Logo of jester cap with thought bubble.

Image source: The Motley Fool.

GW Pharmaceuticals PLC (NASDAQ:GWPH)
Q3 2020 Earnings Call
Nov 3, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the GW Pharmaceuticals Third Quarter 2020 Financial Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]

I would now like to turn the conference over to your host, Mr. Stephen Schultz, Vice President of Investor Relations for GW Pharmaceuticals. Thank you. You may begin.

Stephen Schultz -- Vice President, Investor Relations

Welcome, all of you, and thank you for joining us today for our third 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, US 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. We expect to file our Form 10-Q later this week.

Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it and, as such, does include risks and uncertainties. A 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. Finally, an archive of today's call will be posted on 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. On today's call, Darren and Chris will provide US and European commercial updates, Volker will provide an R&D update, and Scott will then review our financial results.

Overall, I'm very pleased to report a strong quarter with total revenue in Q3 of $137 million, a sequential growth of 13% over the prior quarter and 51% over the prior year quarter. Year-to-date total revenue is $379 million, representing 87% growth over the prior year. While the pandemic makes for a more challenging commercial backdrop, we are confident that Epidiolex has all the characteristics to continue to exhibit strong growth in the months and years to come.

In the close to two years since launch in the US, we estimate that Epidiolex has to date achieved penetration of approximately 30% of LGS patients, 40% of Dravet patients, 10% of TSC patients, and less than 10% of other refractory childhood-onset epilepsies. While this level of penetration is significant, it is clear that there are tens of thousands of US patients that remain potential candidates for Epidiolex.

In the second half of August, our US sales organization started actively promoting the TSC indication. Receptivity to-date has been very positive, and we believe that this indication will offer strong support to the commercial momentum of Epidiolex as we move through the remainder of the year and into 2021. We have also seen important progress in recent months and expanding payer coverage. And overall, consider ourselves to be very well positioned to deliver on the full potential of Epidiolex.

Outside the US, Epidiolex delivered a strong quarter, demonstrating a strong recovery from a COVID-impacted Q2, and we continue to make important progress in pricing and reimbursement in key European market. As we have stated on previous calls, we see Epidiolex is representing the beginning of a new era for cannabinoid science, and we are committed to advancing GW's cannabinoid pipeline to develop important new treatments for patients with a particular focus on the fields of neurology and neuropsychiatry.

In recent weeks, we have commenced a new Phase 3 program in MS, the start of a new Phase 2 program in schizophrenia, and the first-in-human dosing in a Phase 1 trial of a new drug candidates targeted within neuropsychiatry. Notably, we announced today that the nabiximols Phase 3 clinical program is now under way, with the first MS spasm study now recruiting patients. A second Phase 3 study on track to commence shortly, and three other studies set to begin in 2021. As we have previously stated, any one of these studies could lead us to an NDA submission with FDA, and data from the first study is expected in 2021.

Let me now hand the call over to Darren for US commercial update.

Darren Cline -- US Chief Commercial Officer

Thank you, Justin. In the third quarter, US achieved $122 million in Epidiolex net sales, compared to $86 million in Q3 of last year. Year-to-date, US revenue through September 30 was $339 million, compared to $188 million in the same period last year, representing an 80% increase. During the quarter, Epidiolex continued to deliver the benefits that our patients and their caregivers have come to depend on. Patient persistency continues to be a cornerstone of the brand.

We also achieved growth in new patients in Q3 relative to the prior quarter. It was, of course, the time where COVID's impact was particularly acute. Epidiolex continues to have near-universal adoption among top prescriber targets with nearly 100% of top tier and approximately 95% of second tier targets prescribing Epidiolex in Q3. Market research demonstrates that we have significant growth opportunities for new patients to initiate Epidiolex therapy.

As Justin said in his opening remarks, we estimate that we have achieved penetration to date of approximately 30% in LGS, 40% in Dravet syndrome, 10% in TSC, and while we do not promote beyond those approved indications, less than 10% in other refractory childhood-onset epilepsy syndromes. This provides us confidence that there are tens of thousands of patients that remain future candidates for Epidiolex.

In this most recent quarter, the sales team has reported an overwhelming positive response to the new TSC data, label and the branding indication, given Epidiolex had approximately 10% market penetration in TSC at the time of this indication approval. As we have guided previously, we see this label expansion as very different to Epidiolex initial launch. The commercial uptake is in line with our expectations, and we are well positioned to execute successfully on this sizable new opportunity.

Active promotion of this indication commenced in the second half of August. And it is encouraging to note that September virtual sales calls and face-to-face interactions were up substantially relative to August. Broad spectrum efficacy among a wide range of seizure types in TSC and the ability to treat patients as young as one year of age is resonating well with physicians, and has also yielded a reinvigorated excitement around LGS and Dravet.

With all that said, these are not normal times and COVID inevitably impacts our sales efforts, as it is doing more broadly in the field of neurology. While patient office visits have improved from Q2, it continued to be down relative to pre-COVID levels, especially in our pediatric population. For our sales team, our overall face-to-face healthcare professional interactions have increased from the second quarter. They remained far below pre-COVID levels. Clearly, there is a difference between the benefits of an office face-to-face interactions versus virtual engagements, rapidly due to [Phonetics] the virtual environment, I've been very impressed with the agility of our commercial and medical affairs organizations.

I will now turn to our payer initiatives, where we have seen important progress in further broadening Epidiolex coverage. For TSC, we're already at over 90% coverage and should reach near-universal coverage levels within the fourth quarter. Recent commercial TSC formulary adoptions include CBS, Anthem, Prime, Optum United and most State Medicaid plans. One of our goals in 2020 was to share data with payers more broadly through treatment resistant epilepsy. So that payers across Medicaid, Medicare and commercial, and they can form an appropriate formulary and coverage decisions following promoting Dravet, LGS and TSC to physicians.

