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GW Pharmaceuticals Plc (NASDAQ:GWPH)

Q2 2014 Earnings Conference Call

May 7, 2014 8:00 AM ET

Executives

Steve Schultz – VP, IR

Justin Gover – CEO

Stephen Wright – Director, Research & Development

Adam George – CFO

Analysts

Ritu Baral – Canaccord Genuity

Tazeen Ahmad – Bank of America Merrill Lynch

Phil Nadeau – Cowen & Company

Joseph Schwartz – Leerink Partners

Lala Gregorek – Edison Investment

Kristina Cibor – Piper Jaffray

Operator

Greetings and welcome to the GW Pharmaceuticals’ Second Quarter 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to turn the conference over to Mr. Steve Schultz, Vice President of Investor Relations. Thank you, Mr. Schultz. You may now begin.

Steve Schultz

Welcome and thank you for joining us on the call today. Again, my name is Steve Schultz and I’m the Vice President of Investor Relations at GW based in the United States. Here with me today are Justin Gover, GW’s Chief Executive Officer; Chris Tovey, our Chief Operating Officer; Dr. Stephen Wright, our Director of Research & Development and Adam George, our Chief Financial Officer.

We hope you’ve had a chance to review our regulatory filings from earlier today. These documents provide additional details of the company’s first quarter financial and operating results. As a reminder, during today’s call we will be making certain forward-looking statements. These statements reflect GW’s current expectations regarding future events, including but not limited to statements regarding financial performance, clinical and regulatory activities, including the regulatory clearance of our products, timing of product launches and statements related to market acceptance and commercial potential.

Forward-looking statements involve risks and uncertainties and actual events could differ materially from those projected herein. A list and description of risks, uncertainties and other risks associated with an investment in GW can be found in GW’s filings with the U.S. Securities and Exchange Commission. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today’s date 7 May, 2014. Finally, an archive of today’s call will be posted to the GW website in the Investor Relation section.

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

Justin Gover

Thank you Steve and welcome to all those who are able to join us on the call today. On today’s call, I will briefly review our recent progress, Dr. Stephen Wright will provide a more detailed updates on our Epidiolex Program and Adam George will provide an overview of our financial results for the quarter. At the conclusion of our prepared remarks, we will open the line for questions.

This past quarter continued to be a very active one for GW and I am pleased to say one in which we advanced both the Epidiolex and Sativex programs through a number of important clinical and regulatory milestones. Just this morning, we announced that the FDA has accepted the Epidiolex IND for Dravet syndrome. Following a successful pre-IND meeting earlier in the year IND is now open and we are now on track for Phase 2 and 3 trials to commence in the second half of 2014.

As a reminder, Epidiolex was granted orphan drug designation by the FDA last November for Dravet syndrome. In addition to Dravet syndrome, we are also advancing plans to develop Epidiolex in the treatment of Lennox-Gastaut syndrome. In the last quarter, GW was granted orphan drug designation by the FDA to treat these condition and we now plan to hold a pre-IND discussions with the FDA in order to confirm the required development program.

In parallel with the formal development activities, GW continues to receive a substantial amount of interest from physicians looking to open expanded access INDs with the FDA in order to commence treatment with Epidiolex. In the last few months, the FDA has authorized significant expansion of both the number of children and the number of clinical sites for the treatment with Epidiolex under these expanded active INDs. Steven will provide more detail on this in a moment.

In addition to this interest from physicians, GW has received numerous inquiries from various U.S. state legislators facing difficult decisions regarding the accessibility of cannabinoid-based products at Epilepsy Children. Two U.S. State governments Minneapolis and Georgia publicly expressed interest in collaborating with GW on separate state-based clinical trials in Epilepsy. These discussions were still in the early stages. However it is encouraging that legislators are taking steps to seek to conduct an appropriate scientific research under FDA authorization with pharmaceutical CBD.

Finally, with respect to Epilepsy, we yesterday announced the appointment of Dr. Ken Sommerville as Vice President of Clinical Science based in the United States. Dr. Sommerville joins GW with a significant record of achievement including over 20 years of experience in the pharmaceutical industry with particular expertise in Epilepsy pain and other areas of neurology. As such, we expect Dr. Sommerville to play an important role in our US clinical and regulatory activities particularly those related to Epilepsy.

Turning now to Sativex. Last month, Sativex received fast track designation by the FDA in the treatment of cancer pain. This designation represents important recognition by the FDA of the potential for Sativex to address significant unmet needs in patients with advanced cancer to whom opioids have failed to provide adequate pain relief. The Phase 3 trial to Sativex in this indication are nearing completion and we remained on track to report top-line Phase 3 data toward the end of this year.

