Q4 2019 Earnings Call
At this time all participants are in listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Steve Schultz Vice President Investor Relations. Thank you Sir you may begin.
Welcome all of you and thank you for joining us today for our fourth quarter year end results call for our 2019 financial year again, Im Steve Schultz, Vice President Investor Relations at GW.
Today I'm joined by Justin Gover, GW is Chief Executive Officer, Darren Cline, U.S., Chief Commercial Officer, Chris Tovey, our Chief operating officer.
Dr. Volcker can efforts Chief Medical Officer, and Scott Jukka below our Chief Financial Officer, We hope you've had a chance to review our press release issued a short while ago, we expect to file our form 10-K later this week.
As a reminder, during today's call will be making certain forward looking statements. These statements reflect GW is 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 state.
Since relating to market acceptance and commercial potential.
Forward looking statements involve risks and uncertainties and actual events could differ materially from those projected herein.
The list and description of risks and uncertainties associated with an investment in GW can be found in the company's filings with the US Securities and Exchange Commission. These forward looking statements speak only as of today's date February 20, Fiveth 2020.
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 as Chief Executive Officer. Thank you, Steve and welcome to all those who have joined us today.
2019 was an exceptional and transformative year for GW pharmaceuticals.
The success was underpinned by the first full year of Epidiolex sales of nearly $300 million.
In Europe, we obtained approval for Epidiolex and I'll now entering the launch phase.
Our experiences in 2019 confirm that Epidiolex is a medicine that is in high demand by patients with major unmet needs warmly welcomed by physicians from one the pay is recognized as providing meaningful value.
In a moment Darin will provide more details on the us commercial opportunity as it moves into its second year.
I've also ask Chris to review the European launch status.
Beyond our initial episodic indications the positive phase three trial in Cuba Sclerosis complex reported in 2019 has now that's a submission of the TSC supplemental NDA.
Earlier this month.
This approval would broaden the label to another 50000 diagnosed patients and would confirm the broad anti seizure properties of this medicine.
We also continue to make progress in relation to Epidiolex exclusivity.
Beyond the nine Orange book listed patents, we now have an additional two new allowed patents that broadly cover use in ltvs and drove a syndrome.
We also have two pending applications in patent families related to TSC data.
And in addition, we're prosecuting a patent application protecting the composition of epidemics.
We're also advancing a number of additional patent applications in relation to Epidiolex.
Beyond Epidiolex, we spent 2019 further investing in and progressing our pipeline and notably finalizing plans to bring the big Simos to the United States.
Although this product with first approved outside the U.S some time ago.
Our most recent US market research has demonstrated that this product to which we expect strong regulatory protection presents represents a compelling commercial opportunity.
We have an abridged route to market NMS spasticity and also plan on a series of additional indications each of which represent major market expansion opportunities.
Volcker will review in a big Simos and the pipeline with you later on this call.
Finally on this school Scott will review our financial results.
Let me begin by asking Darrin to provide a us commercial uptake Darren.
Thank you Justin Epidiolex 2019, net product sales were 296.4 million, which included Q4 global Epidiolex net product sales of 104.5 million in the US net epidiolex product sales in Q4 were 100.2 million. This performance is one that way.
Our all exceptionally proud off.
Market research conducted during the fourth quarter indicated continued high satisfaction by physicians and patients and an intention to prescribe to more patients in their practice.
These dynamics were echoed through our many physician interactions during the American epilepsy Society meeting in December.
Beyond the positive impact that epidiolex as having what their patients and families. Additional feedback from this meeting included a high level of satisfaction with payer coverage and LG asked Intravase syndrome.
We also heard examples of their ability to access epidiolex for other intractable epilepsies.
We see many opportunities for growth in 2020, and LG Essen driveway, even with our successful adoption to date.
We believe that we are still penetrated less than 50% of the market, leaving significant room for growth in our indicated population.
In terms of physicians as a normal in the first year of a new HDD launch a concentrated number of specialist and institutions represented the majority of prescriptions.
We therefore see significant opportunity in 2020 to accelerate adoption across a wider prescriber base.
A key priority this year will be to spend more time effort and resources expanding on our solid base of specialist physicians.
With targets, consisting of mainly adult neurologist nurse practitioners and physician assistants, who see diagnose and undiagnosed LG us Mds patients among a wide spectrum of epilepsy patients.