These efforts have led to a very meaningful expansion in coverage, and in total 85 million lives across Medicaid and commercial plans have either no prior authorization requirement or have been assigned a broad PA with a criteria independent of diagnosis designation. This is an increase of 47% since the beginning of 2020. We are seeing meaningful coverage expansion of Medicaid. As of today, I'm pleased to report that about 55% of the 70 million lives in Medicaid either have no prior authorization requirement or have been assigned a broad PA. This is up from about 25% at the beginning of 2020.

In the last few months alone, approximately 17 million Medicaid lives have experienced a positive formulary change. Most notably, during the quarter, Florida Medicaid updated its formulary having an electronic look back for any epilepsy ICD-10 code. Virginia Medicaid moved [Phonetics] Epidiolex and removed their prior authorization. 19 state Medicaid policies now reflect this broad coverage. We anticipate more Medicaid policy changes before the end of the year.

For commercial plans, nearly 25% of 185 million commercial lives either have no PA requirement or have been signed abroad PA. This is up from 14% at the beginning of 2020. We are confident that we will see further progress with commercial plans in the coming months. We recently launched our field reimbursement team, which provides direct national and regional payer policy and patient-specific support to providers. We are seeing a positive impact from this team and supporting patients, accessing Epidiolex therapy and navigating any plan requirements.

Overall, our results this quarter reflect the continued dedication of the US commercial organization, and I am proud of our team's commitment to the patients and physicians we serve, while adapting to the challenges of the global COVID-19 pandemic. We are excited by the tremendous growth opportunities that Epidiolex provides in addressing the remaining important unmet needs of patients in our target populations. In class [Phonetic] team in place, a high level of engagement from prescribers, we continue to make meaningful progress with payers. And we have an unrelenting passion and focus to ensure patients that can benefit from Epidiolex are diagnosed and prescribed therapy. Overall, we are extremely well positioned to execute on our plans.

With that, I'd like to turn the call over to Chris to discuss our progress in Europe, as well as manufacturing.

Chris Tovey -- Chief Operating Officer

Thank you, Darren. Ex-US net sales of Epidiolex in the first three quarters totaled $28 million. And Q3 has been our highest ex-US Epidiolex sales quarter with revenue of $11 million. This is very reassuring following Q2 where we noted a more significant COVID-19 impact. However, we do expect epilepsy clinics to be impacted by the recent significant uptick in COVID-19 in Europe, and therefore, expect European sales growth to be impacted in Q4.

Our European commercial medical customer-facing staff are, in the majority, still working from home, and customer engagement is largely through digital channels. However, during the quarter, we did restart limited face-to-face field engagement and have made considerable progress in upgrading our digital platforms and channels, and transitioning planned face-to-face events into virtual ones, which positions us well for the near future.

The only two major countries in which we actively promote today in the UK, hence our activities this year are still predominantly focused on securing good pricing and reimbursement in the major European markets. And we remain on track to secure favorable pricing conditions for Epidiolex in these markets. In the UK, where we had already received endorsement from NICE, an central funding for Epidiolex from the NHS in England, broad access within hospitals in Scotland was approved by the Scottish Medicines Consortium, SMC in September, meaning that reimbursed access to Epidiolex now exists across the whole of the United Kingdom. And then another highly respected international reimbursement organization has endorsed the value of Epidiolex.

In Germany, where Epidiolex enjoys orphan medicine status within the pricing and reimbursement process, where we secured a positive GBA benefit rating, we're currently engaged in positive final stages of negotiations with the authorities, which are anticipated to conclude shortly. In Italy, where Epidiolex received innovation status from the reimbursement authorities, we're also currently engaged in final stage pricing negotiations with the authorities, which are anticipated to conclude by year end.

In France, the number of Epidiolex patients in the French regulatory agency sponsored ATU early access program continues to grow. In parallel with this, we are progressing well with final pricing negotiations based on the transparency commission granted ASMR IV rating, which recognize the clinical importance of Epidiolex, in order to conclude negotiations before the year end in France. In Spain, following some administrative delays due to COVID-19, we've now begun discussions with the local pricing and reimbursement authorities, and we expect these to conclude in the first half of 2021.

In addition to these major European markets, we continue to progress our expansion across the second wave with smaller European countries. We remain optimistic on the potential to be able to launch in most of these countries in 2021, with favorable pricing and reimbursement conditions.

Outside of Europe, in late September, the Australian Therapeutic Goods Administration, TGA, approved Epidiolex. And we are now actively progressing pricing and reimbursement negotiations with PBAC, which should conclude by year end to enable launch in the first half of 2021.

Finally, let me provide an update on global manufacturing and supply chain, which falls under my oversight. Following on from the positive situation in the second quarter, our manufacturing facility continues to operate at its highest levels of efficiency and deliver against planned production schedules. We've been able to build and maintain significant stocks of US and European product. And our supply chain continues to exhibit ongoing resilience to ensure patient supply continuity, even through these recent months of COVID restrictions.

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. We are building a robust cannabinoid pipeline at GW across all stages of development, and this quarter provides examples of progress across the spectrum of R&D, including the start of a new Phase 3 program, the start of a new Phase 2 program, and first-in-human dosing in the Phase 1 trial of a new drug candidate. We firmly believe that GW has a wealth of opportunity to bring new cannabinoid products to patients within the fields of neurology and neuropsychiatry, and expect the pace of pipeline activity to continue to accelerate in the remainder of 2020 and throughout 2021.

