SEC Filing | GW Pharmaceuticals

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gwph-10q_20190930.htm

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

☐

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.

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.

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.

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.

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	)