And additional layer of opportunity in 2020 this to service patients who reside in long term care facilities.
These individuals are living with developmental delays generally and group homes or skilled nursing care facilities and many suffer from refractory seizures, including those associated with LG us Intravase syndrome.
We believe that within these settings. The majority of these individuals can be impacted with a small and highly focused team. We're beginning deployment of dedicated resources to the long term care segment in this first quarter.
We also continue to prepare for an expected TSC launch later this year.
The effectiveness of Epidiolex in the TSC population greatly expands our understanding of the drugs potential to treat a broad spectrum of both focal and generalize seizure types associated with fees were epilepsy syndromes, which we believe will be an important driver of Epidiolex peak sales potential.
Our team is running promotional materials and excited to begin outreach in this patient population.
Finally further expansion of payer coverage as a key priority for 2020.
Payer coverage in 2019 was already strong for instance, one year post launch open access.
Reimbursement has already available to over 15% of covered lives.
This means.
That no prior authorizations are required if epidiolex as prescribed by an epilepsy physician.
A further 70% of covered lives require a prior authorization to indication and were but we believe there is an opportunity for a portion of this coverage to move towards open access.
As we look to increase awareness of and expand on that coverage.
We are putting in place a new reimbursement team that can support patients and accessing epidiolex. The role will focus on communicating the evolving payer coverage of epidiolex developing strategies to address access and reimbursement needs and enhancing awareness and utilization of epidiolex patient access services.
My confidence in our ability to widen access comes from the following observations from Twoq 2019, first patient compliance as high indicating a strong clinical response.
Second prescriptions are predominately written by our epileptic energy in neurology targets.
Thereby reassuring payers that epidiolex has been prescribed by appropriate physicians for appropriate patients.
Third restrictive utilization management has an adverse impact on patient outcomes and costs associated with uncontrolled epilepsy.
Fourth we have data to demonstrate that use of Epidiolex has a favorable impact on medical costs fifth the average price of Epidiolex is consistent with what we guided payers before launch and considered reasonable providing a positive value proposition for the plan and their patients and finally, we know that physicians want to utilized.
Epidiolex to treat other rare intractable epilepsy patients for whom no approved treatment exist upon appeal pairs, often approve epidiolex based on medical necessity.
Overall these factors, we believe position epidiolex well in 2020.
In closing, let me comment on what we expect in the upcoming quarter, while we don't have a good comparator as Q1 last year was the first full quarter of our launch we do expect that Epidiolex may experience the seasonality influence as you see in many other medicines.
As we stated in January of JP Morgan Conference.
As you model this upcoming quarter, we would expect Q1 sales performance to be consistent with that of Q4.
Now I'd like to turn the call over to Chris to provide an update on our progress in Europe Chris.
Thank you Darren.
Following European approval for Epidiolex in late September last year.
For now nearly launch phase focused on the five major European markets of Germany, UK, France, Italy and Spain.
First commercial launch took place in Germany during the fourth quarter of 29 team building on the experienced developed through our early access program. It's clear that Epidiolex is being warmly welcomed by Jim and physicians and patients alike.
In the UK during November Apple Dylex was recommended by England's National Institute for Health and care excellence nice to receive retain NHS reimbursement.
But audit just hold me launched in the UK late January annually with centralized funding by NHS, England.
In France, Epidiolex is being made available and reimbursed by the National 18, New program, which supports early patient access to important new medicines in serious diseases.
In parallel the formal reimbursement process is ongoing the outcome of which is expected later in twentytwenty.
Only at this time will formal launch activities in France commence.
Finally in Spain, and Italy launches are expected later this year once appropriate pricing and reimbursement negotiations are finalized.
Our market feedback continues to suggest that we are launching into a receptive environment, whether it's clear unmet need.
Research tells us that physicians are eager to have access to new therapy to treat these difficult cases, and there is a high level of awareness amongst patients with that said as you'll note the pace of launches new medicines in Europe is of course traditionally slower than that in the U.S.
Beyond the five made European markets, we're submitting pricing and reimbursement dossiers in many of the European countries with a view to launching next year.
We're also starting to look beyond Europe, and I've been able to provide early access to epidiolex in a range of countries across the world.
Moving away from commercialization activities, our global commercial manufacturing and supply chain, which also falls under my responsibility continues to run smoothly.
In addition, our longer term future capacity manufacturing expansion plans are on track to service, but we expect to be robust long term demand.