This morning, we announced that our most advanced pipeline candidate, nabiximols has entered Phase 3 trials in the United States. As a reminder, we have previously completed three positive Phase 3 trials in Europe and have agreed a path forward with the FDA such that a positive result in one of these five MS spasticity studies will enable an NDA submission. The first of these five studies, the 450-patient placebo-controlled spasm frequency study, is now actively recruiting. We are also working to start the 52-patient placebo-controlled muscle tone study by the end of the year, COVID permitting. We are also progressing preparations for the three remaining nabiximols MS studies to start next year. Data from the first nabiximols pivotal study remains on target for 2021 readout, and there will be results from the remaining four trials at regular intervals over the course of the remainder of 2021 and 2022.

We have chosen spinal cord injury spasticity as the second spasticity indication, because it is the closest to MS spasticity from a neuroanatomical and pathophysiological point of view, with the vast majority of pathology and MS spasticity believed to stem from the spinal cord lesions. Discussions with the FDA suggests that a broad spasticity indication should be attainable with MS and spinal cord injury spasticity results. The spinal cord injury program consists of three studies, one observational study and two subsequent Phase 3 studies, which we also aim to commence in 2021.

US market research shows that there's a very sizable opportunity for nabiximols within this field of spasticity. As such, given the operating environment presented by COVID, we have decided to prioritize our focus on the execution of this spasticity clinical trial program and to push back the timeline for non-spasticity life cycle trials, and specifically, our planned post-traumatic stress syndrome study. We will review the timing of the PTSD trial in the second half of 2021.

The pause in clinical trials caused by the pandemic has also caused us to review our lifecycle focus for Epidiolex. Following the successful TSC label expansion, we have decided to commit to further expanding the Epidiolex label within the field of epilepsy and consequently expect to commence a Phase 3 trial in an additional orphan epilepsy syndrome in 2021.

We also remain committed to more broadly understand the potential of cannabinoids in neurodevelopmental disorders. Until now, these efforts have been centered around the study of Epidiolex and Rett syndrome, and an investigator-sponsored trial of CBDV in autism. The pandemic has caused meaningful feasibility challenges for the Rett study, and we have, therefore, decided not to resume recruitment into this trial. Rather, we will further the understanding of the behavioral and cognitive effects of CBD in the broader autism population with a new study. This new 160-patient placebo-controlled trial is expected to commence in Q1 2021, and will address the core symptoms of autism with the CBD formulation. Regarding CBDV, an autism spectrum disorder, recruitment has resumed in the investigator-led 100-patient placebo-controlled trial.

During September we were pleased to initiate a Phase 2b study in schizophrenia. This randomized double-blind placebo-controlled trial will investigate the safety and efficacy of GWP42003 versus placebo as adjunctive therapy in participants with schizophrenia experiencing inadequate response to ongoing anti-psychotic treatments. Additionally, a study of an intravenous form of cannabidiol to treat neonatal hypoxic ischemic encephalopathy, or NHIE, continues to recruit.

Finally, I'm excited to introduce a new botanical cannabinoid product candidate, GW541. GW541 is a complex botanical formulation that contains many known constituents of the cannabis sativa plant, but differs in cannabinoid composition from nabiximols. The relative amounts of the target cannabinoids have been optimized to treat conditions within the field of neuropsychiatry. The Phase 1 study to assess the safety, tolerability and pharmacokinetics of GW541 in healthy and elderly volunteers has recently commenced. This is one of several new candidates that our discovery team has been evolving, and we expect additional new cannabinoid products to enter the clinic in 2021.

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

Scott Giacobello -- Chief Financial Officer

Thanks, Volker, and good morning. I'll now summarize financial results for the quarter and nine months ended, September 30, 2020. More detailed discussion of results will be provided in our 10-Q we file later this week.

Starting with revenue. Total revenue for the quarter increased to $137.1 million, compared to $91 million in the prior year quarter, due primarily to global Epidiolex net sales of $132.6 million in the quarter. Total revenue for the first nine months of 2020 was $378.6 million, compared to $202.3 million in the prior-year period.

Total deductions from gross sales for allowances were $37.1 million for the quarter, compared to $18.6 million in the prior year and relate mainly to Epidiolex. Cost of sales amounted to $7.6 million for the quarter or 6% of net product sales, compared to $8.2 million or 9% of net product sales in the prior-year quarter. This improvement is due primarily to the substantial increase in Epidiolex net sales over the prior-year period and related manufacturing efficiencies.

Moving to R&D spend. Research and development expense was $56.9 million for the quarter, an increase of $20.6 million from the prior-year quarter and reflects expenses related to the ongoing Epidiolex development program, as well as advancing the readiness of nabiximols clinical program and our other pipeline programs. This represents an increase of $11.2 million over Q2, driven mainly by the restart of studies previously on hold due to COVID-19 and start-up activities for the nabiximols program.

Turning to SG&A. Selling, general administrative expenses increased to $85.2 million in the quarter from $64.2 million in the same period in 2019. This increase is primarily due to costs related to the launch of Epidiolex in the US, including the recent TSC launch, and the build out of our commercial operations in Europe. This has all resulted in a net loss for the quarter of $12.2 million, compared to a net loss of $13.8 million in the prior-year quarter.

Moving to cash flow for the nine-month period. Net cash used in operating activities for the nine months ended September 30, amounted to $33.3 million, compared to $107.58 million for the prior-year period. Net cash used in investing activities for the nine-month period was $23 million, compared to net cash provided by investing activities of $73 million in the prior-year period, which included the proceeds from the sale of our priority review voucher.

Capital expenditure for the period was $16.6 million, compared to $31.1 million for the prior-year period and reflects continued investments in the expansion of our cannabinoid production facilities. The resulting net decrease in cash and cash equivalents for the nine-month period amounted to $56.6 million. And we ended the quarter with cash and cash equivalents of $480.3 million.