Outside the U.S. Sativex is now approved in 25 countries and is currently available on prescription in 12. End market sales continued to grow with volumes sold by GW’s commercial partners in this quarter increasing by 43% over the prior year. Underlying these achievements is the financial support we received from investors in our successful $100 million follow-on offering in January. Our cash on hand at the end of March was over $159 million which includes these proceeds, allowing GW to invest with confidence in order to advance our Epilepsy program as rapidly as possible. We express our thanks to those investors who participated in the offering and appreciate their support.

Let me now turn the call over to Dr. Stephen Wright for more detail on our Epilepsy clinical program. Stephen?

Stephen Wright

Thank you, Justin. My remarks on today’s call will focus primarily on the Epilepsy program and then briefly touch on other progress in our pipeline. As a reminder and by way of background, GW is developing Epidiolex, a liquid formulation of highly purified CBD extract as a treatment for severe drug resistant childhood Epilepsy. Our initial focus is on conducting formal development programs for Epidiolex in the treatment of both Dravet syndrome and Lennox-Gastaut syndrome, and FDA has granted orphan designation for Epidiolex in each of these conditions.

Our Epidiolex activities fall into two distinct areas. First, a series of FDA authorized physicians sponsored INDs under which Epidiolex is being given to children down to the age of 12 months with a range of treatment-resistant Epilepsy. And second, formal GW sponsored clinical development programs in Dravet and Lennox-Gastaut syndrome.

Looking first at the physician-led INDs. Since January, the number of children authorized by FDA for treatment with Epidiolex has increased from 125 to approximately 300 children. The number of U.S. hospital sites at which theses INDs are approved has increased from 5 to 12. As part of this expansion, the New York University – expect to be total of approximately 80 patients. GW also anticipates commencing an additional Phase 3 trial in Dravet syndrome in early 2015 in parallel with part two of the first Phase 2/3 trial.

In addition to Dravet syndrome, GW is also planning to submit an IND for Epidiolex in the treatment of Lennox-Gastaut syndrome. Having now received orphan designation, we expect to hold a pre-IND meeting with the FDA for Epidiolex in this indication around the middle of this year with the aim being to conduct two Phase 3 trials in Lennox-Gastaut syndrome during 2015 alongside our Dravet Phase 3 trial. All included in the GW’s sponsored placebo control trials will also be eligible to enter a long-term open label study in which more efficacy and long-term safety data will be collected.

I’m often asked about the expected placebo effect in these trials? What existing clinical data would suggest the placebo effect in pediatric Epilepsy studies is in the single-digit to mid-teens percentage range, we have taken to position that in light of very encouraging feasibility for recruitment, it’s prudent to take a conservative usage sample in our studies. Hence we plan for 80 patients in Part 2 of the first Dravet trial and we expect similar sample sizes in our other studies.

We believe that this approach is appropriate to maximize the probability of success, while not materially impacting timeline. In parallel, with the Epidiolex program, GW has a second product candidate in the field of Epilepsy GWP42006 in which the primary component is the cannabinoid CBDV or cannabidivarin.

GW completed a Phase 1 safety trial for GWP42006 and the results indicated that it was well-tolerated even at the highest tested dose. We expect to hold a pre-IND meeting with FDA in the second half of this year with the objective of opening an IND for a Phase 2 proof-of-concept study.

Combined, these two Epilepsy programs represent important product candidates within GW’s Epilepsy franchise that have the potential to yield a variety of individual orphan indications providing GW with significant new market opportunities. These programs are funded completely by GW and we retain all commercial rights.

Beyond Epilepsy, Justin previously commented on the fact that Sativex Phase 3 cancer pain trials remain on track for initial top-line data toward the end of this year. We also progressing the special protocol assessment with FDA for a proposed Phase 3 trial of Sativex in the treatment of multiple sclerosis spasticity. And with respect to our earlier stage pipeline, we have an active clinical program as follows: Phase 2 trial of GWP42003 in the treatment of ulcerative colitis is due to report top-line data in the second half of this year. Phase 1b/2a trial of GWP42002 with GWP42003 in the treatment of glioma is ongoing with safety data on an initial cohort due this year.

We recently started randomizing patients into Phase 2b trial GWP42004 in treatment of type II diabetes and also into a Phase 2a trial of GWP42003 in the treatment schizophrenia. In addition, to these clinical stage programs, our pipeline discovery activities remain very active and we are committed to generating a number of additional product opportunities new GW cannabinoid over the coming years.

Let me now turn the call over Adam George for the financial review. Adam?