Keith and let me now hand, the call to Voca the his update.
Thank you, Chris and good day everyone.
Looking first at the EFI Dylex program and to you see the supplemental new drug application for this indication was recently submitted.
We do not yet have a formal PDUFA date. So current guidance is to expect approval in the second half of 2020.
On the heels of this us TSC submission the European filing of the TSC data is expected by the end of the first quarter. This year.
We believe that the addition of seizures associated with tuberculosis complex, which are predominantly focused in on said we will be important new features in the prescribing information.
In ret syndrome, or placebo controlled phase three trial is actively recruiting.
This trial is different from the five previous pivotal Epidiolex trials. Some that we have focused our investigations on the non seizure aspects of this disease.
Beyond any dynamics, we are now significantly increasing our investment in the development of the big some loads in the us.
We believe the fastest route to market for this product is through the indication already approved in Europe, namely for the treatment of specificity due to multiple sclerosis.
We've had several interactions with the FDA and the last few regarding this product.
As a result, our plan for Emmis specificity is to bridge from the previously conducted positive phase three trials in Europe by adding a new phase three placebo controlled trial with approximately 450 patients in a number of smaller mechanistic studies.
We expect this clinical program to commence in the second quarter over this year.
It is important to emphasize that other elements necessary for an MD a submission are largely in place. For example, we have nearly 100000 patient years of safety data as well as a regulatorily approved commercial scale manufacturing process that has been in place for many years.
Spasticity associated with multiple sclerosis is the common symptom, which significantly impacts patients quality of life.
There's not been any significant advancement in oral anti specificity treatment options for over 20 years, approximately one third of Emmis patients live with uncontrolled specificity and we believe for quarter two half currently self Medicaid with unapproved cannabis derived products in the United States.
Recent market research firm, our us commercial team indicates that both physicians and patients are eager for the availability of an FDA approved can add a node product such as the VIX evolves.
We very much seen a big someones as a pipeline into product as we think about the lifecycle for the VIX most beyond emmis specificity. They are real opportunities within the broader spasticity market as they are around 3 million patients in the United States with specificity associated with various conditions.
To this end, we're planning a clinical program in spasticity due to spinal cord injury.
Beyond specificity, we have selected post traumatic stress disorder PTSD as the new target indication for this product.
We expect to commence these clinical programs later this year with review to achieve a series of approved indications for the big some modes over the coming years.
Furthermore, due to the product significant complexity, we believe that the big similar it's will benefit from strong long term market regulatory protection.
Moving to autism, our clinical program with CBDV includes a 30 patient open label study as well as an investigator led to 100 patient placebo controlled trial, both of which ongoing.
In schizophrenia. We are also advancing a clinical development program an area of its GW has been researching for approximately a decade in particular GW previously conducted a phase two study in 88 subjects with schizophrenia, demonstrating that is CBD containing product and.
Secondly, you've reduced positive symptoms and significantly improve the clinical global impression of improvement compared to placebo.
We're now moving forward with a follow on phase two study.
The study aims to further estimate the magnitude of the treatment effect of an investigational CBD containing product on positive.
Negative and general symptoms of schizophrenia.
We expect to initiate enrollment in mid 2020. Finally, we have commenced a safety study of our intravenous CBD formulation in neonatal hypoxic ischemia consent from Lapa Theo image E and expect to treat the first patient at any time.
They are currently no FDA approved medicines indicated for anybody.
Clearly a product to address this patient population would represent a major breakthrough and we look forward to advancing this program.
Thank you let me now have the call to Scott Chuckle below to provide the financial review.
Thanks, Volcker and good afternoon.
I'll now provide some high level comments on financial results for the quarter and year ended December 30, Onest 29 team.
A more detailed discussion of results will be provided in our 10-K to be filed with the SEC later this week.
I'll start with revenue.
Total revenue for the quarter was $109.1 million compared to 6.7 million in the prior year quarter.
This increase is due primarily to global Epidiolex net sales of 104.5 million in the quarter.
Total deductions from gross sales for allowances for 22.6 million for the quarter related mainly to Epidiolex.
Gross to net is inline with our expectations at this point in the launch.
For the year total revenue was $311.3 million driven mainly by global Epidiolex net sales of 296.4 million.
Cost of sales for the year ended December 30, onest amounted to $27.2 million or 9% of net product sales compared to 6.6 million or 45% of net product sales in the prior year.