Turning to guidance. As in previous quarters, the extent to which the COVID-19 pandemic will impact our expenditure for the remainder of the year continues to be uncertain. That said, we are narrowing our guidance range for R&D and SG&A expenses for 2020 to $530 million to $550 million from the previous guidance range of $520 million to $550 million. We're also lowering our range for capital expenditure to $20 million to $25 million from the previous guidance range of $25 million to $35 million.

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

Justin Gover -- Chief Executive Officer

Thank you, Scott. In closing, we are very pleased with the performance of GW's overall business in Q3. The essential elements to support future Epidiolex revenue growth are in place, in particular, an expanded indication in efficacy profile, broadening payer coverage and near-universal adoption by key prescriber target. We fully expect Epidiolex to follow the same long-term growth path seen with previous highly successful anti-epilepsy drugs.

We continue to enhance the exclusivity position of Epidiolex. In addition to the 13 patents currently listed in the Orange Book, 12 of which expire in 2035, two further Orange Book listable patents are expected to be allowed or granted by Q1 2021, and additional applications beyond this are in prosecution. We also believe that the addition of the composition patent, currently under review, will provide an additional layer of protection. And beyond Epidiolex, as I mentioned in my opening remarks, we are committed to advancing GW's cannabinoid pipeline to develop important new treatments for patients.

GW is the unparalleled world leader in this field of science, and our early mid- and late-stage pipeline taking shape. This is most evident for nabiximols where we have multiple opportunities for our NDA submission as early as mid-next-year. The commercial potential and long-term exclusivity prospects for this product in the US are truly exciting.

In closing, I should like to thank our employees for their extraordinary hard work, resilience and commitment to our patients. Since March, COVID-19 has challenged us all personally and professionally, and I remain proud and grateful to our talented staff to continue to ensure that we are making excellent progress in all aspects of our business. 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

Thank you. [Operator Instructions] Our first question comes from line of Cory Kasimov with JPMorgan. Please proceed with your question.

Turner Kufe -- JPMorgan -- Analyst

Hey. Good morning, everyone. This is a Turner on for Cory. Thank you for taking our question. So I just want to ask about use you're seeing in other childhood epilepsies. I believe you said in your prepared remarks that it's less than 10%. But can you provide any more details there, just because even 10% of the segment would be a lot and suggest much of the higher sales levels. So can you just describe these trends you're seeing, and if you could better define how many patients there with refractory epilepsy not directly covered by the label? Thank you.

Justin Gover -- Chief Executive Officer

Hi. Good morning. It's Justin here. Maybe I'll start and maybe if Darren you want to add anything. I mean, clearly, as you know, within the field of epilepsy where there are multiple orphan syndromes, which together provide a range of different childhood-onset epilepsies, and of course, this is not an area that we promote. So, I mean, we don't wish to provide more color on that demographic in this call rather than to say that it's -- there are, as you've heard from Darren's remarks, coverage plans that allow for those patients to be prescribed Epidiolex in a relatively straightforward way. But I don't think we wish to give more color than we've given on the call this morning.

Operator

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

Tazeen Ahmad -- Bank of America -- Analyst

Hi. Good morning, guys. Thanks so much for taking my questions. Justin, I wanted to ask you a little bit of color, as it relates to the early days of the TSC launch. As far as the contribution to US sales in 3Q, can you give us at least directionally the weighting of TSC that led to the growth versus the contribution from Dravet and LGS? And then, so far in 4Q, can you give us some qualitative color on new patient as are you seeing the trend similar to what you saw in 3Q, specifically in the US, or are there certain improvements that you're seeing? Thanks.

Justin Gover -- Chief Executive Officer

Hi, Tazeen. We're not going to comment on 4Q today. I think, it's -- we're going to focus remarks on 3Q, if you don't mind. Darren, please add some more color. But I think the high level take, Tazeen, is that Q3 was largely -- was essentially an LGS, Dravet quarter, right, with TSC launch and payer coverage, etc., really took place toward the end of the Q. So I think it's best for investors to see the Q3 results largely as an LGS, DS quarter. But Darren more color?

Darren Cline -- US Chief Commercial Officer

Yeah. Good morning, Tazeen. Yeah. Our -- the TSC promotional efforts really took hold and launched in mid-August post our virtual launch meeting we had. Subsequently, TSC payer coverage really began to kick in during the month of September. And as we've stated before, this label expansion is going to differ from the initial launch of DS, LGS. And with our about 10% TSC market penetration at the approval, and the initial feedback of the data being very strong, we're very excited about the continued growth of the brand. Engagements are growing and everything is where it needs to be to see growth from TSC in Q4 and beyond.

Operator

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

Salveen Richter -- Goldman Sachs -- Analyst

Good morning. Another question here on TSC, I guess. You're looking at a launch that's in line with expectations and that the -- that it's different from Lennox-Gastaut and Dravet. Could you just explain to us how so and what the challenges are here initially with regard to uptake and how confident you are that approval in TSC is going to open up the broader focal seizure market for you on the forward? And I guess, there just seems to be a disconnect here as to why you're not seeing an initial uptake right off the bat?

Justin Gover -- Chief Executive Officer

Darren, do you want to take that?

