GW Pharmaceuticals PLC (NASDAQ: GWPH) Q1 2020 Earnings Call Transcript

GW Pharmaceuticals PLC (GWPH) Q1 2020 earnings call dated May. 11, 2020

Corporate Participants:

Stephen Schultz — Vice President, Investor Relations

Justin Gover — Chief Executive Officer

Darren Cline — U.S. Chief Commercial Officer

Chris Tovey — Chief Operating Officer

Volker Knappertz — Chief Medical Officer

Scott Giacobello — Chief Financial Officer

Analysts:

Cory Kasimov — JP Morgan — Analyst

Salveen Richter — Goldman Sachs — Analyst

Tazeen Ahmad — Bank of America Merrill Lynch — Analyst

Phil Nadeau — Cowen and Company — Analyst

Marc Goodman — SVB Leerink — Analyst

Paul Matteis — Stifel — Analyst

Serge Belanger — Needham & Company — Analyst

Esther Rajavelu — Oppenheimer — Analyst

Neena Bitritto-Garg — Citi — Analyst

Yatin Suneja — Guggenheim Partners — Analyst

David Kideckel — AltaCorp Capital — Analyst

Presentation:

Operator

Greetings and welcome to the GW Pharmaceuticals First Quarter 2020 Financial Results 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] It is now my pleasure to introduce your host, Mr. Stephen Schultz, Vice President, Investor Relations. Thank you, sir. You may begin.

Stephen Schultz — Vice President, Investor Relations

Welcome all of you and thank you for joining us today for our first quarter 2020 results call. Again, I’m Steve Schultz, Vice President of Investor Relations at GW and today I’m joined by Justin Gover, GW’s Chief Executive Officer; Darren Cline, U.S. Chief Commercial Officer; Chris Tovey, our Chief Operating Officer; Dr. Volker Knappertz, Chief Medical Officer; and Scott Giacobello, our Chief Financial Officer. We hope you’ve had a chance to review our press release issued a short while ago and expect to file our Form 10-Q later today.

As a reminder, during today’s call, we’ll be making certain forward-looking statements. These statements reflect GW’s current expectations regarding future events, including but not limited to, statements regarding financial performance, clinical and regulatory activities, patent applications, timing of product launches, and statements relating to market acceptance and commercial potential. Forward-looking statements involve risks and uncertainties and actual events could differ materially from those projected herein. A list and description of risks and uncertainties associated with investment in GW can be found in the company’s filings with the U.S. Securities and Exchange Commission. These forward-looking statements speak only as of today’s date, May 11th, 2020. Finally, an archive of today’s call will be posted to the GW website in the Investor Relations section. I’ll now turn the call over to Justin Gover, GW’s Chief Executive Officer.

Justin Gover — Chief Executive Officer

Thank you, Steve and welcome to all those who have joined us today. Let me begin by expressing my best wishes to you and your families in these extraordinary times that we are living through. I hope that all of you are healthy and safe. When the significant risks of the COVID-19 situation became evident, GW acted rapidly to develop an action plan with the primary goals of protecting the safety and well-being of our employees and safeguarding patient access to our medicines. With the exception of our manufacturing personnel, our company moved to a work-from-home operation in mid-March and this continues to work well. I’m impressed with the flexibility and agility of our entire organization pivoting to operate in this new environment and want to take this opportunity to express my appreciation to our employees for the way in which they have responded to this crisis. We have not had any interruptions in ensuring that our medicines are available to those who rely on them for their daily health and we continue to make progress across all areas of the business.

We at GW control our own manufacture and supply chain, which has proven to be very beneficial. This control has not only enabled GW to ensure manufacturing continuity, but it has in fact allowed us to increase Epidiolex production in recent weeks. I will ask Chris to provide more detail on the specific actions his team have taken regarding production as well as his thoughts on the progress of Epidiolex commercialization in Europe later in the call. Our commercial teams continue to actively interact with clinicians albeit virtually. We are fortunate that going into this COVID-19 situation, Epidiolex brand awareness was very high among both patients and physicians. Our specialty pharmacy model, which features direct home delivery for the vast majority of our patients has been in place since launch and continues to work well. In a moment, I will have Darren provide his perspective on how the U.S. commercial operation is adjusting and preparations for the expected upcoming TSC launch and insights to date on the second quarter. Following the U.S. and European commercial updates, Volker will provide an R&D update and Scott will review our financial results. Let me now hand the call over to Darren for a U.S. commercial update.

Darren Cline — U.S. Chief Commercial Officer

Thank you, Justin. I’m very pleased to report continued growth and strength of Epidiolex U.S. sales in the first quarter. We continue to hear feedback from both caregivers and healthcare professionals as to how this transformational therapy continues to improve the lives of thousands of patients. U.S. Epidiolex sales were $106.1 million in the first quarter compared to $33.5 million in the equivalent quarter last year. You will recall in our Q4 call, we discussed the likely seasonality impact in Q1 common to the anti-epilepsy drug class. While we did see this expected seasonality effect in January and early February, the latter half of the quarter, particularly March, showed strong sales growth.

Overall, we believe our proactive efforts to support patients managing through reauthorization requirements, out of pocket resets, and change of employer plans led to a minimal drop off in refill rates. As COVID-19 took hold in March, we do not believe there was a pulling forward of Epidiolex prescription into the first quarter. Given that Epidiolex was, until very recently scheduled, the majority of health plans did not approve 90-day fills. As a result, we see the Q1 revenue number as an indicator, but there remains significant potential for the growth in the brand in 2020. New patient starts were consistent with the prior quarter and retention remains a strength of the brand. We continued to see a slight increase in average dosing during the quarter.

