish in nature, but very precise with regards to looking at the cardinal symptoms that is common to odd specificity, which is really the hypertonia of the muscle and some other features that are sort of neurological in nature. And we're looking at the direct effects in more of a laboratory type of setting in these mechanistic studies, which I think are going to be critical for our discussions with the regulatory agency in the United States.

Regarding the primary endpoint for our Phase 3 study, we have looked back at our three positive studies in MS spasticity and from the cardinal core symptoms and features of MS spasticity, which FDA wants us to focus on. We selected the spasm and spasm frequency as the primary endpoint. This is something we're quite comfortable with. We've used this before in clinical trials and the prior data is quite supportive of this endpoint.

Marc Harold Goodman -- SVB Leerink LLC -- Analyst

Thanks.

Operator

Our next question is from Esther Rajavelu with Oppenheimer and Company.

Analyst -- -- Analyst

Yeah. Thanks.

Operator

Our next question is from Esther Rajavelu with Oppenheimer and Company.

Esther P. Rajavelu -- Oppenheimer and Company -- Analyst

Good morning or good afternoon. Thank you for taking my questions. Based on the prescriptions that have come to this quarter, how many vials does each script equate to on average? And how much of attain have you seen in the vials per script from 1Q to Q2?

Justin D. Gover -- Chief Executive Officer and Executive Director

Yeah. This is Justin. We're not giving that level of granularity. Obviously, as time moves on, the average number of vials in a prescription goes up, as those things go up. So it has increased, but we're not yet at a stage where we can give you that number.

Esther P. Rajavelu -- Oppenheimer and Company -- Analyst

Got you. And then I'm going to ask the pricing question a little differently. Someone else had asked this before, but where are you netting on price per patient now relative to that annual guidance of 30 to 500 when you launched?

Justin D. Gover -- Chief Executive Officer and Executive Director

It's another way of asking your first question. Of course, you do have a price per bottle, the only price of course there is for the product. So, we are guiding, the dosing is at the lower end of the dose range. You've got 40% adult, so you have to await these drugs. So frankly, I feel like we're giving you enough information to be able to sort of try to understand this dynamic, but I'm afraid we're not giving you more detail.

Esther P. Rajavelu -- Oppenheimer and Company -- Analyst

Got you. Thank you.

Operator

Our next question is from Yatin Suneja with Guggenheim Partners.

Yatin Suneja -- Guggenheim Partners -- Analyst

Hey guys, congrats on a great launch. Just two questions for me. First, could you just comment on the size of the European market? How big that is relative to the U.S. in light of the add on label you have? And then I have a follow-up.

Justin D. Gover -- Chief Executive Officer and Executive Director

Chris?

Christopher John Tovey -- Chief Operating Officer

Yeah. So I think we said in the past, the European market is about -- there's about a quarter to a third of the U.S. market. I think, in terms of the European label that we've got now from the positive opinion of a week or so ago, we're not seeing that opinion and that label has much of an impact on our expectations for European business. It's important to know that what we've done so far in analysis is, we don't see it'll impact pricing reimbursement. And I think everybody's aware, Europe's successes is largely predicated on pricing reimbursement. And what we know from this physician community is that, they've been using clobazam extensively for nearly 25 years. It's generic in Europe and they have very comfortable chopping and changing their therapies and therefore the use of clobazam, so a very limited impact.

And obviously with the TSC application in Europe, we're optimistic that we've got a good opportunity to obtain an indication statement, which doesn't include any clobazam reference. So Europe about a quarter to a third of the U.S. and we don't think the label has much of an impact.

Yatin Suneja -- Guggenheim Partners -- Analyst

Got it. Thanks. And then just following up on the TSC data, I think you are going to present full data at some point, but could you comment on whether you were able to look at some of the cognitive and behavioral related benefits now that you have more time to analyze that data?

Darren S. Cline -- U.S. Chief Commercial Officer

Yeah. So we are just getting to some of those exploratory endpoints within the TSC study. So we have not seen the full data, but keep in mind that these studies were designed to really focus on patients with high seizure frequency. If I recall, these patients on average had about 56 or so seizures per month. And it really overwhelmed any other signal you can see. So we have chosen now, as I said in my prepared remarks in Rett for example, to really focus on the non-seizure aspects. And I think you need to really understand that the confounding by the seizures and the effect of the seizures and the seizure reduction is probably so large that those data will not be guiding us very strongly.

However the Rett and the non-seizure aspects of Rett that we're really focusing on here now in next Phase 3 study will help us really understand mood, behavior, cognitive development aspects where we specifically designed also to longer treatment periods to assess these. So, we'll be reporting that separately as we have a better understanding on these exploratory endpoints in TSC. But really this was a seizure focus study also by it's duration, and just want to manage your expectations on that endpoint to other programs, really assess and cognitive function and neuro cognitive development.

Yatin Suneja -- Guggenheim Partners -- Analyst

Great. Thank you very much.

Operator

Our next question is from David Kideckel with AltaCorp Capital.

David M. Kideckel -- AltaCorp Capital -- Analyst

Hi. Good afternoon, everybody. Congratulations on the quarter and thanks for taking my call. Just a couple of questions here. Firstly, I'm just curious with the Epidiolex patients that you're seeing physicians prescribe drug to. Would you say that most or is there a material number of patients that are physicians prescribing Epidiolex too that are currently on other medications or are these altogether newly identified and organically grown patients.