Darren Cline -- US Chief Commercial Officer

Yeah. I think that we've -- we are very excited about the future. I think that TSC, with the approval, the launch payer coverage kicking in, we're starting to see momentum build. As you recall with LGS, Dravet, this was an unprecedented launch with a list of patients and not a pandemic. I think, the feedback from our prescribers has been, as I noted in my remarks, very well received. The TSC clinics highly overlap with our current epilepsy center and our call points. And we're in full launch execution mode now. And so all those variables give us a tremendous amount of confidence. And also, I will note, and I reiterate, we had about 10% or so penetration, which isn't surprising with Epidiolex being on the market. And so, we'll continue to grow this indication. And I think that broad spectrum data within TSC is resonating with physicians, not only our TSC physicians, but our other broader audiences and the ability to dose to down to one. So again, I think that, you look at this quarter, what we were able to deliver in the phase of the pandemic. And I noted engagements are starting to increase, most notably, face-to-face and so we're very confident in the continued opportunity with TSC now added to the label.

Justin Gover -- Chief Executive Officer

And Salveen just to circle back to your -- premise of your question, I think TSC is rolling out exactly as we thought it would. I mean, it's -- just to emphasize again, this is exactly as we had guided in terms of adding an indication and being different to the launch and usage already happening. And the messaging is going down very well. And I think you're hearing from, Darren, the confidence in how this messaging will result in future growth.

Operator

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

Phil Nadeau -- Cowen and Company -- Analyst

Good morning. Let me add my congratulations on a strong quarter in light of the circumstances. I was curious about a few different metrics that you didn't mention in your prepared remarks, if you could give us any sense of trends in those. And those would be things like compliance, persistence, dosing, particularly in light of the TSC label having a higher dose. And also you did mention the penetration estimates. I'm curious if you could give us some sense of where you think peak penetration could ultimately be in those markets? Thanks.

Justin Gover -- Chief Executive Officer

Hey, Phil, it's Justin here. Maybe I'll go for this one. We haven't been giving persistence rates. So we're not going to start now. But I think, you've heard from Darren that retention is consistently been since launch a strength of the product and remains. So ever since the launch, the rate has been encouraging and has essentially stayed unchanged. Dosing, we are close to the midpoint of the dose range, but not there yet. Dose continue to creep up. And with penetration rates, obviously we chose today to give more color to really give a sense that there is still clearly a long runway ahead. I don't think we want to suggest that what the peak is going to be, but it's going to be -- we expect well north of where we are today. The unmet -- you and investors on the call will know that the unmet need in these target epilepsy syndromes is very real, and one would expect over time to see vast majority of patients in this target population to take Epidiolex.

Operator

Thank you. Our next question comes from the line of Josh Schimmer with Evercore ISI. Please proceed with your question.

Josh Schimmer -- Evercore ISI -- Analyst

Thanks for taking the question. One related to Phil's last question. Is there any reason the TSC indication can't get to levels of penetration that you're seeing in DS or LGS currently? And then what triggered the decision to start a new orphan seizure study for Epidiolex? Thanks.

Justin Gover -- Chief Executive Officer

Hey, Josh. No, I mean, I think, what we wanted to do was make sure today that we emphasize that there has been TSC usage already as anything that will be a surprise to you. But there's nothing about the TSC indication with it, which would lead us to expect lesser penetration in TSC than any other target indications. As it relates to the new epilepsy trial for Epidiolex, I think we've very committed to the epilepsy space, as you know. Discussions with patients and physicians continue to demonstrate that the interest in understanding the broader application of Epidiolex within the epilepsy space. So there is obviously a huge need there. There are also parts of, as a syndromes, we know less about, as a seizure type we know less about as well. So, we've seen the benefits with TSC of broadening the profile of the medicine within the seizure landscape. And so we think that an additional trial will in -- we won't yet disclose what that is, but it'll help us not only target an additional population with an epilepsy, but also different additional seizure types.

Operator

Thank you. Our next question comes from the line of Charles Duncan with Cantor Fitzgerald. Please proceed with your question.

Charles Duncan -- Cantor Fitzgerald -- Analyst

Hi, Justin and team, first of all, thanks for taking our question and congratulations on a strong Epidiolex quarter. That said, I did want to ask some questions on nabiximols and saw a ramp several of these up into one, and that is relative to the ongoing Phase 3. Can you help us understand the baseline screening period whether or not that's been disclosed? And also the assumed effect size that you'd like to see that drives a sample? And then whether or not there'll be an open-label extension to that study?

Justin Gover -- Chief Executive Officer

Volker, would you like to take that?

Volker Knappertz -- Chief Medical Officer

Yeah. So thank you for the question and your interest in the 450-patient study of nabiximols that will address a primary endpoint of spasm frequency. And we're looking at about a reduction of spasms in the order of two spasms the baseline spasm frequency that we have seen in prior trials is around eight. So that's sort of the assumption of the effect size. That is what we've seen in the European studies that have led to the successful approval there. And so the assessment will be, of course, the baseline assessment. In the period, I don't think we have disclosed the details of this. However, the trial is listed on clinicaltrials.gov, and there's some information there that I would like to refer you to. But -- so it is a study that will address this type of an effect, and it's adequately powered with the sample size to reach those effect levels. Regarding open-label extension, there is a provision for that in the protocol.

Operator

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

Charles Duncan -- Cantor Fitzgerald -- Analyst

Hi. Good morning. [Technical Issues] talk about your [Technical Issues]. Secondly...

Justin Gover -- Chief Executive Officer

Marc, can you repeat that. We didn't hear the first part of your question, sorry.

Marc Goodman -- SVB Leerink -- Analyst

Sorry. The first question has to do with descheduling efforts for Epidiolex across the states. Can you just give us an indication of how that's going, and if it's [Technical Issues]. And then secondly, can you talk about Sativex, just the overall strategy? We have gotten this question several times still, and I just figured it'd be good if you could just straighten this out. If you only need one additional study, why you are doing such a large program? Thank you.

Justin Gover -- Chief Executive Officer

Thanks, Marc. Darren, do you want to descheduling?