Adam George

Thank you, Stephen. I intend to provide some general comments on today’s Q2 financial results. A more detailed discussion of our results is given in the interim press release that we issued earlier today.

GW presents its financial results in accordance with International Financial Reporting Standards or IFRS accounting rules, in British pounds sterling. For convenience purposes U.S. dollar equivalence to certain key numbers. As a UK listed company, we are required to report results today for both the three and six months periods ended 31, March, 2013

I’ll start with Q2 revenues. Total revenues for the quarter were £7.5 million or $12.6 million, compared to £7.7 million in Q2 2013. Our revenue consisted of three income streams. First Sativex

Sales, which increased of £1.3 million from £0.04 million in Q2 2013, reflecting increased shipment to partners in the period. End market sales volumes by our partners in Q2 was 43% over the prior period, driven by strong performance in Italy and Germany.

Next, we have R&D charge to Otsuka which decreased in Q2 by £1.2 million or £ 5.8 million linked to the reduction in pre-clinical cost to Otsuka following the end of our collaboration in June 2013. Finally, we have licenses fees which are in line with Q2 2013 at £0.3 million.

Cost of sales for Q2 increased in line with the volume shipped to partners to £0.06 million from £0.02 million in Q2 2013. Total research and development expenditure in Q2 increased from £8.7 million to £11.9 million. This is driven GW-funded R&D spend which, which increased to £6.1 million this reflects our investments Epidiolex and CBDV epilepsy research plus the parts of the other pipeline Phase 2 trial are underway in ulcerative colitis, glioma, Schizophrenia and diabetes.

Management and admin spend of in Q2 by £1 million or $2.1 million off this £1 million, £0.7 million relates to employer payroll taxes potentially payable in future on unrealized stock option gains and £0.3 million related to unrealized foreign exchange losses arising from re-translation of a U.S. denominated cash deposits into pound sterling at the closing exchange on March 31st. This resulted in a loss before tax in Q2 of £7.1 million or $7.8 million which compares to a loss of £2.3million for Q2 2013.

In Q2, we then recorded a tax credit of £1.9 million, £ 1.6 million higher than the 0.3 million recorded Q2, 2013 reflects an additional of R&D tax credit that we expect to claim on increased 2014 spend.

For the six months ended March 31 2014, we have now recorded total revenues of £15 million or $25 million. Looking at total R&D spend, we spent £21 million or $35 million on R&D, 39% higher than the first six months of 2013 and 58% of this was funded by Otsuka. Management and admins spend of £3.6 million for six months is £1.6 million higher than the first-half of 2013 and as explained from Q2 the increase is due to accounting for provision for future employee and payroll taxes on stock option gains and unrealized exchange gain exchange losses on re-translation of our U.S. dollar cash deposit at the closing sterling exchange rate.

In terms of profitability for the six month, we are showing loss after tax of £8 million or $13.3 million. Clearly, the increase to our reported losses were entirely due to increased investment in the Epidiolex program and that as a pipeline projects.

Turning to cash flow for the six months to 31 March, 2014, we’ve recorded a net cash outflow from operating activities of £5.2 million or $8.7 million. Capital expenditure was £2 million consisting primarily of planned manufacturing facility upgrades. Total net proceeds from equity issued in the six months including receipts from our January fund raising plus subsequent warrant and option exercises totaled £63.7 million. So in total, we recorded a net inflow for the six months to 31 March 2014, a £57.5 million or $95.9 million. This was also in the closing cash position at March 31, 2014 of £95.6 million or $159.4 million.

Finally, let me update our 2014 full year guidance. In terms of Sativex sales, we now expect strong double-digit revenue growth in 2014, driven by end market sales volume growth by our partners. In terms of milestone income, I previously guided to expect an NS Phase 3 $5 million milestone from Otsuka close to the end of our 2014 financial year. This is now expected to be early in our 2015 financial year. With our in-house financial position, GW funded R&D will continue to increase this year as we progress our Epidiolex clinical program and does earlier stage pipeline activates.

Finally cash guidance, the core operating cash outflow for 2014 including capital expenditure is expected to be around £24 million or $40 million, marginally higher than previous guidance. This would result in a healthy closing cash position of approximately £75 million to £80 million or $125 million to $133 million.

Thank you. I’ll now hand the call back to Justin.

Justin Gover

Thank you, Adam. During the remainder of 2014, we expect to see very active new flow from GW with respect to epilepsy, we’ve remained on track for an initial data disclosure from the Epidiolex expanded INDs around middle of this year. Following this initial disclosure, GW expects additional data on these patients as well as data on an increasing number of IND patients to follow during the second half of 2014 and beyond and will periodically provide status updates through republic disclosure. We also expect the start of our first company-sponsored Epidiolex trial in Dravet syndrome designed to lead to an NDA with the FDA.