This improvement is due to substantial increase in epidiolex sales over the prior year.
Cost of sales is favorably impacted by Epidiolex inventory produced prior to approval, which was expensed in accordance with accounting guidelines.
Moving to R&D spend.
Total research and development expense for the quarter increased to $43.5 million from 29.1 million in the prior year quarter.
This increase reflects expenses related to the ongoing Epidiolex development program, including preparation of the supplemental anda for TSC as well as advancing the novick VIX, a malls clinical program and our other pipeline programs.
For the year research and development expense was $142.7 million compared to 146.6 million in the prior year.
This slight decrease is mainly due to costs related to epidiolex growing and inventory build prior to regulatory approval, which were expensed as incurred in the prior year.
Turning to SGN, ang, selling general and administrative expenses for the quarter increased to $78.4 million from 49.1 million in the same period in 2018.
For the year SGN expenses were 259.9 million compared to 165.7 million in the prior year.
This increase is primarily due to costs related to the launch of Epidiolex in the us and the build out of our commercial operations in Europe.
The resulting net loss for the quarter was $24.9 million compared to a net loss of 71.9 million in the prior year quarter.
For the year net loss was 9 million compared to a net loss of 305.3 million in the prior year, including the net gain on the sale of our priority review voucher of $104.1 million.
Moving to cash flow.
Net cash used in operating activities for the year ended December 31 amounted to $123.5 million compared to 254.8 million for the prior year.
Net cash provided by investing activities for the year was $61.6 million compared to net cash used in investing activities of 42.9 million for the prior year.
The current year amount includes net proceeds from the sale of our priority review voucher.
Capital expenditure of 2019 amounted to $42.5 million compared to 43.4 million for the prior year, reflecting continued investments and the expansion of our companywide production facilities.
The resulting net decrease in cash and cash equivalents for the year amounted to $54.6 million for the quarter and that decrease in cash and cash equivalents was 17.7 million.
We ended 2019 cash cash equivalents of $536.9 million.
Turning to guidance R&D and SGN a expenses for the quarter ended December 31, 2019 amounted to $122 million.
For the year ended December 31, 2020, we expect R&D and SGN expenses in the range of $530 million to $560 million, reflecting continued investment and epidiolex in the us the commercial launch in Europe and investments in our R&D portfolio.
We also anticipate capital expenditure in the range of $30 million to $40 million related mainly to manufacturing expansion. Thank you and I'll now hand, the call back to justify.
Thank you Scott.
In closing as we move into the second year of Epidiolex commercial availability, we have an established and growing base of patients and prescribers and see major growth opportunities in twentytwenty and beyond as more and more patients gain access to this important medication.
We believe epidiolex as a long commercial life ahead, and we continue to invest in multiple exclusivity and lifecycle management strategies.
We also expect twentytwenty to be an important year for our pipeline.
It makes a malls is an exciting late stage program for GW in the United States.
I will note was first developed outside the U.S sometime ago. We strongly believe that now is the ideal time for this products to emerge into the us and believe that it can meet patient needs across multiple indications in the coming years.
Beyond these exciting programs there is a growing pipeline of earliest stage products in multiple indications.
GW is world leadership position in cannot Benoit science has not happened overnight and with over 20 years of research behind US. We believe that the next chapter will be even more exciting.
We are intensely focused on ensuring epidiolex reaches its potential whilst advancing our pipeline.
Thank you for your time today, and I look forward to updating you on progress in Twentytwenty.
I would now like to open the call for a few questions operator.
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One moment, please let me pull for questions.
Thank you. Our first question is coming from Marc Goodman with SVB Leerink. Please proceed.
Hi, This is Ron on the line from Mark.
So I was curious could you maybe qualitatively talk a bit about the dynamic we might see with EPA dialects on transitioning from first quarter to second quarter. I know you mentioned seasonality effects, but I'm wondering if that could uncertainty made back opt in second quarter.
Hi, it's.
It's Darren thanks for the question.
No I think you know in Q1, you will see the seasonality things, but as we've stated 2020 were.
Several drivers of the business that we think will propel us into 2020 Epidiolex clinical performance on we still look to opportunity we have within LG Essen drove a and as we spoken about.
Trc approval and the latter half of 2026 sets us up for on a really nice 2020.