As discussed in our previous earnings call, our adoption of Epidiolex varies across different target segments. Our penetration in and prescribing of our top level targets is driving nearly half of TRxs with 97% of those targets haven’t [Phonetic] written a prescription in Q1. We continue to believe that the next wave of prescribers, which account for over 1,000 HCPs is a significant growth opportunity for the brand and a key focus for our commercial team in 2020. During Q1, we saw increased prescriber penetration in this group with nearly 90% having prescriptions filled. All HCP deciles added prescription volume and grew market share over Q4.

As the effects of COVID-19 started to take hold in mid-March, we suspended all face-to-face field sales activities, but we have continued to interact with our customers on a virtual basis. Once we transitioned to the virtual setting, we were able to provide our sales team with updated core materials optimized for digital distribution along with the ability to, where appropriate, engage in virtual interactive lunch and learns. We were also successful in converting 70% of previously scheduled live speaker programs to an online platform.

While we have seen a significant decline in the number of engagements, as you would expect, the quality of the engagements that are taking place are robust and meaningful conversations focused on identifying patients that can benefit from Epidiolex. We continued to see solid performance during April and in general feel that Epidiolex as a product that has the attributes to stay strong even in the COVID-19 environment. To date, the impact of COVID-19 has been less than we had feared. That said, we must recognize that few patients are currently visiting their physicians in person and that many epilepsy physicians are not accustomed to initiating new therapies through telemedicine. This is therefore a more challenging environment for new patient initiations in the second quarter.

Looking at the market more broadly, market research conducted in the first quarter prior to COVID-19 continued to show intent to increase Epidiolex use. While the majority of use identified in our research is coming from DS and LGS, approximately 60% of HCP’s interviewed reported using Epidiolex for other refractory epilepsies with the intent to grow use in these other segments. One of our initiatives in 2020 is a focus on the long-term care segment and we completed the build out of our account team in Q1. As we all know, long-term care has been impacted particularly hard by the pandemic.

That said, we have started to execute our plan and launched a collaboration with the largest long-term care group purchasing organization during the quarter. This allows us to interact and educate 1,100 plus independent long-term care pharmacies and associated consultant pharmacists within their network. We plan on rolling out virtual Epidiolex education programs to this audience next month.

Looking ahead and beyond COVID-19, the recent DEA action to deschedule Epidiolex is a positive development for the brand that will have long-term benefits for healthcare providers, patients, and caregivers. While this descheduling is now complete at a federal level, there remains ongoing administrative work within many states and we hope will be completed later this year. We are excited about the expected label expansion at the end of July to include seizures associated with TSC. Our pre-launch preparations are well underway with our medical, market access, and marketing teams all having conducted extensive market research, advisory boards, and other launch planning activities that will position us for a successful launch into this disease state.

Regardless of the COVID-19 circumstances, we are planning for this launch for either an in-person or virtual sales environment. Interestingly, our market research suggests most clinicians are not currently aware of the Epidiolex TSC data and we believe they will be highly receptive to our outreach from our commercial team when we receive approval. I want to remind you that the estimated number of patients that have seizures within the TSC population is 40,000 to 45,000, a doubling of the addressable diagnosed patient population. This expansion is clearly an important opportunity for growth in the second half of this year and beyond.

Turning to our payer initiatives, we started the new year with continued momentum in our discussions around the evolving coverage for Epidiolex in DS, LGS, and broader intractable epilepsies. We are using these interactions to engage payers with the goal of removing or easing PAs and moving to simple step edits where appropriate. Our conversations also now include the future inclusion of TSC into their Epidiolex policies. These have been very productive conversations and we foresee near immediate inclusion of the TSC indication within most plans upon approval. This review of TSC and the anticipated approval coincides nicely with their current utilization review of Epidiolex. The plan’s utilization data continues to show appropriate use in LGS and DS and the vast majority of other intractable epilepsy claims are being approved via the plan’s appeals or peer-to-peer process. While COVID-19 has had an impact on the scheduling of some important payer meetings in the last six weeks, we remain confident that payer policy will evolve and expand throughout the remainder of the year.

In conclusion, we are well-positioned to see continuation of U.S. sales momentum in the remainder of 2020. This medicine addresses the significant unmet need and has proven itself to provide meaningful and sustained seizure reductions in otherwise treatment-resistant patients. Intent to increase prescribing among HCPs remains high, payer discussions are heading towards further opening of access and in the next few months, we expect to expand the opportunity significantly through the launch of the TSC indication.

We continue to be focused on serving our patients and providers during this extraordinary time and are comforted that Epidiolex continues providing benefit to patients and families in need. Now I’ll turn the call over to Chris to provide an update on progress in Europe and manufacturing.

Chris Tovey — Chief Operating Officer

Thank you, Darren. Let me start with an update on global manufacturing and supply chain, which falls under my oversight. First and foremost, GW’s significant investments in our own manufacturing facilities and limited reliance on other organizations in our production process has given us the ability to control the environment and the output. We’ve implemented numerous operating changes to ensure the safety of our manufacturing staff and I’m pleased to report that they are working effectively with no impact on our production schedule.