In addition, we expect to open the IND to conduct the trial of Epidiolex in the treatment of Lennox-Gastaut syndrome and also to open the IND for CBDV for a Phase 2 proof-of-concept epilepsy trial. I recognized the epilepsy program has been at the forefront of investors in attention, while this is indeed are very exciting and important program for GW, I remind you that there is going on at GW in addition to this program. For Sativex, as the Phase 3 cancer pain trial are near in completion of the patient recruit Phase, the program is on track for initial data from the first of two Phase 3 trial for Sativex in cancer pain by the ends of this year with the second Phase 3 trial to follow shortly thereafter.

We also expect to complete in the coming months, the SPA progress with the FDA for the proposed U.S. Phase 3 trial in MS spasticity. We also expect to report data from the Phase 2 ulcerative colitis in the second half and we also expect to advance recruitment in our Phase 2 clinical programs in type II diabetes, Schizophrenia as well as the addition orphan program like glioma. We look forward to reporting these important pieces of news to investors in the months ahead, a period in which we hope the GW journey is the world’s leading cannabinoid company will continue to go from strength-to-strength.

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

Question-and-Answer Session

Operator

Thank you ladies and gentlemen. Sorry for the delay. We will now be conducting a question and answer session. (Operator Instructions). Thank you. Our first question comes from Ritu Baral of Canaccord Genuity. Please go ahead.

Ritu Baral – Canaccord Genuity

Hi, guys. Thanks for taking the questions. Questions on the upcoming Epidiolex trials. One, what sort of seasonal reduction do you think that you would need to see to reach a level of meaningfulness mix for FDA, EMA and general approvability and what level is different would you need to see to make a difference in patient’s lives? And then two, if you think just sort of – well, the order in which we started this trials which one will inform the other? Do you feel that you need data from the Phase 2/3 before you start the second Dravet Phase III and will the two informed Lennox-Gastaut or would it be much more parallel than that?

Stephen Wright

Hi, Ritu. It’s Steven right here. I think I can probably take the questions in the reverse order if you don’t mind. Our plan is that the pivotal safety and efficacy studies for Epidiolex in Dravet syndrome will be more or less simultaneous, so we are not waiting for the result of the first pivotal efficacy and safety study that’s the Phase 2/3 study before we start the second. So, that’s very important to note first of all.

Secondly, in terms of what we reclining from those studies to gain approvals to have a successful NDA, clearly we require a statistical significant difference between drug and placebo, and that’s what the studies of powered on and that’s the difference that we aim to detect. And so, if it happens that we get a largest placebo response then we would need a larger drug response and if it happens and we get a very small placebo response then we would need a relatively smaller drug response. It’s the difference that matter.

With regard to whether or not the Dravet syndrome results necessarily imply that Lennox-Gastaut syndrome results will be also significant in favor of Epidiolex. I think the answer is partly they do yes. Clearly, we’ve give you a lots of confidence that Epidiolex will likely to be effective in one resistant child with epilepsy syndrome, if they had already been sent to be effective and another. However, we are intending to conduct pivotal efficacy and safety studies in Lennox-Gastaut again more or less simultaneously with our Dravet study. So, we will actually see the results within a relatively short space of time in both development programs.

Ritu Baral – Canaccord Genuity

And as far as the design and prediction of the placebo, what will inform that in terms of trial design? Will it be to what you are seeing from the current INDs even though there are open label or is it data in the literature?

Stephen Wright

I think the open label expansion information that we’ll get, we will be happy to present once we are confident in the outcomes later this year is that, it will certainly help you to inform the likely response to drug. I think that’s fair. I’m not sure that it helps with placebo response is very much. We depended on the literature. So, that in both Dravet and Lennox-Gastaut and indeed in some other child epilepsy syndrome low single-digit to the mid teems seems to be reasonable predictable for the placebo responses.

Ritu Baral – Canaccord Genuity

Got it. And last question and I’ll get back in the queue. Can you outline for us the sequence of Sativex Phase 3 data that should be coming towards the end of the end of the year? Basically, how the data from the three different Phase 3 trials should be coming in?

Stephen Wright

Certainly, the intention was that the first two of the large Phase 3 studies is it Phase 2 studies which are more or less mirror image involving 380 patients in each study together with an open label expansion to those studies. They should come in quite close to each other around about the end of this year. We think that one will come in a little bit before the other and one at the end of this year and one very shortly thereafter.