Darren S. Cline -- U.S. Chief Commercial Officer

Yes. I think our experience -- I think if you look at the clinical trial is pairing out in the commercial where -- these patients have three or four potential therapies that they could be, have had or co-administered with Epidiolex.

David M. Kideckel -- AltaCorp Capital -- Analyst

Okay. Thank you. My next question has to do with the so called refractory epilepsies or we're using Epidiolex in other conditions, not necessarily associated with LGS or Dravet. Can you maybe just comment on not the numbers of patients in this category, but do you see, I guess qualitatively are the payors willing to reimburse Epidiolex for the so called refractory epilepsies.

Darren S. Cline -- U.S. Chief Commercial Officer

Yeah. Let me remind you that we only promote on label and really don't have much visibility into diagnosis of others. But eight months into the launch, as I stated, payers have a clear appreciation of the unmet need in DS and LGS and our payer access metrics reflect this for those patients. And at this point of the launch, it's been an absolute priority to execute and provide access for DS and LGS patients. Now we do recognize there are other rare refractory epilepsy patients that may wish to access Epidiolex and were engaged in an ongoing basis with payors as appropriate to help them make responsible decisions for access to these patients in need. And I remind you, and you kind of pointed out that these patients are very sick and in need of new treatment options.

But this early in the launch, one would not expect to see unrestricted access in this broader patient population by the payors. However, we do see some instances already, in both the commercial and Medicaid patients. But over time we do expect Epidiolex to have similar access to comparable AEDs.

David M. Kideckel -- AltaCorp Capital -- Analyst

Thank you. That's helpful. My final question, just shifting gears a bit here to CBDV, and I guess autism spectrum disorders as well as Rett. I'm just curious then for this actual cannabinoid CBDV given that autism spectrum disorders in Rett are quite dissimilar, are they potentially going to be -- is CBDV going to be potentially targeting similar manifestations between both disorders or is it being used entirely to treat different manifestations of autism and Rett?

Justin D. Gover -- Chief Executive Officer and Executive Director

Yeah. So it's still early days in our CBDV autism and Rett development, although we're in Phase 3 in Rett, a lot of the priors are based on other related areas. So I believe, I was trying to make the case that there are of course, substantial differences. Rett is not ASD. On the other hand, they are overlapping features. I think the Rett study will serve multiple purposes, including of course being potentially pivotal trial for the Rett indication. But I think the RSBQ, which is the symptomatic and behavioral scale as I believe 46 items on it. And I think there's a lot of overlap to what we generally consider autism spectrum disorder symptomatology.

And I think we're going to use this in really broadly understanding where we can use this type of pharmacology of CBDV. And we'll mix and match between our learnings from ASD and Rett to really come to that conclusion.

Okay, great. Thanks very much. That's it for me.

Operator

Our next question is from Danielle Brill with Piper Jaffray.

Danielle Catherine Brill -- Piper Jaffray -- Analyst

Hi, guys. Thanks for the question and congrats on the quarter. A few for me. So I know in the past you had said, IMS data missing the top seven dispensing pharmacies. I'm just curious if that's still accurate. And then do you know the average number of refills per patient per quarter? And I know this was asked, but I missed it. What was the gross to net?

Darren S. Cline -- U.S. Chief Commercial Officer

So IMS data does not capture, I think it's still remains what you had stated, a small sample size of total. Second question, refill -- again, we're not providing any level of metric or color on refill or persistency at this point.

Scott M. Giacobello -- Chief Financial Officer

Yeah. And then Danielle, it's Scott. On the gross to net, we haven't disclosed the gross to net percent. What we would say is that we're right where we think we should be at this point in the launch. We have 93% of commercial Medicaid and Medicare lives, which have a coverage determination and we've been able to achieve that at this point through a limited number of contracts. So channel mix is still settling out, but overall we're right where we need to be or where we think we should be from a gross to net perspective.

Danielle Catherine Brill -- Piper Jaffray -- Analyst

Okay. Got it. Thanks so much.

Operator

We have reached the end of the question-and-answer session. I'd now turn the call over to management for closing remarks.

Justin D. Gover -- Chief Executive Officer and Executive Director

Great. This is Justin, just thank you all for your time. And we look forward to updating you on progress and reporting Q3 results and Q4 later this year. So thank you very much for your attention today.

Operator

[Operator Closing Remarks]

Duration: 59 minutes

Call participants:

Stephen D. Schultz -- Vice President of Investor Relations

Justin D. Gover -- Chief Executive Officer and Executive Director

Darren S. Cline -- U.S. Chief Commercial Officer

Christopher John Tovey -- Chief Operating Officer

Volker Knappertz -- Chief Medical Officer

Scott M. Giacobello -- Chief Financial Officer

Tazeen Ahmad -- Bank of America Merrill Lynch -- Analyst

Mariana Brightman -- Goldman Sachs -- Analyst

Cory William Kasimov -- JP Morgan -- Analyst

David Neil Lebowitz -- Morgan Stanley -- Analyst

Paul Andrew Matteis -- Stifel, Nicolaus and Company -- Analyst

Philip M. Nadeau -- Cowen and Company -- Analyst

Marc Harold Goodman -- SVB Leerink LLC -- Analyst

Esther P. Rajavelu -- Oppenheimer and Company -- Analyst

Yatin Suneja -- Guggenheim Partners -- Analyst

David M. Kideckel -- AltaCorp Capital -- Analyst

Danielle Catherine Brill -- Piper Jaffray -- Analyst

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