As a result, our manufacturing facility is operating at its highest levels of efficiency and we’ve been able to build up significant stocks of U.S. and European product. Importantly, with the recent news of the descheduling of Epidiolex in the U.S., we can now look forward to greater simplicity in our supply chain, which further enhances our ability to ensure U.S. patient supply continuity.

Now, switching to our Epidiolex launch in Europe, which is predominantly focused on five major markets. In the first quarter, we made good progress against our launch plans. As I’ve stated previously, in 2020, our principal focus is on securing favorable pricing and reimbursement conditions for Epidiolex in the major European markets.

In the U.K., towards the end of 2019, we received endorsement from [Indecipherable] and central funding for Epidiolex from the NHS in England was introduced in January. In Italy, the reimbursement authorities have now completed the first step in their process by awarding Epidiolex innovation status on the basis of clinical value. Consequently, following finalization of pricing negotiations with the reimbursement authorities, which is still expected later this year, Epidiolex will be funded centrally as opposed to through regional funding which would have taken more time to secure and could have varied across Italy. This is an excellent result.

In Germany, where Epidiolex enjoys orphan medicine status within the pricing and reimbursement process, we’ve received a positive GBA benefit rating. Further, the GBA also considered the value of Epidiolex 10 mg per kg per day to be considerable which ensures that we’re in good shape as we enter the pricing negotiation phase. In France, the number of Epidiolex patients in the French regulatory agency sponsored ATU early access program continues to grow and in parallel with this, we’re making good progress in the pricing and reimbursement process with the Transparency Commission. Finally, we’re also enjoying early success in our second wave of European countries as we’ve been granted early temporary reimbursement in Sweden whilst our submission is still under review.

Along with these pricing and reimbursement successes, sales in the first quarter from the commercial launch countries of Germany and the U.K. represent a good start. Ex-U.S. net sales in Q1 totaled $10 million. This number is, in part, flattered by the transition of early access patients and some additional long-term prescriptions being written in March as Germany and the U.K. entered COVID related lock downs. In addition, these sales do include a contribution from ATU and EAP sales in France and Spain, respectively. With that said, these sales clearly demonstrate a positive reaction to the Epidiolex proposition by physicians. The COVID-19 crisis has come at a difficult time in our European launches as our sales organization was just beginning to establish relationships and educate clinicians. With all of our commercial and medical customer facing staff now working from home and customer engagement limited largely to digital channels, their contact with physicians is significantly constrained.

Looking ahead, epilepsy clinics in Europe are heavily impacted by COVID-19 and new patient initiations are currently reduced. This reality will mean that the return to normal treatment and prescribing practices will be prolonged and will particularly impact the next few months in the two commercial launch countries. Thank you and let me hand the call to Volker for his update.

Volker Knappertz — Chief Medical Officer

Thank you, Chris and good day everyone. Before I begin, I would like to add my personal thanks and appreciation to all the healthcare and service professionals who continue to work so hard on the front lines during this pandemic.

Regarding our Epidiolex program, I am pleased to report that the FDA has accepted our sNDA for the use of Epidiolex to treat seizures associated with tuberous sclerosis complex. The FDA has granted priority review, which highlights the unmet need for new treatment options for patients with TSC and the PDUFA date has been set for July 31st, 2020. In Europe, we also submitted a type 2 variation application to the European Medicines Agency and recently received notice that this filing also has been accepted for their review. If approved, Epidiolex will be shown to be effective in treating seizures associated with Lennox-Gastaut syndrome, the Dravet syndrome and tuberous sclerosis complex, thus confirming the broad anti-seizure effects of this medicine. The publication of our Phase 3 TSC trial is currently under review by a major medical journal.

Moving to clinical trials, like for the rest of the industry, COVID-19 has caused disruption to our activities. Our clinical operations team has been using this time productively to plan for a successful restart of our studies depending on the regional COVID-19 situation. All startup activities have continued and we are now in a position to initiate study sites in the upcoming weeks. As small clinical trial sites in various regions continue to resume a more normal pattern of activity, we anticipate our studies will return to standard operations and we look forward to delivering our clinical activities to plan. As we emerge from COVID-19, I’m excited at the extensive clinical program planned for this year. Indeed, by the end of this year, we expect to be conducting seven Phase 2 and four Phase 3 trials as well as one Phase 4 study. We will also be conducting six Phase 1 trials on new pipeline products and formulations. Further trials are also in the planning for 2021.

As we look ahead in the next wave of cannabinoid products, it is clear that nabiximols is our top priority. Nabiximols offers a near-term route to market in the U.S. and is a product for which extensive safety and efficacy data already exist and which is already manufactured at commercial scale. It is truly a pipeline in the product with at least three target indications expected to be developed over the next few years. U.S. market research demonstrates that it has significant commercial potential in MS spasticity, spinal cord injury spasticity, and the broader spasticity market. As a complex botanical product, we also believe that nabiximols may benefit from long exclusivity. Interactions with the FDA have been particularly productive. For MS spasticity, we are able to bridge from previously conducted positive Phase 3 trials in Europe by adding a new Phase 3 placebo-controlled trial with approximately 450 patients and a number of smaller mechanistic studies to the body of evidence.