So, we retain on track to meet our previous guidance that we would be filing the NDA in the first half of 2015. There is a third study as you know, which utilizes a different design, utilizes a enrich design and that we intended that there should be an interim in that study if required available to fit into to the NDA process and that study remains on track to provide a syndrome analysis. So, we are very comfortable that the guidance that we have given previously about Sativex in cancer pain remains viable and valid.

Ritu Baral – Canaccord Genuity

And the interim would be around the same time point as the first data we’ll see?

Stephen Wright

Around about. It would certainly be ready to feed into the NDA in the first half of 2015, yes.

Ritu Baral – Canaccord Genuity

Great. Thanks for taking all the questions.

Operator

Thank you. The next question is from Tazeen Ahmad of Bank of America. Please go ahead.

Tazeen Ahmad – Bank of America Merrill Lynch

Hi, guys. Thanks for taking my questions. I had a couple here. With regard to these IND trials that are underway, if you happen to see activity in epilepsy types other than Lennox and Dravet even as early as the first two side, would you be motivated to try to seek orphan designation for the other types that you are seeing activity in or would you want to wait to see results from now all of your trials reading out before doing that?

Stephen Wright

Hi, Tazeen. It’s Stephen Wright here again. I think both options are open to us honestly once we see data with what we regard is a meaningful outcomes from the expanded INDs I think the other factor that fit into this is the fact that we do have Fast Track status for – we are hoping to get Fast Track phases for Epidiolex and once we have got Fast Track status that will allow us to have a more expensive and open dialog with FDA and which these questions can more readily addressed. But yes, I think those options are certainly open to us.

Tazeen Ahmad – Bank of America Merrill Lynch

And then sort of follow on trials that you just mentioned this morning just because I’m not clear, is that the case you would do Phase 2/3 trial for Dravet and then another Phase 3 trial but for Lennox you would do two Phase 3 trials, is that right?

Stephen Wright

That’s correct. We are making an assumption which has yet to be completely fully tested that the pharmacokinetics and the dose ranging pharmacokinetic and safety that we are exploring in Dravet syndrome will be applicable to Lennox-Gastaut. We believe that would be a very safe assumption.

Tazeen Ahmad – Bank of America Merrill Lynch

Okay. I see and then last question I have here is, I noticed that you have filed on equity shelf this morning, have you disclose the amount given your strong cash position, do you anticipate having to top end to this?

Justin Gover

Hi, Tazeen. It’s Justin here. As you may recall, we not that listing with a year ago actually as of 1st of May, so this is the first opportunity for the company to be self-eligible since the listing. So, this is very much a housekeeping exercise with the eligible. So, there is no dollar amount in shelf with no current plan to utilize that shelf.

Tazeen Ahmad – Bank of America Merrill Lynch

Okay, great. Thanks.

Operator

Thank you. The next question is from Phil Nadeau of Cowen & Company. Please go ahead.

Phil Nadeau – Cowen & Company

Good morning. Thanks for taking my questions. My first is on the med year data release. Give us some information about the characteristics of the data that we’re going to get from two set of centers patients been on Dravet. So, just wondering if you maybe can discuss a little bit more about the format of data release. How religiously corrected all this data can be? Will patients have good idea of base line rates and rates after three months? I’m trying to get a sense of how much we will be able to reenter that data and the effectiveness of the Epidiolex.

Stephen Wright

Hi, Phil. Stephen Wright here. Firstly there is a formal protocol which investigators in this investigator launched IND submitted to the USFDA and there are case record forms that go along with those forms of protocols. So, the answer is yes. The data are being collected quite systematically in the same way that would be in a company’s sponsored clinical trial and they cover the whole range of efficacy, quality of life, emergency, treatment requirements, status and so on that you would expect from a more formal companies sponsored clinical trial.

So, we believe the data that we’re going to be present will cover both efficacy, will cover episodes of hospitalization, will cover episodes of status and will cover safety, that’s our intention. We’re engaged in the data collection from both expanded excess INDs as we speak.

Phil Nadeau – Cowen & Company

Okay, great. And following this initial data release, what are your plans for the second half of the year, I think how often in what forms will you publish additional data.

Justin Gover

Phil, Justin here. I think we’re currently focused as you are on the first disclosure. I think the amount of data will increase exponentially in the second half, simply because of the number fight that will be starting treatment during that period. But I think we also need to collaborate within physicians who are ultimately responsible for these IND. So we’re using the word periodic and I think we would expect to be from time-to-time, but we’re getting weekly update from media onwards, but we’ll try and ensure that reasonably regular and probably try them in with medical meetings as if possible.

