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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35892

 

 

GW PHARMACEUTICALS PLC

(Exact name of Registrant as specified in its charter)

 

 

England and Wales

 

Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

Sovereign House, Vision Park
Chivers Way, Histon
Cambridge, CB24 9BZ
United Kingdom

 

+44 1223 266800

(Address of principal executive offices)

 

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol

 

Name of exchange on which registered

American Depositary Shares, each representing 12 Ordinary Shares, par value £0.001 per share

 

GWPH

 

The Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     YES   NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES   NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES   NO

As of October 31, 2019, 370,958,132 shares were outstanding including 356,415,948 shares held as American Depositary Shares, each representing twelve Ordinary Shares, par value of £0.001 per share and 14,542,096 Ordinary Shares.

 

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018

1

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018

2

 

Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended September 30, 2019 and 2018

3

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018

4

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

25

 

 

 

PART II.

OTHER INFORMATION

26

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 6.

Exhibits

30

Signatures

31

 

 

 

 


PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GW PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

554,682

 

 

$

591,497

 

Accounts receivable, net

 

 

41,818

 

 

 

4,192

 

Inventory

 

 

69,288

 

 

 

33,030

 

Prepaid expenses and other current assets

 

 

32,196

 

 

 

17,903

 

Total current assets

 

 

697,984

 

 

 

646,622

 

Property, plant, and equipment, net

 

 

110,161

 

 

 

90,832

 

Operating lease assets

 

 

20,438

 

 

 

 

Goodwill

 

 

6,959

 

 

 

6,959

 

Deferred tax assets

 

 

8,425

 

 

 

8,720

 

Other assets

 

 

3,884

 

 

 

2,935

 

Total assets

 

$

847,851

 

 

$

756,068

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,934

 

 

$

9,796

 

Accrued liabilities

 

 

81,704

 

 

 

52,477

 

Current tax liabilities

 

 

 

 

 

2,384

 

Other current liabilities

 

 

6,627

 

 

 

1,559

 

Total current liabilities

 

 

95,265

 

 

 

66,216

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Finance lease liabilities

 

 

5,297

 

 

 

5,690

 

Operating lease liabilities

 

 

17,007

 

 

 

 

Other liabilities

 

 

10,627

 

 

 

10,082

 

Total long-term liabilities

 

 

32,931

 

 

 

15,772

 

Total liabilities

 

 

128,196

 

 

 

81,988

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock - Ordinary shares par value £0.001;

   370,937,744 shares outstanding as of September 30, 2019;

   366,616,688 shares outstanding as of December 31, 2018

 

 

570

 

 

 

564

 

Additional paid-in capital

 

 

1,619,649

 

 

 

1,581,144

 

Accumulated deficit

 

 

(813,013

)

 

 

(828,940

)

Accumulated other comprehensive loss

 

 

(87,551

)

 

 

(78,688

)

Total stockholders’ equity

 

 

719,655

 

 

 

674,080

 

Total liabilities and stockholders’ equity

 

$

847,851

 

 

$

756,068

 

 

See accompanying notes to these condensed consolidated financial statements.

1


GW PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product net sales

 

$

90,849

 

 

$

2,343

 

 

$

201,312

 

 

$

8,249

 

Other revenue

 

 

122

 

 

 

77

 

 

 

944

 

 

 

496

 

Total revenues

 

 

90,971

 

 

 

2,420

 

 

 

202,256

 

 

 

8,745

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

8,150

 

 

 

1,399

 

 

 

19,901

 

 

 

4,815

 

Research and development

 

 

36,301

 

 

 

28,943

 

 

 

99,143

 

 

 

117,541

 

Selling, general and administrative

 

 

64,178

 

 

 

52,685

 

 

 

181,529

 

 

 

116,644

 

Total operating expenses

 

 

108,629

 

 

 

83,027

 

 

 

300,573

 

 

 

239,000

 

Loss from operations

 