We had been expecting to commence this program in the second quarter, but in light of COVID-19, now expect this to begin in the second half of this year. Towards the end of 2020, we also expect to commence the spinal cord injury spasticity clinical program as well as a Phase 2 trial in post-traumatic stress disorder. Beyond nabiximols, we are advancing Phase 2 programs in autism, schizophrenia, and neonatal hypoxic ischemic encephalopathy. In addition, a number of earlier stage programs are being ready to enter the clinic in 2021. As we emerge from COVID-19, I very much look forward to updating you as we commence these important clinical trials. Thank you and let me now hand the call to Scott Giacobello to provide the financial review.

Scott Giacobello — Chief Financial Officer

Thank you, Volker and good afternoon. I’ll now provide high level comments on GW’s financial results for the quarter ended March 31st, 2020. A more detailed discussion of results will be provided in our 10-Q to be filed with the SEC later today. I’ll start with revenue. Total revenue for the quarter was $120.6 million compared to $39.2 million in the prior year quarter. This increase is due primarily to global Epidiolex net sales of $116.1 million in the quarter. Total deductions from gross sales for allowances were $31.1 million for the quarter compared to $7.5 million in the prior year and relate mainly to Epidiolex. Gross to net performance in the quarter is in line with our expectations. Cost of sales amounted to $10.8 million for the quarter or 9% of net product sales compared to $5.1 million or 13% of net product sales in the prior year quarter.

Moving to R&D spend, total research and development expense for the quarter was in line with the previous quarter at $45.9 million. This represents an increase of $15.5 million from the prior year quarter. This increase reflects expenses related to the ongoing Epidiolex development program as well as advancing the nabiximols clinical program and our other pipeline programs. Turning to SG&A. Selling, general and administrative expenses increased to $71.2 million in the quarter from $55.1 million in the same period in 2019. This increase is primarily due to costs related to the launch of Epidiolex in the U.S. and the build out of our commercial operations in Europe. This has all resulted in a net loss for the quarter of $8 million compared to $50.1 million in the prior year quarter.

Moving on to cash flow. Net cash used in operating activities for the quarter amounted to $18.6 million compared to $58.4 million for the prior year quarter. Capital expenditure was $6.9 million compared to $12.3 million in the same period in 2019. As previously announced, during the quarter, we re-acquired the rights to commercialize Sativex in the U.K. from Bayer for approximately $6.4 million. The cost to reacquire the license has been capitalized as an intangible asset and will be amortized over its estimated useful life. The resulting net decrease in cash and cash equivalents for the quarter amounted to $36 million. We ended the quarter with cash and cash equivalents of $500.9 million.

Turning to guidance, the full extent to which the COVID-19 pandemic will impact our expenditure for the remainder of the year is uncertain and at this time, there is no change to our previous guidance. We continue to expect R&D and SG&A expenses for 2020 in the range of $530 million to $560 million and capital expenditure in the range of $30 million to $40 million. We do anticipate, however, that spend will be in the lower-end of the ranges. Thank you and I’ll now hand the call back to Justin.

Justin Gover — Chief Executive Officer

Thank you, Scott. As you have heard, Epidiolex continues to demonstrate strong receptivity in both the U.S. and in Europe and even in the COVID-19 environment, we see major growth opportunities in 2020 particularly as we expand the products use to include the seizures associated with TSC significantly broadening its overall utility in epilepsy. We continue to believe that Epidiolex has a long commercial life ahead. With the addition of another patent last week, we now have 10 patents listed in the orange book and we expect the addition of further LGS, DS, and TSC patents this year. These patents expire in 2035 and provide real confidence in the durability of the brand.

In addition to the use patents granted and under review, we continue to progress the composition patent application process and while our clinical trials are on hold until the current restrictions are sufficiently eased, this is a temporary situation and we continue to expect important pipeline progress in 2020. At the forefront of that list is nabiximols, an exciting late-stage program for GW in the U.S. for which we expect extended exclusivity. We strongly believe that now is the ideal time for this product to emerge into the U.S. and believe that it can meet patient needs across multiple indications in the coming years. Indeed, we are now planning a virtual deep dive for investors and analysts on this product. So please look out for further details of this event in the coming weeks.

I do believe that GW is as well-positioned as any company to withstand the impact of the COVID-19 situation and to emerge from this crisis with real momentum for both Epidiolex and the pipeline. Again, we hope you and your families are safe and healthy during these challenging times and on behalf of GW, I want to thank those workers on the front lines from doctors, nurses to all other essential workers who are continuing to provide critical services. Also, I’m extremely grateful to those GW manufacturing employees that have made a significant commitment to maintain our operations in recent weeks to ensure patient access to our medicines. Thank you for your time today and I look forward to updating you on future progress. I would now like to open the call for a few questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Cory Kasimov with JP Morgan. Please proceed with your question.

Cory Kasimov — JP Morgan — Analyst

Hey, good afternoon guys. Thank you for taking my question. I wanted to ask you about the descheduling of Epidiolex. It sounds like there hasn’t been any sort of acute tailwind from this just given the administrative work that needs to be completed, but can you talk about what you see as the impact kind of longer term, how much easier does this make access for patients and providers alike and what might it mean for off-label use?

Justin Gover — Chief Executive Officer

Hey, Cory, it’s Justin here. Thank you for the question. I’ll start and maybe hand to Darren in a second. So, just as you said, to clarify the process, the descheduling is complete at the federal level. Different states operate in slightly different ways when it comes to this issue. So there will be a process over the coming months for this to take place throughout the union. So one wouldn’t expect immediate impact, but one would expect during the course of this year for descheduling to be actioned across all 50 states, but Darren maybe some practical implications?