Darren Cline -- US Chief Commercial Officer

Yeah. Thanks, Marc, good morning. Yeah, the descheduling effort is going very well. In August, there was a Federal Register descheduling announcement, which really helped the kind of second wave of states. And so I think we're up north of 40% [Phonetic] now that have been descheduled and we anticipate the majority to be converted by the end of 2020. So it's going very well.

Justin Gover -- Chief Executive Officer

And with nabiximols, I think, the -- we've laid out the strategy, which I think serves a number of purposes and clearly provides accelerated timelines for an NDA submission. So I think the opportunity here given the interactions we've had with FDA to find multiple ways of bridging from European to the US just makes a ton of sense to ensure that we have multiple opportunities to do that. There's such great benefits for -- obviously, for submission to be sooner rather than later. So providing studies of different sizes, timelines and addressing slightly different end points, it seems to us to be a very prudent approach to maximizing our chance of success and minimizing the timeline.

There is also, as you'll appreciate Marc, given the history of nabiximols, which is essentially largely been a European-focused development, a benefit to ensuring the studies are performed in both the US and Europe in this program as well. So we are -- and there are -- there is still so much to learn. And as we think about spinal cord injury as well, a lot that we will learn from there as it relates to spinal cord injury. So, the backdrop here, we think is a very constructive one from FDA, a compelling sort of data set in place and studies, which are -- have multiple different ways of achieving the goal of an NDA submission. And I'm sure investors would prefer us to ensure that we maximize the chance of success and minimize the timeline here and that's exactly what we're going to do.

Operator

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

Paul Matteis -- Stifel -- Analyst

Hey. Thanks so much and congrats on the nice quarter. Hey, so a couple quick things. I was wondering if you could clarify some of the outside variables that can kind of impact the way we model organic growth. So can you just comment on any changes in inventory ahead of a TSC launch, changes in gross to net, and changes in average dose per patient? And then just separately, as you guys codified the penetration to-date in TSC and LGS, how do you kind of handle and think through the reality that there are some overlapping diagnosis in these populations and how should we delineate that? Thanks so much.

Justin Gover -- Chief Executive Officer

Thanks, Paul. Scott, would you like to take the first question?

Scott Giacobello -- Chief Financial Officer

Sure. Sure. Thanks, good morning. On the inventory side, Paul, there's no material changes in inventory quarter-over-quarter. Remember, as we said previously, we keep a fairly small amount of inventory actually in the channel. So there is no significant impact quarter-on-quarter coming from inventory even with the TSC launch. The second part of your question on gross to net, we did see an increase in gross to net quarter-over-quarter, and that's being driven as we've mentioned previously, that the Medicaid mix seems to be increasing, which is not surprising, given the current economic environment. So we have seen that tick up and we expect that that's probably going to continue certainly through the rest of the year.

Operator

Thank you. Our next question -- I am sorry...

Justin Gover -- Chief Executive Officer

Hold on a sec. And so, Paul, can you just clarify your second question on LGS?

Paul Matteis -- Stifel -- Analyst

Just one of the things -- yeah, no problem. One of the things just for start on average dose and if that increases at all as over time as it has in the past. And then my second question, Justin, was just on, sorry, LGS versus TSC. There's some literature and KOL feedback that we've heard that I think you've heard as well that there are TSC patients that are also codified or diagnosed as LGS patients, and I was wondering if you estimate penetrations to-date in these populations, how you think about overlapping diagnoses or how you kind of work through delineating that? Thanks.

Justin Gover -- Chief Executive Officer

Yeah. I think on the dose question, I think, I -- we've seen modest increases in dose -- average dose since launch. But the -- I think, I mentioned earlier, we're still below the midpoint of the dose range. With regard to the overlapping diagnosis, I mean, I think, we still are comfortable with this is a separation if you will of the different demographics that I think you and others use for your model. So we don't see the two -- if your numbers overlapping. No, I think, the there is very clearly TSC centers where we focus, which are clearly TSC patients. I don't know, Darren, if you have any particular color on Paul's question.

Darren Cline -- US Chief Commercial Officer

Yeah. Yeah. I think -- yeah, I mean, there is. So we've heard this through market research and prior to the approval and you're right the data -- some data out there. But it's really a minority. I think, now that we have this TSC label, we're able now to actively promote the data and the label expansion. We feel, just to reiterate [Phonetics] to Justin, I mean, there is a clear TSC diagnosed and treated patient, and those are the majority of our opportunity ahead for the brand. So, now again, that we can go out and speak specifically to physicians about the specific label and data, there's plenty of opportunity ahead for us for TSC.

Operator

Thank you. 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 morning. Thanks for taking my questions. First one is on the third quarter. Can you give us some color on the sequential progression through the quarter? Where is telemedicine used and in terms -- and also the cadence of new patient visits? And have we reached, I guess, a normalized COVID environment that could continue for the rest of the year?

Justin Gover -- Chief Executive Officer

Yeah. Hi, Serge, it's Justin here. So, sequential progressions that relates to the sort of under dynamics of COVID and telemedicine virtual patient visits and so on. Is that your question?

Serge Belanger -- Needham & Company -- Analyst

Yeah.

Justin Gover -- Chief Executive Officer

Darren, do you want to take that?

Darren Cline -- US Chief Commercial Officer

Yeah. Good morning, Serge. Yeah, I think the phrase is kind of normal. I -- it is tough. I think we're in this pandemic, we do see this pivot back in March to telemedicine. I think our physicians and patients have pivoted, but we're still in the pandemic. And I think that you look at some third-party data and you see that patient visits are down still and then within telemedicine across neurology and pediatrics specifically, new-to-brand prescriptions are down. So I think that we're starting to see some of our offices continue to open, some of our epilepsy centers and minority of them still are not open at our full capacity. But I will say that, we -- our face-to-face, as I alluded to in my remarks, our engagements are up as the country starts to open a bit and our virtual engagements based on the TSC label expansion also drove engagements. Now as it relates to predicting the future, very uncertain, as we see cases continue to rise in the US and specifically across different regions. But we're pleased with what we've been able to do and deliver in the face of this pandemic.