Phil Nadeau – Cowen & Company

Okay. And then my second question is on the pivotal trials for Dravet and Lennox-Gastaut, it does sound like Dravet and Lennox-Gastaut are fundamentally different diseases today. Some patients do respond to Dravet and Lennox-Gastaut, it seems like patients really don’t responded all. How’s that going to be reflected in the trial design? Is the Lennox-Gastaut trial is going to be much bigger and more highly power to maybe you can pick up more settle signals or do you plan to have similar designs between the two programs, which just the patient characteristic being different or the diagnosis of the patient is being different between the two trials, the two programs?

Stephen Wright

Hi, Phil. Stephen here. With respect I think it’s a little bit way around. I mean Dravet, no currently approval medications in the United States, so it’s not regarded as an epilepsy syndrome pretty well responsive to treatment. It’s really very well characterized syndrome where is diagnosis is pretty much agreed primarily clinical but in many, many cases with a specific genetic mutation present.

So, whereas with Lennox-Gastaut, Lennox-Gastaut is really a description of kind – into which a number of syndromes can fit and in Lennox-Gastaut as well, there is wide spread recognition that even though that are three current anti-epileptic drugs approved in that syndrome most recently Plebicom there a lot of children who remain resistant to those drugs.

So, I think in both cases in both Dravet and Lennox-Gastaut, there are a very substantial number of treatment resistant children out there. Now, whether each of them respond differently to current anti-epileptic drug is not known, because there are relatively few placebo-controlled trials in Dravet syndrome and really not that many in Lennox-Gastaut either.

It is fair to say though that the most recently approved drug in Lennox-Gastaut is also quietly widely used in Dravet so it’s widely used in Dravet and many investigators think it provide some benefit. So, I think that allows us from additional comfort if we see the efficacy in Dravet, it’s pretty likely that we will see in Lennox-Gastaut as well.

Phil Nadeau – Cowen & Company

Okay. And one last question, I think we all saw the press release, you say from potential competitor that’s moving their own formulation CBD into development. I’m curious on your take on the orphan status that you have. Do you think should you be the first approved you orphan exclusivity would exclude them from the market or could there be differences in purity or formulation that would allow both CBDs to be commercialize simultaneously?

Justin Gover

Phil, Justin here. I’ll take that. So, thanks for the question. Yes, the orphan exclusivity is applied to the structure of the cannabinoid, so in the event that we are the first to achieve an NDA for Epidiolex in these orphan indications, it would prevent a synthetic of the same molecule being approved during the orphan exclusivity.

Phil Nadeau – Cowen & Company

Okay, great. Thanks for taking my questions.

Operator

Thank you. The next question comes from Joseph Schwartz of Leerink Partners. Please go ahead.

Joseph Schwartz – Leerink Partners

Thanks very much. Congrats on all the progress. I was wondering if you could give us more of your thinking behind the decision to not need Phase 1/2 before going directly Phase 2/3 in Dravet and have you seen any data from the ongoing expanded access programs or can you help us to understand why the FDA is allowing an expansion there because if we read through the lines, it sounds like they would not do that if they aren’t going well anyway if they’re going poorly anyway. So, how much read through is there from all the positive updates that you are giving us today?

Stephen Wright

Joe, hi. Stephen Wright here. We have had exposure of around about 200 same patient to our own CBD in Phase 1 and Phase 2 studies adult disease in other indication. So, there is a substantial body of data regarding pharmacokinetics and so on. I think that’s very important. We’re not starting from zero here. So, what we are aiming to do is to demonstrating part one of our study the pharmacokinetics and safety in the target patient group that is children with Dravet and we know the FDA are very comfortable with that. And then move rapidly on to a typical safety and efficacy phase which we calling part two study aimed at using the optimal dose in children with Dravet.

So, I think it make good sense and I would emphasize that, we do have a substantial body of existing clinical data in human at all phases actually of exposure to CBD. I think I’m sure that’s the reason why we haven’t been require to do a specific and separate Phase 1 study before moving on.

Joseph Schwartz – Leerink Partners

Right. Was the FDA comprised of any of the ongoing safety or efficacy data from the extended access treatment INDs?

Justin Gover

The FDA received safety data from the investigators that’s one of the requirement as do we actually. We’ve not so formally transmitted our safety data on Epidiolex expanded access to FDA but they are in receipt of the same safety data from the investigators.