Darren Cline — U.S. Chief Commercial Officer

Yeah, sure. Hi, Corey. Thanks for the question. I think there are a few that we can think about. One is the ability for physicians to write for a longer duration of therapies, three months to, in some cases out to a year. It also provides flexibility in some states for nurse practitioners or physician assistance to write prescriptions and then lastly, I would think I’d point to just the ability of prescriptions to more easily move from specialty pharmacy to other specialty pharmacies that are perhaps in network. So those are the long-term benefits we see from from the descheduling and early feedback once this all gets sorted out is excitement across the physician base around this.

Cory Kasimov — JP Morgan — Analyst

Okay. Thanks for taking the question. Nice to see a good quarter. Thanks guys.

Operator

Thank you. Our next question comes from the line of Salveen Richter with Goldman Sachs. Please proceed with your question.

Salveen Richter — Goldman Sachs — Analyst

Good afternoon and thanks for taking my questions. So just maybe you could just comment on organic growth here and in this current period how doctors are looking at diagnosis and telemedicine as we look to an additional add-on on a launch with a new indication.

Justin Gover — Chief Executive Officer

Thanks, Salveen. Darren, I think I’ll hand this one to you.

Darren Cline — U.S. Chief Commercial Officer

Yeah, sure. Hi, Salveen. Thanks for the question. I think that physicians now, I think you mentioned telemedicine. As you know, we entered into mid-March and we moved to not only pulling our field, but we started to see move to shelter for patients and physicians. Not a lot of epilepsy centers were set up for telemedicine, but in general, I think the disease state will lend itself very well for the future, but I think that, and then also that from a patient retention perspective, but I think new diagnoses are difficult in the telemedicine and epilepsy world, at least as they did this transition mid-March through April and I think as we see things opening up in the future, they’ll get more settled in as it relates to the ability to manage patients via telemedicine.

Salveen Richter — Goldman Sachs — Analyst

Thank you.

Operator

Thank you. Our next question comes from the line of Tazeen Ahmad with Bank of America. Please proceed with your question.

Tazeen Ahmad — Bank of America Merrill Lynch — Analyst

Hi, good afternoon guys. Thanks for taking the question. Maybe, Justin, can you give us a little bit of color on how your expectations are set or how we should set our expectations for the TSC launch. I think in the past you had indicated not to expect the same type of initial pent up bolus of demand that you had been when you launched your first two indications, but at the same time, just based on some of the market data research you’ve done or told us about today, there does seem to be a significant amount of physicians who may not fully know about PSC. So should we assume that the contribution of TSC initially would be led by doctors being educated and there isn’t already a decent amount of off-label use in that indication and then I have a quick follow-up.

Justin Gover — Chief Executive Officer

Yeah, thanks Tazeen, maybe I’ll start and Darren maybe you can add. I mean I think it’s an interesting launch and obviously a different circumstance to when we first launched Epidiolex in that there was obviously no option for patients prior to the launch. There is that case for TSC patients today, but I think research continues to demonstrate that usage in TSC is not high at this moment and so plenty of opportunity here. I think it’s also reasonable to say that as I think Darren put it and said in his remarks that whilst we have a lot of the key investigators within the community that know the product within TSC, broad awareness of our TSC data is not as high and I think that actually represents a really good opportunity for real growth, but it will be a different dynamic to the launch experience that we had with Dravet and LGS. Maybe Darren hand to you for maybe payer aspects of this as well?

Darren Cline — U.S. Chief Commercial Officer

Yeah, I think there’s a couple, Tazeen, that we think about — one just to that prescriber awareness. You know in our market research, when we’re able to show for those that are not aware, show them a target product profile, it’s very high and I think the focal seizure aspect being the predominant seizure type in these patients also gives physicians a greater appreciation for how they may utilize this and adopt it in their practice. I think on the payer front, as I alluded to in my prepared remarks with the priority review and the PDUFA date at the end of July, this has really accelerated payer interactions focused on TSC and initial reaction is very easy add to their current Epidiolex policy.

This in conjunction with already the utilization review that they continue to do around LGS with Dravet and the other refractory epilepsies that are upon appeal or peer-to-peer or getting approved. So these two are coming together very nicely and so we expect broad coverage for TSC upon approval and I think lastly because of the call to profile [Phonetic] that we currently have as we get closer to approval, more targeting of physicians, whether in the COVID environment, whether its face-to-face or in the virtual, I think this type of data, this label expansion, physicians will be very eager to engage with us regardless of that COVID-19 environment. So as we prepare for that, we think this is an important label expansion and important for patients and physicians.

Tazeen Ahmad — Bank of America Merrill Lynch — Analyst

And do you expect patients to be on a higher dose relative to the other two indications? Thanks.

Justin Gover — Chief Executive Officer

We do expect the label to reflect the TSC data namely the 25-milligram per kilogram maximum dose. So we don’t expect that the bottom of the dose range to change though. So it may lead to some additional increase. It obviously depends on exactly how the label is written, but we do expect some increase to the max of that might have an impact certainly within the TSC population on the average dose.

Tazeen Ahmad — Bank of America Merrill Lynch — Analyst

Okay, thank you.

Operator

Thank you. Our next question comes from the line of Phil Nadeau with Cowen and Company. Please proceed with your question.