 

(17,658

)

 

 

(80,607

)

 

 

(98,317

)

 

 

(230,255

)

Interest income

 

 

2,249

 

 

 

1,283

 

 

 

6,646

 

 

 

3,041

 

Interest expense

 

 

(272

)

 

 

(297

)

 

 

(805

)

 

 

(935

)

Other income

 

 

 

 

 

 

 

 

104,117

 

 

 

 

Foreign exchange gain (loss)

 

 

1,889

 

 

 

(823

)

 

 

2,801

 

 

 

(5,123

)

(Loss) income before income taxes

 

 

(13,792

)

 

 

(80,444

)

 

 

14,442

 

 

 

(233,272

)

Income tax (benefit) expense

 

 

(35

)

 

 

(565

)

 

 

(1,485

)

 

 

79

 

Net (loss) income

 

$

(13,757

)

 

$

(79,879

)

 

$

15,927

 

 

$

(233,351

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

$

(0.23

)

 

$

0.04

 

 

$

(0.68

)

Diluted

 

$

(0.04

)

 

$

(0.23

)

 

$

0.04

 

 

$

(0.68

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

372,246

 

 

 

341,302

 

 

 

371,286

 

 

 

340,675

 

Diluted

 

 

372,246

 

 

 

341,302

 

 

 

376,985

 

 

 

340,675

 

 

See accompanying notes to these condensed consolidated financial statements.

2


GW PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

(unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net (loss) income

 

$

(13,757

)

 

$

(79,879

)

 

$

15,927

 

 

$

(233,351

)

Foreign currency translation adjustments

 

 

(7,783

)

 

 

561

 

 

 

(8,863

)

 

 

(1,242

)

Comprehensive (loss) income

 

$

(21,540

)

 

$

(79,318

)

 

$

7,064

 

 

$

(234,593

)

 

See accompanying notes to these condensed consolidated financial statements.

3


GW PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balances at December 31, 2018

 

 

366,617

 

 

$

564

 

 

$

1,581,144

 

 

$

(828,940

)

 

$

(78,688

)

 

$

674,080

 

Issuance of common stock from exercise of

   stock options

 

 

1,996

 

 

 

3

 

 

 

770

 

 

 

 

 

 

 

 

 

773

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(50,064

)

 

 

 

 

 

(50,064

)

Share-based compensation

 

 

 

 

 

 

 

 

11,142

 

 

 

 

 

 

 

 

 

11,142

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,798

 

 

 

3,798

 

Balances at March 31, 2019

 

 

368,613

 

 

$

567

 

 

$

1,593,056

 

 

$

(879,004

)

 

$

(74,890

)

 

$

639,729

 

Issuance of common stock from exercise of

   stock options

 

 

2,008

 

 

 

3

 

 

 

2,102

 

 

 

 

 

 

 

 

 

2,105

 

Net income

 

 

 

 

 

 

 

 

 

 

 

79,748

 

 

 

 

 

 

79,748

 

Share-based compensation

 

 

 

 

 

 

 

 

12,188

 

 

 

 

 

 

 

 

 

12,188

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,878

)

 

 

(4,878

)

Balances at June 30, 2019

 

 

370,621

 

 

$

570

 

 

$

1,607,346

 

 

$

(799,256

)

 

$

(79,768

)

 

$

728,892

 

Issuance of common stock from exercise of

   stock options

 

 

316

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(13,757

)

 

 

 

 

 

(13,757

)

Share-based compensation

 

 

 

 

 

 

 

 

12,303

 

 

 

 

 

 

 

 

 

12,303

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,783

)

 

 

(7,783

)

Balances at September 30, 2019

 

 

370,937

 

 

$

570

 

 

$

1,619,649

 

 

$

(813,013

)

 

$

(87,551

)

 

$

719,655

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balances at December 31, 2017

 

 

337,964

 

 

$

527

 

 

$

1,220,206

 

 

$

(523,683

)