Joseph Schwartz – Leerink Partners

Okay, great. And then just one the 42006 CBDV compound. How are you thinking about the development of that drug across in different epilepsy indications or even other indications and the strategic positioning, what are the advantages, the potential advantages over CBD that could give you a longer life cycle? Can you help us think about the addition of that product to your portfolio?

Stephen Wright

Phil, I’ll answer first part of your question first and then pass over to Justin for the second part. There is very limited experience of 42006 in humans to-date and there is no existing historical literature about its use in epilepsy unlike with CBD. So, we are doing much in close conventional approach towards this development by first taking it in to a proof-of-concept study, having had a successful Phase 1 taking into a proof-of-concept study to show that it does indeed have anti-epileptic efficacy in humans and we hope that will start towards the end of this year and possibly around the turn of the year. So, that’s what we are doing with CBDV proof-of-concept first.

Justin Gover

And Joe, it’s Justin. With regard to the positioning, I think options remain very open to us right now. It is fair to say that, there is significant work ongoing with regard to determining the ultimate commercial positioning of CBDV that is going on mostly in with in-house right now. So, I think that’s a story that remains in-house for now but we’ll release it overtime, but it won’t impact Steven’s near-time ambition with regard to the proof-of-concept, which we need to do anyway.

Joseph Schwartz – Leerink Partners

Okay, great. Thanks very much.

Operator

Thank you. The next question Lala Gregorek of Edison Investment. Please go ahead.

Lala Gregorek – Edison Investment

Good afternoon gentlemen. I have a couple question for you regarding Epidiolex and so the interaction between the physician INDs and the study that you will running. First of all, I was interested in what sort of overlap you have between the centers which have these expanded access INDs and the trail that you will running?

Secondly, will the physician run INDs be informing the dose ranges that you’ll be studying in your Phase 2/3? And then lastly, in relation to the centers licensing and amendment, it comes out from two to three and I was wondering how many patients have specific INDs within their centers?

Stephen Wright

Hi, Lala. Maybe I can answer the first question here. Stephen Wright here. Well, there would be – we will utilize centers in the expanded access INDs within our GW sponsored program. The answer is, absolutely yes. That’s one of the reasons why we are confidence about the feasibility of recruitment into the studies. It’s always helpful to have physician who are comfortable using your medicine, if you are going to new clinical trials. It gives us it gives us – it means we have the ground building with the randomized control trial essentially.

Now suddenly from the point you of physician being comfortable with the way the drug is being used, but also because these physicians have also been through the DEA licensing process. So again, we hit the ground running with regard DEA licenses for new studies as they might be doing. Besides of dose that’s being used in the Expanded Access INDs, we are doing across all of studies regardless of whether the investigator led or GW sponsored is guided by prior clinical experience and pre-clinical safety data, toxicology data in particular. So, prior experience and the toxicology data provides the framework, the range if you like of doses that is acceptable to explore in humans.

So we anticipate that the dose or we are using in our GW sponsored program will be very similar to the doses that are being used in the Expanded Access INDs and again that gives us comfort.

Justin Gover

Lala, I think your final question was the INDs in the patient for center. I mean the just to clarify, what we are talking about here is we centers each obtain in IND under Expanded Access IND which relates to a certain number of authorized patients within centers. So, the centers are underway and in general being centered that have received authorization for 25 patients each. As Steve mentioned in the call earlier, one of those centers actually recently expanded authorization to 60 patients but that’s a recent development. So, I am not sure if that answered question or you can just clarify whether there is something that we are missing?

Lala Gregorek – Edison Investment

No. That does answer my question with regard to centers. Can I have a follow-up question in relation to the doses? Currently what three doses have been studied or the dose range that you’ve seen for Epidiolex?

Justin Gover

Certainly. Now, I can answer that. In the Expanded Access INDs, the project initially started the children at 2.5 milligram per kilogram per day. In a two of the centers that have started dosing, that actually been increased up to a starting dose of 5 milligram per kilogram a day. That starting doses then gradually targeted upward actually a raise of once a week up to a maximum of 25 milligrams per kilogram a day.

In individual cases, investigators are seeking to use higher doses in 25 milligrams per kilogram per day because the drug has been very benign even at those even at those levels we have had no children withdraw from treatment due to any unwanted effect or incidentally due to the drug testing guidance and we understand that the productivity seems very good as well as the tolerability.

Lala Gregorek – Edison Investment

Okay, great. And since you touched about what’s to do. Are you able to provide any additional comment on the one withdrawal that being seem so far under the Expanded Access INDs?

Justin Gover

No. We are not giving further color today. We’ll do this all when we have the data mid-year.

Lala Gregorek – Edison Investment

Okay. Then thank you very much.