Phil Nadeau — Cowen and Company — Analyst

Good afternoon. Thanks for taking my question. Just one maybe back on COVID and the impact to current trends. It sounds like based on your commentary about new patient starts and also a bit of pull forward of orders in Europe, it wouldn’t be unreasonable for us to expect flat quarter-over-quarter sales in Q2? I guess the question is that a fair assumption or would you like to suggest that we should be thinking otherwise about Q2 sales and then related as we monitor the quarter, many of us are looking at prescription trends, given the recent withdrawal of data from some of those prescription services, in your opinion, are the trends that we’re seeing at all informative, how much weight should we put on prescription data as we evaluate the quarter as its progressing. Thanks.

Justin Gover — Chief Executive Officer

Thanks, Phil for the question. I mean just dealing with the latter point first. I mean our answer is no different to the previous couple of quarters where we’ve been cautioning heavily against too much over interpretation particularly of the data feeds that you get. Obviously the proportion of — given there have been some reduction in the fees going into that service, it’s less, not more reliable over time. So be careful of that. Obviously, with respect to your first question, we are just approaching halfway through Q2. So I think we’re obviously very hesitant to be too prescriptive around what Q2 might look like, but maybe Scott, I’ll invite you just to share some thoughts.

Scott Giacobello — Chief Financial Officer

Yes, so I mean I think that your comment around Europe is correct. I think that Europe certainly has been more impacted than the U.S. specifically due to the timing of where we were in the launch and so I think you’re going to definitely certainly going to see — we expect to see pressure there. From a U.S. perspective, I think we’ve commented on what we’ve seen kind of through April, but I would say that it’s certainly not unreasonable what you are thinking. I mean I think that we wouldn’t expect anything necessarily much better than flat.

Phil Nadeau — Cowen and Company — Analyst

Perfect. That’s very helpful. Congrats on all the progress.

Operator

Thank you. Our next question comes from the line of Marc Goodman with SVB Leerink. Please proceed with your question.

Marc Goodman — SVB Leerink — Analyst

So when you say, flat, you were just talking about the U.S. specifically, right?

Justin Gover — Chief Executive Officer

Hey Marc, it’s Justin here. I think forecasting Q2 now would be challenging. I think we just want to caution on ex-U.S. and just say so far, April has been a good month in the U.S., but we have to be mindful, as Darren put it in his script, that new patient initiations in Q2 is just a more challenging environment for —

Marc Goodman — SVB Leerink — Analyst

No, I understand, I’m just trying to understand how he answered the question. Did he answer the question for total sales or was the answer for just U.S. sales. We completely understand why Europe would be challenging given a lot of pull-through into the previous quarter?

Justin Gover — Chief Executive Officer

Yeah, we’re not expecting to see at least at this point — we’re not expecting to see revenue down in the U.S.

Marc Goodman — SVB Leerink — Analyst

Right, okay and then I guess my question is really just about pricing, if you could just give us a sense for how do you think we should think about pricing. Before the launch, you gave us a flavor for your best forecast obviously, you know, weight based and all that and in the U.S., I was curious how that’s evolved especially since there was a price increase and then also just in Europe, if you could just give us a sense of what number on average, we should be using just given all your conversations. Thanks.

Justin Gover — Chief Executive Officer

Yeah, for the U.S. pricing, I mean our assumptions around year one as we exited were very accurate actually. So I think as we think about this year, we are, as Darren mentioned in his script, seeing some increased use dosing and so that does have an impact, of course. So there maybe some modest impact in terms of the revenue per patient during 2020, but it’s, I think by and large, there is a small price increase that was taken as an effect as well. So a moderate impact, but not significant. On Europe, Chris, would you like to comment on Europe?

Chris Tovey — Chief Operating Officer

Yeah, thanks Justin, thanks Marc for the question. I think whilst in my prepared remarks I talked about the impact on sort of the sales evolution in the launch. I think actually pricing reimbursement processes stood up really quite well despite the the background context. So in terms of the major markets, I think all but Italy were progressing pretty much on plan in terms of pricing reimbursement and obviously what we achieved in the U.K. at the back end of last year and how that fed through the start of this year has put us in a really good place.

So we’re seeing pricing reimbursement the processes, Germany, France, Spain, and Italy although it’s dropped a [Phonetic] month because of the agency’s involvement in COVID-19 progressing really well and we are still really sort of well on track for that sort of 70% plus sort of U.S. anchor range that we’ve talked about. So I think we said [Phonetic] 2020 was about pricing reimbursement and actually making really good progress. So we are happy with where we’re going on pricing in Europe.

Marc Goodman — SVB Leerink — Analyst

Thanks.

Operator

Thank you. Our next question comes from the line of Paul Matteis with Stifel. Please proceed with your question.

Paul Matteis — Stifel — Analyst

Great, thanks so much for taking the question. Just on 1Q per your gross to net comments, your comments surrounding patients or I guess slight up-dosing among your patient base and then also the price increase, I guess was price a headwind or a tailwind in 1Q and maybe you can kind of clarify underlying patient growth and then just separate on your lifecycle program for Epidiolex, do you have a QD formulation in the works and if so, when might we see data on that? Thank you.

Justin Gover — Chief Executive Officer

Scott, do you want to take the price impact on Q1 question?