Okay got it and on one more question if I may and can you remind us what the split is in patients rapid diagnostic between children and adults and if that is still looks like it's up ticking in the last quarter.
Stay does still 60 40.
Okay, great. Thanks.
You're welcome.
Thank you. Our next question is coming from David Lebowitz with Morgan Stanley. Please proceed.
Thank you very much for taking my question could you run us through the process that a payer goes through and determining when to.
The move to open access.
And I guess.
What the trajectory and was likely to get to the initial 15% that you have at this point and how you expect that might evolve as equal to 2020.
Yes, thanks for the question.
As we've said we were very pleased with the coverage we had in the first year with Epidiolex dominant sets a great Foundation for us in 2020 and beyond we're in those discussions now.
With the payers regarding their current utilization in their policies.
Consistent with our previous remarks today as an end JB JP Morgan, we do expect to see real progress in 2020, but these discussions require some time and I expect progress to be steady.
During the course of this year remains our goal to see more open access much like the ASI, which we had out of the gate.
I see it has very realistic for us.
Thanks for taking my question.
Welcome.
Your next question comes from Teva and Ahmad with Bank of America. Please proceed.
Okay. The naphthalene, so hi, guys just wanted to ask if.
You can give us some color about how to think about the cadence of Alonso from the European countries I understand that it's going to be staggered throughout the course of the year.
But for modeling purposes, how should we think about comparing I guess that trajectory of that launch versus what you saw in the last then I guess when you might be in a position, where you would be able to break out going forward.
You asked and actually last now thanks.
Thanks to vein.
I'll, let Justin Skoda answer the second part of the question I think I think everybody's aware that.
The European launch is very very different to us launch I think.
We were obviously the drugs approved late in September and the first country together, a proven where we have genuinely commercial launch ongoing is Germany.
And then the end of January following nice and.
Reinvestment being put in place for the UK.
In late January loans for the UK, so year to market started but.
Two months three months apart Upfronts, we still don't have a full commercial launch, Spain, and Italy, we talk about reimbursement in the second half of the years. So we would hope that we would have.
All five countries up by the ended the year to zero waste.
Reimbursement and and on a good price so it's really going to be.
A much slower cadence in Europe, and Asia will be Beatty, because it will be one country coming on at a time is engaged through word of this year.
And thanks, Chris and does it feel your last point I mean, I think we do definitely see the.
After that likes as a single global brand, which is kind of why we we headline in this way we down did mention and you'll see in the K that we're filing.
A geographic split out so the Q4 at U.S. revenue was just over 100 million.
And so there is we are you able in this quarter at least to show you what the ex US revenue was.
And do you expect that to continue.
Something we're looking at.
Okay. Thank you.
Thank you. Our next question comes from Cory Kasimov with Jpmorgan. Please proceed.
Hey, good afternoon, guys. Thank you for taking my question.
I wanted to see if you could talk more about how you see the IP position for Epidiolex I think a lot of people simply assume you get your orphan exclusivity, but don't really give you credit for the patents out to 2035 and even potentially beyond so can you just remind us of the significance of those patents in your level of confidence as to whether they can.
For the year protection for for the product that far into the future. Thanks.
Thanks, Carina it clearly.
Recognizes an area of ongoing sort of debate, but you know and we start than it has not unusual position because of the lack of events section here, but I think.
Appreciate the opportunity to reinforce the fact that the the strategy that we've adopted here is one that was started many years ago has led to.
A wealth of of filings and granted patents that there really are designed very specifically.
To match the key features of the label.
Nine already in place to new allowed patents to coming for Ts see more on their way. So you will see over the even over the next couple of years soon.
More additional patents in the orange, but with this 2035 timeline.
I think on top of that and we briefly alluded.
Towards the end of last year about a new.
Composition light patent, which is going through prosecution right now it's a different approach complements very much the use IP, but what was that the grand and where that too.
To emerge the way, we hope really puts us in a.
In a very different position as it relates to be.
Protection be on use in more directly to the product itself. So I appreciate as a journey to go through here, but I'm very comfortable saying that the investors recognize there's a lot of work that's going on already a lot of investment going on and.
And more more to come in addition of course with formulations as well so.
I think this is a story that is not not really hasn't yet begun and will play out over many years.
Okay. Thank you appreciate the thoughtful answer.
Thank you. Our next question is coming from the line as Phil Nadeau with Cowen and company. Please proceed with your question.
Afternoon, Congrats on progress.