Operator

Thank you. Our next question is from Kristina Cibor of Piper Jaffray. Please go ahead.

Kristina Cibor – Piper Jaffray

Hi. Thank you for taking the call. Just wanted to ask a question about legalization of medical in many states. So, does this in anyway impact complicate confound a facility you on Epidiolex development? And then what is the status of DEA rescheduling of Epidiolex if there is anything?

Stephen Wright

Hi Kristina, Stephen here. So, the question was we can all note. So, I’ll try to keep my answer pretty brief, which is I think you know the all development is frankly determined by the federal rules, which require FDA authorizations, INDs, DEA licensing et cetera.

So, whether state is legalized medical or not it doesn’t really impact on our development program and I think in a broader sense, certainly, with regard to children suffering from intractable treatment resistant epilepsy, the prospective and FDA approved prescription medicine I think is well recognized as the solution moving forward and of course the fact that you’ve seen such a high level of interest in these INDs, I think it’s consistent with the view that physician and families are of course if it’s possible to get access to Epidiolex as quickly as possible. Its dose raised and I am sure awareness and I am sure we will aware of the epilepsy profile of CBD and I think that is the relevant and probably is helpful as we think about future.

With regard to rescheduling, that is a process which is done upon an NDA. That possibly could be pathway outside of that. But in general, the process for schedule substance disease is first approved by the FDA together with that approval become comes on scheduling recommendation on the DEA then in the power and responsibility to reschedule. So, subject unless there is an exceptional circumstance, we would expect the rescheduling occur following the NDA.

Kristina Cibor – Piper Jaffray

Okay. That’s helpful. And then actually just one question really on the size of the trials. I just wanted to confirm one of the numbers that I heard. So, for the physician-sponsored INDs the trial size did you say, it’s going to be 300 patients overall for those physician-sponsored INDs?

Justin Gover

Well, these are not single study Kristina.

Kristina Cibor – Piper Jaffray

But in total, in total.

Justin Gover

Yeah. The 300 total is the sum of the different expanded access and indeed a few individual emergency INDs that have been authorized so far. As Steven mentioned in the main comments of the call, the focus is very much on the pivotal program at this point. So, it’s important for us and I think we are closely collaborated with the size on this but recruitment into the pivotal trials even compromised by these Expanded Access INDs. So, I wouldn’t expect ongoing acceleration of numbers in the same way that you’ve seen recently and that’s because attention and focus is for this next phase very much turning to towards the pivotal program.

Kristina Cibor – Piper Jaffray

Okay. That’s helpful. Thank you.

Operator

Thank you. The next question is from Tazeen Ahmad of Bank of America. Please go ahead.

Tazeen Ahmad – Bank of America Merrill Lynch

Thanks for taking the follow up. Just with regard to Phase 2/3 trials that are going to start. I know you had no shortage of patients that want to enter the trial, but could there be any advantage of using the patients that are coming off of the three months by IND trials and having them flow into the Phase 2/3 trial just in terms of continuity and being able to have data on specific patient for an extended amount of time.

Stephen Wright

Hi Tazeen. It’s Stephen here. I think the answer is no. It would confound or would possibly confound interpretation of the results having too much. Also, prior to enter into the study and this is partly a reference to earlier question, the patients in the Expanded Excess INDs on the go a very formal base line evaluation of which is frequency. Now clearly, had they being recently expose to Epidiolex, that base line evaluation would be likely to be confounded by the their trials. It’s just one of the requirements for the formal trial; it is they have not been exposed in the recent past to any form of cannabinoid.

Tazeen Ahmad – Bank of America Merrill Lynch

I see. Okay. And then the last question I have is the Dravet foundation meeting is coming up target the end of June. At this time, does GW have any formal presence planned there?

Justin Gover

I don’t think is the formal presence plan there. I think GW tends to attend these kinds of meetings these days for obvious reason but there isn’t formal company presence.

Tazeen Ahmad – Bank of America Merrill Lynch

Okay, great. Thank you.

Operator

Thank you. This all the time we have today for questions. I’ll turn the floor over to management for any additional or closing remarks.

Justin Gover

Thank you. Justin here. Just to round up the call by thanking everyone for their participation. It should be an exciting second half of the year for GW and we’ll look forward to keeping you addressed of all developments and pipeline as well. So, look forward to the midyear IND release and then Q3 in early August. So, thank you for your attention and as always we’ve available for follow-up questions as and when necessary. Thanks again.

Operator

Thank you. Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time and thank you for your participation.

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Source: GW Pharmaceuticals' (GWPH) CEO Justin Gover on Q2 2014 Results - Earnings Call Transcript
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