GW PHARMACEUTICALS PLC Note Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. We intend the forward-looking statements contained in this
report to be covered by the safe harbor provisions of such Acts. All statements
other than statements of historical fact in this report or referred to or
incorporated by reference into this report are "forward-looking statements" for
purposes of these sections. These statements include, among other things,
statements related to the Jazz transaction and the anticipated timing for the
completion thereof, the expected impact of COVID-19 on our business, any
predictions, opinions, expectations, plans, strategies, objectives and any
statements of assumptions underlying any of the foregoing relating to the
company's current and future business and operations, including, but not limited
to, financial matters, development activities, clinical trials and regulatory
matters, manufacturing and supply operations, and product sales and demand. The
words "believe," "may," "will," "estimate," "continue," "anticipate," "intend,"
"expect" and similar words are intended to identify estimates and
forward-looking statements. Estimates and forward-looking statements speak only
at the date they were made, and we undertake no obligation to update or to
review any estimate and/or forward-looking statement because of new information,
future events or other factors. Statements of past performance, efforts, or
results about which inferences or assumptions may be made can also be
forward-looking statements and are not indicative of future performance or
results; these statements can be identified by the use of words such as
"preliminary," "initial," or other forms of these words or similar words or
expressions or the negative thereof. These forward-looking statements are
subject to substantial risks and uncertainties that could cause our results or
future business, financial condition, results of operations or performance to
differ materially from our historical results or experiences or those expressed
or implied in any forward-looking statements contained in this report. These
risks and uncertainties include, but are not limited to: risks and uncertainties
related to the sanction of the
Overview
We are a biopharmaceutical company focused on discovering, developing and commercializing novel therapeutics from our proprietary cannabinoid product platform in a broad range of disease areas. In over 20 years of operations, we have established a world leading position in the science, development, and commercialization of plant-derived cannabinoid therapeutics through our proven drug discovery and development processes, our intellectual property portfolio, and regulatory, manufacturing, and commercial expertise.
On
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order to complete the Transaction were each approved. Completion of the
Transaction remains subject to the sanction by the
Our lead cannabinoid product is Epidiolex®, a pharmaceutical formulation
comprising highly purified plant-derived cannabidiol (CBD), for which we retain
global commercial rights. We initially launched Epidiolex in the
Epidyolex® (the trade name in
We continue to develop Epidiolex for additional indications. Within the field of epilepsy, we are committed to expanding the potential for Epidiolex and plan to commence an additional clinical program in 2021.
We have a deep pipeline of additional cannabinoid product candidates that
includes compounds in Phase 1, Phase 2, and Phase 3 trials. Our most advanced
pipeline asset is nabiximols, for which we have commenced two out of five
clinical trials for the treatment of spasticity due to multiple sclerosis. The
other three are expected to commence in 2021. We believe that any one of these
studies could enable a new drug application (NDA) submission with the FDA. We
anticipate commercializing nabiximols in the
In addition to nabiximols, our pipeline includes cannabinoid product candidates for schizophrenia, autism spectrum disorder, various potential targets within neuropsychiatry, and Neonatal Hypoxic Ischemic Encephalopathy. Clinical trials for each of these indications are ongoing.
In addition to seven years of orphan exclusivity, we seek to protect Epidiolex
through the expansion of our patent portfolio. Our patent portfolio relating to
the use of CBD in the treatment of epileptic encephalopathies includes 91
distinct patent families that are either granted or filed. Most of the patent
families in this portfolio claim the use of CBD in the treatment of particular
childhood epilepsy syndromes, seizure sub-types and interactions with other
concomitantly dosed anti-seizure drugs. To date, we have obtained 91 Epidiolex
patent families and 157 total patent families. Some of these patents are
directly aligned with the Epidiolex label, and we have listed 15 patents in the
Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known
as the Orange Book), and received notices of allowance for a further two patents
from the USPTO). These patents have expiry to 2035 and include claims for the
use of CBD for the treatment of convulsive, drop and atonic seizures associated
both LGS and Dravet syndrome, an oral composition of CBD, as well as the use of
CBD with clobazam, and the teaching that dose adjustment may be needed when
concomitantly prescribed. We filed patent applications in the
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Epidiolex comprises up to 2% of other cannabinoids. It would appear from this early data that the presence of these cannabinoids, albeit in small amounts, provides an additional benefit over CBD alone in an animal model of epilepsy. This patent, if granted, will have an expiry date of 2039. We continue to identify novel findings and submit patent applications resulting from the Epidiolex development program and we expect additional grants from these applications.
Impact of COVID-19 on our Business
In
In
Throughout the COVID-19 pandemic, we have been able to continue operating our manufacturing facilities at normal levels through the implementation of strict safety measures. While we currently do not anticipate any interruptions in our manufacturing process, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our and/or our third-party suppliers' ability to manufacture our products.
While we are continuing to initiate and execute clinical trials at sites across the globe, COVID-19 precautions continue to directly and indirectly impact the timeline for some of our planned clinical trials and other research and development activities.
In the
For additional information on the various risks posed by the COVID-19 pandemic,
refer to Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for
the year ended
Critical Accounting Estimates
Our condensed consolidated financial statements are prepared in accordance with
accounting principles generally accepted in
For a discussion of our critical accounting estimates, please read Part II, Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations in our Annual Report on Form 10-K for the year ended
Recent Accounting Pronouncements
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The adoption of new accounting standards is discussed in Note 2 to our interim unaudited condensed consolidated financial statements.