The question is on the TSC market, you mentioned that that could be a growth driver in 2020, particularly once the label is is expanded to include TSC can you give us some sense of what penetration you havent PSC patients today, and whether epidiolex is being used.
In patients, who predominately a focal seizures.
Hey, Phil it's Darren.
So regarding current utilization, we think it's very minimal.
As you recall, we had the topline results press release in 2019. The data were presented for the first time at a us in December.
And so that data has not been disseminated as you know as you alluded to we just can't we don't promote to it because it's not on our label just yet, but when we look at where Trc is.
Being treated.
Most of these patients are across 40 or so institutions in the us.
There is some overlap with our current treating physician base. So.
Upon the label expansion in the launch of this we've as we alluded to in our remarks, our preparations well underway, we know our target sorry, we anticipate.
Getting out against pretty swiftly to communicate this data to them.
And what is your current understanding of the average dose thats used and how do you think that could change assuming you get the higher doses on the label with the TC label expansion.
Yeah, we don't disclose the exact those but we have said over the last 12 months, it's been creeping up towards the towards the middle of that dose range, Phil So thats the kind of the guidance we gave there.
As it relates to TSC of the thing the let the label is likely to include reference to the 25 milligram per kilogram. So that there may well be some effect on on the average dose at that point in time, obviously have much better when we see the better idea when we see the label.
Perfect. Thanks for taking my questions.
Thank you. Our next question comes from Palma teeth with Stifel. Please proceed.
Hi, This is Alex on for Paul just one question here.
So you mentioned that you are still less than about 50% penetrated.
Yes, and drive and just wondering.
You know how much of that you think you can close the gap on with payer access that you're kind of improving this year.
And what else do you think you can do to close that thanks.
As Darren I'll take I think closing the gap when we when we think about well first of all the LG extra Bay.
On label reimbursement is very good.
Again with sets a strong foundation for us moving forward when we think about market penetration. It's the available patients within the us that are diagnosed will drive NLG has.
Got a currently on.
Epidiolex sort of seen up a dialogue so we.
Feel confident theres plenty of growth available there within that labeled population.
And then as we've talked about the TSC label expansion in the second half of the year.
Hi, Thanks.
Okay.
Thank you in the next question comes from Salveen Richter with Goldman Sachs. Please proceed with your question.
Hey, Thanks for taking the questions as Ross on for Salveen.
Can you guys just highlight and talk a little bit more about the long term care segment. What is the patient numbers here look like how big is this opportunity and then some of the barriers they are likely to exist to penetrate this market.
Yeah, let's turn and thanks for question. So the long term care segment, which encompasses group homes.
Facilities that obviously patients cannot care for themselves.
We think theres about 300000 beds in the in the United States.
And we think about a quarter to a third of the patients have some form of seizure.
And so there's a tremendous opportunity there we've looked at analogs other eightys within the class and other of our peer groups that have have worked within the long term care facilities. So we think our approach with a small dedicated team.
To work within the buying groups educating the pharmacist all complement our neurology account management team will currently calling on.
Physicians.
To generate the demand. So we think in in 2020, it's a nice opportunity for us.
Great and then I guess is lastly here. If you can talk to you know any changes in the discontinuation rates are patterns, you're seeing in the us at these rates have gone are still consistent with what you're seeing in the clinical trials.
Yes still consistent.
Persistent says we think become a strength of the brand.
Great. Thanks.
Welcome.
Thank you. Our next question comes from Charles Duncan with Cantor Fitzgerald. Please proceed with your question.
Hi, This is Larry on for trial. Thank you for taking my questions and congratulations great year.
My question has to deal with the ongoing phase three rat study that you launched in May of 2019 could you maybe provide some more color on how enrollment is going and what you expect to complete enrollment and also if you have any insight and expect the timing of near term read outs or it is and why you plan to present baseline data for the study.
Thank you.
Hi, Thanks to the question I mean, we don't generally update on ongoing studies in terms of enrollment I mean this is not as study expected to report out in 2020, So I think.
They will just have a much better view later this year as to the and be able to give you more precise guidance, but it's not a 2020 item.
Okay. Thank you.
Yes.
Thank you. Our next question comes from Aster Rabelo with Oppenheimer and company. Please proceed with your question.
Hey, guys. Thanks.
Intends to the label expansion for KFC, you're doing a lot of legwork right now can expand access and.