 

$

(73,952

)

 

$

623,098

 

Issuance of common stock from exercise of

   stock options

 

 

549

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(69,461

)

 

 

 

 

 

(69,461

)

Share-based compensation

 

 

 

 

 

 

 

 

6,858

 

 

 

 

 

 

 

 

 

6,858

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,108

 

 

 

4,108

 

Balances at March 31, 2018

 

 

338,513

 

 

$

528

 

 

$

1,227,064

 

 

$

(593,144

)

 

$

(69,844

)

 

$

564,604

 

Issuance of common stock from exercise of

   stock options

 

 

634

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(84,011

)

 

 

 

 

 

(84,011

)

Share-based compensation

 

 

 

 

 

 

 

 

9,568

 

 

 

 

 

 

 

 

 

9,568

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,911

)

 

 

(5,911

)

Balances at June 30, 2018

 

 

339,147

 

 

$

529

 

 

$

1,236,632

 

 

$

(677,155

)

 

$

(75,755

)

 

$

484,251

 

Issuance of common stock from exercise of

   stock options

 

 

1,100

 

 

 

1

 

 

 

616

 

 

 

 

 

 

 

 

 

617

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(79,879

)

 

 

 

 

 

(79,879

)

Share-based compensation

 

 

 

 

 

 

 

 

9,609

 

 

 

 

 

 

 

 

 

9,609

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

561

 

 

 

561

 

Balances at September 30, 2018

 

 

340,247

 

 

$

530

 

 

$

1,246,857

 

 

$

(757,034

)

 

$

(75,194

)

 

$

415,159

 

 

See accompanying notes to these condensed consolidated financial statements.

4


GW PHARMACEUTICALS PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

15,927

 

 

$

(233,351

)

Adjustments to reconcile net income (loss) to net cash used in

   operating activities:

 

 

 

 

 

 

 

 

Foreign exchange (gain) loss

 

 

(418

)

 

 

5,097

 

Share-based compensation

 

 

35,633

 

 

 

26,035

 

Depreciation and amortization

 

 

7,096

 

 

 

7,127

 

Deferred income taxes

 

 

 

 

 

835

 

Gain from sale of priority review voucher

 

 

(104,117

)

 

 

 

Other

 

 

39

 

 

 

233

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(37,691

)

 

 

(581

)

Inventory

 

 

(37,561

)

 

 

(14,024

)

Prepaid expenses and other current assets

 

 

(14,869

)

 

 

15,005

 

Other assets

 

 

2,968

 

 

 

(398

)

Accounts payable

 

 

(1,161

)

 

 

4,040

 

Current tax liabilities

 

 

(601

)

 

 

(4,844

)

Accrued liabilities

 

 

29,176

 

 

 

13,503

 

Other liabilities

 

 

(1,943

)

 

 

1,013

 

Net cash used in operating activities

 

 

(107,522

)

 

 

(180,310

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Proceeds from sale of priority review voucher

 

 

104,117

 

 

 

 

Additions to property, plant and equipment

 

 

(29,915

)

 

 

(23,614

)

Additions to capitalized software

 

 

(1,183

)

 

 

(1,049

)

Proceeds from disposal of property, plant and equipment

 

 

-

 

 

 

517

 

Net cash provided by (used in) investing activities

 

 

73,019

 

 

 

(24,146

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

2,878

 

 

 

619

 

Payments on finance leases

 

 

(317

)

 

 

(211

)

Payments on landlord financing obligation

 

 

(404

)

 

 

(397

)

Net cash provided by financing activities

 

 

2,157

 

 

 

11

 

Effect of exchange rate changes on cash

 

 

(4,469

)

 

 

131

 

Net decrease in cash and cash equivalents

 

 

(36,815

)

 

 

(204,314

)

Cash and cash equivalents at beginning of period

 

 

591,497

 

 

 

559,227

 

Cash and cash equivalents at end of period

 

$