Scott Giacobello — Chief Financial Officer

Sure, absolutely, yeah. So, Paul, I would say overall on price, you’re correct. We did take a price increase in the first — in January actually and remember with the high, it was a 6% increase with the high medicaid we have with our drug, only about half of that would be expected to read through because of the Medicaid CPI penalties that you pay. Gross to net in the quarter, in addition to the CPI part of the impact, there is some seasonal seasonality due to copay resets etc, but I wouldn’t say — it certainly was not a headwind, but I would say it was positive, but probably not remarkably positive in that quarter due to some of the seasonality impacts.

Justin Gover — Chief Executive Officer

And then with regards to formulation, Paul, we have — this is less about moving towards a different dosing schedule and more to do with the formulations themselves in terms of convenience and any other benefit. So a capsule formulation, which is in studies now which would I think likely still be a twice a day regimen and then an improved oral solution, but both of these options, we would expect to continue to be twice-daily formulation.

Paul Matteis — Stifel — Analyst

Okay. Thanks and maybe just to clarify Scott’s, it sounds like with the price increase and gross to net not really rising all that much that price may have been a modest tailwind for the quarter overall, was that the right way to think about it or did I misunderstand that?

Justin Gover — Chief Executive Officer

Yeah, exactly, that’s exactly the way to think about it.

Paul Matteis — Stifel — Analyst

All right. Thank you so much.

Operator

Our next question comes from the line of Serge Belanger with Needham & Company. Please proceed with your question.

Serge Belanger — Needham & Company — Analyst

Hi, good evening. Just one question for me. One of your 2020 goals was to broaden care access to Epidiolex and I think you had previously mentioned that 50% of covered lives had open access and another 70% had a prior auth [Phonetic] just based on indication. Has there been any movement on these numbers and what are other ways we could see this broadening payer access that you’re targeting?

Justin Gover — Chief Executive Officer

Thanks, Serge for the question. Darren, I can hand that to you?

Darren Cline — U.S. Chief Commercial Officer

Yes, so we exited 2019 with nice momentum moving in with payer discussions that continue to be ongoing. Their utilization review continues to show a strong coverage for LGS Dravet and again those other average refractory epilepsies getting approved. That in conjunction now with TSC Priority Review and PDUFA, they’ve now included TSC into their evaluation of the Epidiolex policy which we actually view as a positive because it actually reinforces the broader discussion around removing or using PAs and the burden on physicians.

So we continue to see that movement nothing specifically in the quarter. I think that we’ll continue to move towards this. I will say the recent COVID and we highlighted this in the script, the key meetings that as people transition to work from home have gotten in the way, some big meetings being canceled and we’re working through the logistics, but we have seen those engagement pick back up in the last couple of weeks. So we anticipate movement there and I think that you’ll see for the TSC approval updating policies we would look for that to coincide nicely with a nice broadened Epidiolex policy.

Operator

Thank you. Our next question comes from the line of Esther Rajavelu with Oppenheimer. Please proceed with your question.

Esther Rajavelu — Oppenheimer — Analyst

Hey guys, thanks for taking my question. As you confirmed your spend guidance, can you help us understand whether we should expect fairly stable quarterly spend or more back-end loaded and then if you can also confirm whether the composition of matter patent decision is still expected in the fall this year, I’d appreciate it. Thanks.

Justin Gover — Chief Executive Officer

The first question Esther, I think was about expenditure guidance. Scott?

Scott Giacobello — Chief Financial Officer

Yeah, Esther, I would expect that it would be more back half loaded given the impact of COVID-19 obviously on our clinical trials etc. So I would expect back half loaded spend for the rest of the year.

Justin Gover — Chief Executive Officer

Thank you, Scott and on your second question Esther on the composition of patent — the process is ongoing, but I think the meaningful updates for this will now likely to be in 2021.

Esther Rajavelu — Oppenheimer — Analyst

Great, thank you very much.

Operator

Thank you. Our next question comes from the line of Neena Bitritto-Garg with Citi. Please proceed with your question.

Neena Bitritto-Garg — Citi — Analyst

Hi guys, thanks for taking my question. Just going back to the TSC launch, just given that a lot of these patients are institutionalized either in a long-term care facility or a similar setting. How has COVID-19 changed, if at all your thoughts around that launch. Could you talk a little bit more about about, that would be great.

Justin Gover — Chief Executive Officer

Neena, thank you for the question. Darren?

Darren Cline — U.S. Chief Commercial Officer

Was it, Neena, just to clarify, TSC and then you said, did you say long-term care also?

Neena Bitritto-Garg — Citi — Analyst

Just that the TSC patients are — many of them are located in either treated and institutionalized or something like that. So just the fact for those patients do tend to be kind of in a hospital setting.

Darren Cline — U.S. Chief Commercial Officer

Yeah. Yes, I think. Thanks for the clarification. So I think I’ll take it on two fronts. I think one the the market research or discussion with physicians and even down to the patient and the TS Alliance, which is a pretty strong advocacy group, they’re excited for new approved products in this space. So I think that our ability to — upon approval to go out and educate physicians around the data will spur them to evaluate patients so that they currently treat and how to incorporate Epidiolex into that. I think that also in this — as you mentioned, this COVID environment, we’re preparing for both scenarios and again, I think the data is compelling enough. The unmet need is there, that they’ll be, I think, willing to engage and understand the data dependent upon that, the COVID.