And I'm kind of wondering what happens whether you can leverage that work when you nabel expands the PSC or would you have to it if renegotiate the contract at that point.
Odds Darren Thanks for the question you know we.
The Ts C and in our discussions with payers, we talk about Elds yesterday, but also payers want to know what's what's next so we're starting to discuss what the those data look like and I think when the payers are now as I alluded to in my remarks.
Evaluating their usual with utilization data or they'll take this into account when I go back to the value proposition. We have four LG essence survey is we believe.
Strengthened by the addition of TSC on the label.
Okay.
Gotcha and then.
Composition hadn't that you have fab you've recently submitted when do you anticipate a decision on the Pat.
Well go through prosecution for this year, so it will either be.
Moving towards the end of this year early next.
Okay. Thank you.
Thank you. Our next question comes from Yatin, Some major with Guggenheim. Your partners. Please proceed with your question.
Hey, guys. Thank you for taking my questions and congrats on a per quarter.
Just on the Q1 comment that you made that thing he said that performance should be consistent so just trying to understand some of the pushes and pulls in Q1, you don't expect a down quarter right and then in terms of channel inventory done that dynamics anything in for Q on Q1 that we need to keep an eye on.
Thanks for the for the question I'll take the first part let Scott talked about the second.
Regarding the this Q1, we really don't have a good compared to last year as I've stated because it was the first full launch here in 2019, but much like our peer companies, we're seeing resetting of deductibles Copays insurance and those types of things that you know of other folks experience, but of course you know.
We plan for those things and in Q1.
And we have a good team to minimize the impact but the issue remains for us as it does for everyone else and we continue to work through it.
And then now Yatin, it's Scott I'll take the second part of the question on inventory.
There are no.
Inventory dynamics that would be impacting the quarter I mean, one thing I would remind everyone is that.
Epidiolex is scheduled drug in for that reason the ability for there to be much inventory and channels very limited so there quarter to quarter dynamics from an inventory perspective or not significant okay. And then just just quickly one more question could you maybe give us a sense, where you ended 2019 on the average price and what sort of estimate you have.
On the average price that that.
As you and Twentytwenty. Thank you.
Yes, when we launch of this adjustment as and when we when we launched we we stated that we expected by the end of the first year to be other around an average of.
Gross of 32 and half thousand per patient.
Looked at across the patient population I think we ended up really pretty close to that actually so they are our assumptions ended up being correct.
And so as we move into this year.
We've taken a modest price increase but of course.
The net effect of that is.
It's less than the actually increase itself so.
There's no made material shift in in terms of how we expect the average price too too.
Pan out in 2020.
Great. Thank you very much.
Thank you. Our next question is from Douglas Tsao with HC Wainwright. Please proceed with your question.
Hi, good afternoon, Thanks for question and just.
If you could provide some perspective on the current access for full color onset seizures, and how do you expect that will change with the approval for T.S.C.
Later this year.
Hi, it's Darren I'll take the question, while focal is a predominant seizure types within CSC I think thats, how you have to view it I.
Physicians will diagnose Trc, which has a very specific diagnosis and focal seizures being the primary one and so thats. How we we look out at about again something that won't be promoting till we havent label expansion on the latter half of 2020, yes, but the product is not indicated in a broad adult critical onset seizure market in north.
Or is are we expecting that to be a driver of.
Utilization, it's it's not within our indications.
It's a different part of the market.
Okay, and just so as a follow up it would you expect the reimbursement will remain limited for both parts of Asia is focused on debt associated with USA.
I think once we have that label expansion I think that look at the the phase three data and.
And evaluate utilization based on.
What we just how I described how focal Paul as a part of the primary seizure type.
Within Ts.
Okay, great. Thank you.
Thank you. The next question is from Daniel Brims with Piper Sandler. Please proceed.
Hi, guys. Thanks had the questions I guess is a follow up to that last one are you seeing any reimbursement off label reimbursement Christa bogus easier tight I generally what types of seizures are being reimbursed.
And then I have a quick follow up.
I think with strolling Danielle Justin here with the kind of if the question is about.
Like treatment refractory patients on the but beyond survey and LG asked the which have been through multiple eightys et cetera.
Highly refractory then then as Darren said, we have experienced of those scripts getting through and if access widen thin the more those scripts. We go through I think we're just trying to make show that this is.