Results of Operations
The following table summarizes the results of our operations for the three
months ended
Three Months Ended
March 31,
2021 2020 Increase/Decrease
(in thousands)
Consolidated Statement of Operations Data:
Revenues:
Product net sales $ 152,443 $ 120,532 $ 31,911
Other revenue 23 101 (78 )
Total revenues 152,466 120,633 31,833
Operating expenses:
Cost of product sales 11,807 10,769 1,038
Research and development 60,634 45,874 14,760
Selling, general and administrative 101,052 71,183 29,869
Total operating expenses 173,493 127,826 45,667
Loss from operations (21,027 ) (7,193 ) (13,834 )
Interest income 146 1,269 (1,123 )
Interest expense (286 ) (284 ) (2 )
Foreign exchange loss (573 ) (20 ) (553 )
Loss before income taxes (21,740 ) (6,228 ) (15,512 )
Income tax (benefit) expense (2,063 ) 1,737 (3,800 )
Net loss $ (19,677 ) $ (7,965 ) $ (11,712 )
Product net sales
Epidiolex, our treatment for certain severe childhood-onset, drug-resistant
epilepsy syndromes, was launched in
Product net sales for the three months ended
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Cost of product sales
Cost of sales increased
Research and development expenses
We believe that our future revenues and cash flows are most likely to be
affected by the successful development and approval of our significant
late-stage research and development candidates. As of
In addition, our pipeline includes cannabinoid product candidates for schizophrenia, autism spectrum disorder, various potential targets within neuropsychiatry, and Neonatal Hypoxic Ischemic Encephalopathy.
In
In
In
Research and development expenses consist of internal and external costs to
conduct our pre-clinical studies and clinical trials, payroll costs associated
with employing our team of research and development staff, share-based payment
expenses, property costs associated with leasing laboratory and office space to
accommodate our research teams, costs of growing botanical raw material, costs
of processing product for clinical trials, costs of consumables used in the
conduct of our in-house research programs, payments for research work conducted
by sub-contractors and sponsorship of work by our network of academic
collaborative research scientists, costs associated with safety studies and
costs associated with the development of Epidiolex, Sativex, and our other
pipeline product candidates. Research and development expense is presented net
of reimbursements from reimbursable tax and expenditure credits from the
We track all research and development expenditures against detailed budgets but do not seek to allocate all research and development costs by individual project. The components of R&D expense for the three months endedMarch 31, 2021 and 2020 are as follows: Three Months Ended March 31, 2021 2020 (in thousands) External clinical trial expense Epidiolex$ 3,412 $ 5,913 Nabiximols 4,061 1,413 Other programs 5,606 3,625
Total external clinical trial expense 13,079 10,951 Research and development tax and expense
credits (1,065 ) (816 )
Other internal research and development 48,620 35,739
Total research and development expense
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Research and development expenses increased
Sales, general and administrative expenses
Sales, general and administrative, or SG&A, expenses consist primarily of salaries and benefits related to our executive, commercial, and corporate support functions, expenses associated with our commercial activities, and other general administration expenses.
SG&A expenses increased
Interest income
Interest income decreased
Interest expense
Interest expense remained consistent for the three months ended
Foreign currency exchange (loss) gain
Foreign currency exchange loss was
Income tax (benefit) expense
The provision for income taxes is determined using an annual effective tax rate. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as expected utilization of research and development tax credits, valuation allowances against deferred tax assets, the recognition or derecognition of tax benefits related to uncertain tax positions, and changes in or the interpretation of tax laws in jurisdictions where we conduct business. Also, excess tax benefits and tax deficiencies related to future stock option exercises could result in fluctuations in our effective tax rate in future periods.
Income taxes arise in
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Liquidity and Capital Resources
In recent years, we have incurred significant net losses and negative cash flows from operations. We have largely funded our operations from issuances of equity securities, government expense and tax credits, and milestone payments from our out-license partners. Our cash flows may fluctuate, are difficult to forecast and will depend on many factors, including:
• the timing of achievement of future regulatory approvals and commercial
launches in the United States and Europe ;
• the extent to which we seek to retain development rights to our pipeline
of new product candidates or whether we seek to out-license them to a
partner who will fund future research and development expenditure in
return for a right to share in future commercial revenue;
• the extent of success in our early pre-clinical and clinical stage
research programs which will determine the amount of funding required to
further the development of our product candidates;
• the terms and timing of new strategic collaborations;
• the number and characteristics of the product candidates that we seek to
develop;
• the outcome, timing and cost of regulatory approvals of our product
candidates;
• the costs involved in filing and prosecuting patent applications and
enforcing and defending potential patent claims; and
• the costs of hiring additional skilled employees to support our
continued growth.
We believe that our cash and cash equivalents as of
Cash Flows
The following table summarizes the results of our cash flows for the three
months ended
Three Months Ended
March 31,
2021 2020
Net cash used in operating activities
(5,606 ) (213 )
Cash and cash equivalents at end of period
Operating activities
As of
Investing activities
Net cash used in investing activities was
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investing activities for the three months ended as of
Financing activities
Net cash used in financing activities was
Contractual Obligations
There have been no significant changes to the disclosure of payments we have
committed to make under our contractual obligations as summarized in our Annual
Report on Form 10-K for the twelve months ended
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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