Operator

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

Neena Bitritto-Garg -- Citi -- Analyst

Hey, guys. Thanks for taking my question. I just wanted to ask about the Rett syndrome study. I know you said that you faced some challenges and you've decided not to continue to enroll patients in that study. But I guess, could you just elaborate a little bit more on what some of the complications you or the challenges that you've faced, or given that I thought many of these assessments were essentially patient diaries and could be done remotely? And I guess, do you expect any of those challenges to translate into the CBD formulation studies that you're planning to start in autism? Thanks.

Justin Gover -- Chief Executive Officer

Thanks, Neena. Volker?

Volker Knappertz -- Chief Medical Officer

Yeah. So it was a difficult decision for us to stop the Rett study. As you may recall, Rett is a rare, almost ultra-rare condition that affects predominantly girls and women. I think the estimate for the United States today is about 60,000 total patients prevalent in the United States. And so it's a very different proposition to try to recruit a population that has -- that is so rare under these conditions. So it was challenging to recruit Rett before the pandemic started. And during the pandemic, I think, the concerns also about the patient safety and bringing patients to the sites for the assessments, despite our best efforts to try to do things by telemedicine within the constraints of the protocol and within the constraints of what is actually feasible with regards to the guidances that regulators and the FDA have issued on this have really shown to us that this is a study that we don't believe we can recruit in a reasonable timeframe. And our interest in Rett has always been that it's a monogenic disease that has a lot of the features, while not itself an autism spectrum disorder, it has a lot of the features that are also seen in autism spectrum disorder. And after some very careful considerations, we believe, the much higher prevalence of autism spectrum disorder that will lend itself better to get these very important non-seizure neurodevelopmental outcomes for which we have a lot of anecdotal reports, especially in the syndromatic epilepsies for which we are already approved that these non-seizure neurodevelopmental features and the core features of autism can be addressed there. So it's really a question of safety, a question of feasibility and it was a difficult decision to make. And we are confident that with regards to autism, we have a much better path forward there and get to some of the similar answers that we're looking for the effect of CBD.

Operator

Thank you. Our next question comes from line of David Lebowitz with Morgan Stanley. Please proceed with your question.

David Lebowitz -- Morgan Stanley -- Analyst

Hello. Thank you for taking my question. How have dynamics changed with respect to willingness for physicians to prescribe via telemedicine and patients' willingness to change therapies via telemedicine? And has there been different dynamics in the adult and pediatric populations?

Justin Gover -- Chief Executive Officer

Hi, David. Thank you. Darren?

Darren Cline -- US Chief Commercial Officer

Yeah. I think there -- I mean, listen, I think, there is. I alluded to some third-party data that shows new-to-brand prescriptions in the telemedicine world, this down across neurology and pediatrics. And so, but I will say that if you look at our top prescribers, which we alluded to in our prepared remarks, near universal writing within the top one and two. So a lot of comfort in those physicians being willing to write a script for Epidiolex. But it's still can't take away from the face-to-face patient workup. I do think there is, if you think about our pediatric patient population, which is pretty fragile, we've heard that a high reluctance to bring those children into the clinic. So, therefore, a lot of patient management is done via telemedicine. But I think if you look at Epidiolex, the characteristics we've talked about, the -- really I think clear cut now efficacy and safety profile. There is a lot of comfort and you look at our persistency is as high as it is, a lot of comfort in those prescribers in writing Epidiolex through this pandemic.

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, appreciate you guys taking our question. Just two for us quickly. On the penetration number that you disclosed, could you maybe talk about the base numbers that you've used for each of those indications Dravet and Gastaut TSC to get to that number? Any updated thought on the prevalence of the actual number of these patients that are out there? And the other question I have is on the European side. Can you may be put in perspective the opportunity there? When should we expect an inflection? Are you seeing any use outside Lennox-Gastaut or Dravet? And how big is that opportunity may be relative to yours? Thank you.

Justin Gover -- Chief Executive Officer

Yatin, and also just for everyone, we're obviously aware we're at the bottom of the hour. So we got a few more questions in the queue and we'll definitely address those efficiently. And Yatin, I don't think we're going to give more on -- we've given penetration numbers and we think that should hopefully be helpful to you in thinking about what's happened so far. Chris, do you want to address the European question?

Chris Tovey -- Chief Operating Officer

Yeah. Thank you, Justin. So, obviously, the European approval came nearly 18 months after the US original approval. So Europe is behind. And obviously, Europe is the [Phonetics] first wants to get all of our achieving pricing reimbursement. So far we're launched in Germany and the UK. And all the effort really at the moment beyond those two commercial launches is dedicated to pricing reimbursement. So I think we've said -- I said in my prepared remarks, there's a lot of effort in Italy, in France and in Spain, and those negotiations will be concluding. Italy and France we hope by the year end, and Spain in the first half of next year. So in terms of seeing an inflection point, you won't be seeing that in the immediate next couple of quarters, because we've got to do the commercial launches after pricing reimbursement. But those discussions are going really well, so we're optimistic about pricing and reimbursement. In terms of the major markets in Europe, the population is about the same as the US and the -- therefore the DS, LGS, TSC opportunities are about the same, although, pricing tends to be lower. And we are in with the regulatory authorities on TSC. So TSC is not yet approved in Europe. So, a little way to go, but Europe's basically behind the US in terms of the curve.