It is not the adult focal seizure drug in the in a way of and kept for another drug. So just trying to make sure that were not stretching into that territory. When answering this question, but when we when we think about access and how physicians prescribing this medication and wanting to use it is very much within.
The treatment resistant.
Setting.
And with some of those patients may well have focal seizures of course.
I see okay. Thanks for clarifying and then.
Okay and Fourk here did you have the same run rate as you as you quoted last quarter. I think you said about 3000, new patient AD and do you expect this rate to continue in the U.S. moving forward.
Yes, so weve as you know and everyone is aware we've kind of that metric is something that is not something we are using in 2020. If it was very much just for the launch so qualitatively there were no material for the changes in patent in the sort of patents that we saw in Q4 versus Q3.
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Got it thanks to the question.
Thank you. Our next question is from David critical with Altacorp Capital. Please proceed with your question.
Hi, good evening, congrats on the quarter and thanks for taking my and my question I have a couple of them. The first is.
More around here in the Big Smalls and Sativex program with your your phase Threea in the U.S. in particular now given that there has been I guess relatively little revenue contribution across Europe with Sativex in particular.
How should we be thinking.
Abode sativex in the US do you expect this is a more of a potential label expansion or within.
Spasticity due to amass is something that you did you feel will be fundamentally different in the us as opposed to Europe.
Yes, David it's Darren Thanks for the question.
I think when we look at the VIX malls in the U.S the opportunity initially.
We will be in the M.S. specificity on and as we've spoken to JP Morgan you know the spasticity in a larger.
Contacts there quite a few other diseases like spinal cord injury.
So those are the initial areas and I think when you look at market research.
In patients currently within a mess specificity and how they currently self Medicaid.
With kind of kind of us based products you know there's a there is the time is right both physicians and patients both would like an FDA approved.
Therapy to treat their spasticity.
Okay I think the.
I think David just to add color from a kind of ex U.S perspective going into the into the to the to the present day.
When that product was almost a decade ago.
It was a very different world, we were overcoming a lot of so the societal hurdles.
Symptomatic relief was generally not something that's been a focus in European for Europe for payers.
And I think this is this is truly.
A new and very different opportunity from the U.S market compared with.
A decade ago in Europe, which was a very different different world actually at that point.
Okay, that's very good and encouraging to hear thanks for that color Darden Justin on my last question. Just has to go just going back to your long long term care segment with Epidiolex in particular.
How do we view this I guess as far as.
Payer reimbursement here is this more of a refractory type epilepsy.
And what are the sort of timelines you expect with reimbursement on on this a patient segment.
Hey, David Exterran I think when you look I would I would view the long term care segment around who the payer is for some of the patients in its predominantly a Medicaid and Medicare where depending on the state for Medicaid I will depend on that what that Epidiolex policy is which is currently in place.
As well as Medicare plans, so I think we're well positioned.
Regardless of the payer throughout the you asked for US the the primary objective is identifying patients within these these settings and in generating demand.
And we think that the the payer landscape supports that.
Okay, Thanks, very much and congrats on the quarter.
Thank you. Our next question is from surge ballenger with Needham and company. Please proceed.
Hi, Thanks for taking my questions I'm, just one for Scott related to the Opex guidance.
Just wanted to see if you can give us.
Additional color maybe on the progression in the split between.
R&D and SJ and I think you also mentioned there was a $30 million to $40 million for manufacturing expansion.
Where are we in this manufacturing expansion.
Process and.
Is this the last year of.
We'll see this expense on a as part of Opex.
So let me take the first question on.
On the split between SDN and R&D I would just I think.
The split you would see on the financials.
But it wouldn't be a good starting point, a reasonable but I'll, let you would expect R&D.
As a percentage tick up a little bit.
Compared to that but I think I would at least be a good starting point I think the second question, we continue to to make investments in our manufacturing.
Facilities.
And so I Wouldnt say that this is the last year.
But you know it can probably continue into.
The 2021.
And then.
Beyond that hard to say, depending on how that business evolves.
Thanks.
Thank you we have reached the end of our question and answer session. So I'd like to pass the floor back over to management for any additional concluding comments.
Great. Thank you very much for your time today, and we look forward to updating you on progress with our Q1 results.
Later in the years. So thank you very much for your time and.
Good evening good afternoon.
Ladies and gentlemen, this does conclude today's event. We thank you for your participation and you may disconnect. Your lines at this time.
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