I think as it relates to the long-term care segment, that’s been extremely hard hit, but as I pointed out, we’ve continued through COVID to advance this initiative. Our account team was in place in the early part of first quarter. We’ve had discussions with some of the large-buying groups and went into an alliance with one of the largest, which provides us a platform to educate them around Epidiolex and within the current indications and then in the future around TSC. So I think that by the time we get to the PDUFA date and approved, we’ll be ready to launch this label expansion and really be agnostic to the site. As long as we’re able to engage with physicians and particularly the long-term care of the pharmacy audience, I think we’ll be in good shape.

Neena Bitritto-Garg — Citi — Analyst

Great, thank you.

Operator

Thank you. Our next question comes from the line of Yatin Suneja with Guggenheim Partners. Please proceed with your question.

Yatin Suneja — Guggenheim Partners — Analyst

Hey guys, congrats on the results. Just a couple of questions. Could you maybe comment on the level of penetration you might have achieved in Dravet and Lennox-Gastaut patient population, what the current split might be for adult versus pediatrics? And then I have a quick follow-up.

Justin Gover — Chief Executive Officer

Yatin, just to clarify, the penetration of — within DS LGS patients as well as the adult pediatric split?

Yatin Suneja — Guggenheim Partners — Analyst

Yes.

Justin Gover — Chief Executive Officer

Okay, Darren?

Darren Cline — U.S. Chief Commercial Officer

Yes. I think — so adult pediatric split remains roughly 55% pediatric, 45% adult and without any specifics, we still think there’s a lot of opportunity in LGS Dravet. I mean we can still say we’re less than 50% penetrated in both of those patient populations. So plenty of growth left within the current on-label indication.

Yatin Suneja — Guggenheim Partners — Analyst

Got it. And then with regard to the gross to net, could you comment on what the full year gross to net in terms of percentage we should sort of model, given that Q1 is generally higher, but just want to get a better sense of where you’ll end up on average in 2020.

Justin Gover — Chief Executive Officer

Yes, Scott, do you want to address gross to net.

Scott Giacobello — Chief Financial Officer

Yeah, Yatin, hi, it’s Scott. Yeah, I think what I would recommend is Q1 is probably going to be a fairly good proxy. I mentioned some of the seasonality around the copay resets, you may be aware that we waived copays for our patients through September 30. So for at least the next two quarters without giving specific numbers that Q1 would be a good proxy on the gross to net side.

Yatin Suneja — Guggenheim Partners — Analyst

Okay, thank you.

Operator

Thank you. Our final question comes from the line of David Kideckel with AltaCorp Capital. Please proceed with your question.

David Kideckel — AltaCorp Capital — Analyst

Hi guys and congrats on the quarter. Just a couple of quick questions here. The first is, I think, Darren, in your prepared remarks you mentioned retention is quite well among your patient base. I’m just wondering if you could quantify that a bit further.

Justin Gover — Chief Executive Officer

David, it’s Justin here. I’ll give Darren a rest for a second. We don’t quantify metrics around that. So I think you can take Darren’s positive commentary around retention as a continued strength in terms of the metrics that we measure internally and we continue to be pleased with how it’s going.

David Kideckel — AltaCorp Capital — Analyst

Okay, great. Thanks, Jeff [Phonetic]. And then my second question is around another one of I guess you’re prepared comments. So your next wave of prescribers in the U.S., specifically with the 1,000 health care professionals. I’m just wondering if you think when you’re going down the list now of additional HCPs and given that they may not be in the specialty care setting. Do you think that COVID could have any potential impact into how these 1,000 HCPs will receive Epidiolex?

Justin Gover — Chief Executive Officer

Darren, would you like to address that?

Darren Cline — U.S. Chief Commercial Officer

Yes. Sure. David, thanks. Thanks for the question. Yes. I think to give you a little flavor on these physicians, they’re more community-based, they’re more general neurology, they typically see more adult patients, but I think — and it has set a really good foundation for us in going into that next level. Now I think the one thing that we’ve articulated and everyone’s facing is engagements, but one thing that we found is where we are able to engage in this kind of first, obviously, but even in the second tier, where we can time with these physicians, they are really robust conversations and we’re pulling out a few things.

One is the thought process on prescribing by these physicians, what their current patient types are within their practice and then how do we — how do they fit Epidiolex more broadly into their practice. Now that’s been a focus of ours and it continues to be and again, while the engagements have dropped off, when we do have them, these are the type of conversations we’re having. So I think it will set a good foundation for us once we can engage with our physicians much more on a broad basis, but I think they’re leading to really some nice in-depth conversations.

David Kideckel — AltaCorp Capital — Analyst

Very helpful, Darren. Thanks and congrats again on the quarter.

Operator

Thank you. We have reached the end of our question-and-answer session. I would like to turn the call back over to management for any closing remarks.

Justin Gover — Chief Executive Officer

Great. Well, thank you again for joining us. It’s been a fascinating start to 2020 as we look to navigate this crisis, but I think we do feel that GW is well placed as any company to emerge from this crisis with significant growth prospects for Epidiolex in U.S. and Europe pipeline and several important studies ready to execute, strong balance sheet, and an important leading strategic position in cannabinoid science. So we look forward to the rest of the year and in particular, please do look out for further details about our nabiximols event that we’ll be providing more details on in the next few weeks. So thank you, stay safe and thanks again for your attention today.

Operator

[Operator Closing Remarks]