Operator

Thank you. Our next question comes from line of David Kideckel with ATB Capital Markets. Please proceed with your question.

David Kideckel -- ATB Capital Markets -- Analyst

Hi. Good morning. Congrats on the quarter and thanks for taking my question. A question with respect to how you guys are seeing prescriber habits? When it comes for Dravet specifically, there's a new competitor product in the market. So I'm wondering, where does Epidiolex actually fit from a therapy perspective? Is it first-line for the majority of your prescribers? And what are you hearing overall with respect to that versus the competitor product? Just being a non-cannabinoid versus a cannabinoid, is there a stigma or are folks finally getting the message that this is a really good therapy? Thank you.

Justin Gover -- Chief Executive Officer

Hey, David. Yeah. We obviously will comment on our products and not others. But, Darren, any dynamics you can share?

Darren Cline -- US Chief Commercial Officer

Yeah. Yeah. Good morning, David. Yeah, I think with Epidiolex, across our now three labels, I think, physicians continue to see the benefits that patients can see. And I think, within Dravet being on the market approaching two years, it's a tried and true efficacy and safety profile. And I think one that physicians feel very comfortable either de novo patients or adding Epidiolex to the treatment regimen of these pretty sick patients. So, yeah, we think Epidiolex will continue to play a key role not only with Dravet, but LGS and TSC.

Operator

Thank you. Our next question comes from line Danielle Brill with Raymond James. Please proceed with your question.

Danielle Brill -- Raymond James -- Analyst

Hi, guys. Good morning and thanks for the questions. Two quick ones. Of the 10% of the TSC population that you've penetrated, what proportion of those were new starts versus prior off-label users? And can you give us the current breakdown of adults versus pediatrics? Thanks so much.

Justin Gover -- Chief Executive Officer

Hi, Danielle, I'll do it quickly. So the 10% number was essentially as at the time of the approval. So that's not a post-indicated launch, if you will. TSC launch number, that is the -- 10% is our estimate of TSC patients that have been prescribed Epidiolex and ahead of the indication approval. And your second question, can you just remind me again?

Danielle Brill -- Raymond James -- Analyst

Yeah. The breakdown between adults and peds?

Justin Gover -- Chief Executive Officer

It remained pretty consistent. It's around 60% peds and 40% adult.

Operator

Thank you. Our next question comes from line of Francois Brisebois with Oppenheimer. Please proceed with your question.

Francois Brisebois -- Oppenheimer -- Analyst

Hey. Thanks for taking the question. I'll be really quick here. Just you mentioned on COVID, just the cases spiking back up in Europe and potentially the fourth quarter being a little softer. Is that something that you expect the US to follow or how are you seeing the downturn [Phonetics]?

Justin Gover -- Chief Executive Officer

I think the pattern in Europe has become very clear in the last week or two with national lockdowns. The US is just obviously very different. It's much more regional, and so in that way, it's actually much harder for us to predict Q4 in the US because of the regional disparities. And obviously, there's a lot of uncertainties right now about how those are being handled. So I think -- for today, I think it's -- the line of sight in Europe is more straightforward, which is what we've given I think it's -- I think we just had predicting the world in November, December as it relates to COVID in the US is more challenging. So I just don't think we can give you more color today.

Operator

Thank you. Our next question comes from line of Douglas Tsao with H.C. Wainwright. Please proceed with your question.

Douglas Tsao -- H.C. Wainwright -- Analyst

Hi. Good morning. Thanks for taking the questions. Just really quickly with the TSC approval. Are you more broadly starting to see adoption in focal seizure types?

Justin Gover -- Chief Executive Officer

Maybe I'll take that Doug. Just -- I mean, it's important to stress for investors that the focal seizure is a key part of the TSC seizure landscape. We don't promote, of course, in the broader adult focal seizure market and it's not our target market. These are the broad spectrum efficacy that we refer to is broad spectrum within the syndromes in which we promote. So we want to make sure we clarify that. But I'm not sure we should comment more beyond that at this point.

Operator

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to management for any final comments.

Justin Gover -- Chief Executive Officer

Great. Thank you, and apologies for over running a little bit, but a lot of questions to get through today. Thank you for your interest and thank you for -- I wish everyone well during these times. And we're excited about the Q4 ahead and look forward to updating you on our progress in the New Year. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 68 minutes

Call participants:

Stephen Schultz -- Vice President, Investor Relations

Justin Gover -- Chief Executive Officer

Darren Cline -- US Chief Commercial Officer

Chris Tovey -- Chief Operating Officer

Volker Knappertz -- Chief Medical Officer

Scott Giacobello -- Chief Financial Officer

Turner Kufe -- JPMorgan -- Analyst

Tazeen Ahmad -- Bank of America -- Analyst

Salveen Richter -- Goldman Sachs -- Analyst

Phil Nadeau -- Cowen and Company -- Analyst

Josh Schimmer -- Evercore ISI -- Analyst

Charles Duncan -- Cantor Fitzgerald -- Analyst

Marc Goodman -- SVB Leerink -- Analyst

Paul Matteis -- Stifel -- Analyst

Serge Belanger -- Needham & Company -- Analyst

Neena Bitritto-Garg -- Citi -- Analyst

David Lebowitz -- Morgan Stanley -- Analyst

Yatin Suneja -- Guggenheim Partners -- Analyst

David Kideckel -- ATB Capital Markets -- Analyst

Danielle Brill -- Raymond James -- Analyst

Francois Brisebois -- Oppenheimer -- Analyst

Douglas Tsao -- H.C. Wainwright -- Analyst

More GWPH analysis

All earnings call transcripts

AlphaStreet Logo

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.