EX-99.1 2 tv493418_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

GW PHARMACEUTICALS PLC

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Page

Unaudited condensed consolidated income statement	2

Unaudited condensed consolidated statement of comprehensive loss	2

Unaudited condensed consolidated statement of changes in equity	4

Condensed consolidated balance sheets	5

Unaudited condensed consolidated cash flow statements	6

Notes to the condensed consolidated financial statements	7

GW Pharmaceuticals plc

Condensed consolidated income statement

Three months ended 31 March 2018 and 2017

		Three months ended			Three months ended			Three months ended
		31 March			31 March			31 March
	Notes	2018			2018			2017
			$000’s			£000’s			£000’s
Revenue	3		3,351			2,385			1,627
Cost of sales			(1,637	)		(1,165	)		(687	)
Research and development expenditure			(46,057	)		(32,782	)		(27,157	)
Sales, general and administrative expenses			(24,779	)		(17,637	)		(9,290	)
Net foreign exchange loss			(20,533	)		(14,615	)		(3,988	)
Operating loss			(89,655	)		(63,814	)		(39,495	)
Interest expense			(327	)		(233	)		(153	)
Interest and other income			1,862			1,325			313
Loss before tax			(88,120	)		(62,722	)		(39,335	)
Tax benefit	4		80			57			4,968
Loss for the period			(88,040	)		(62,665	)		(34,367	)

Loss per share – basic and diluted			(26.0c)			(18.5p)			(11.3p)
Loss per ADS – basic and diluted⁽¹⁾			(312.0c)			(222.0p)			(135.6p)

Weighted average ordinary shares outstanding (in millions) – basic and diluted						338.2			303.7

All activities relate to continuing operations.

⁽¹⁾Each ADS represents 12 ordinary shares

Condensed consolidated statement of comprehensive loss

For the three months ended 31 March 2018 and 2017

	Three months ended 31 March 2018 £000’s			Three months ended 31 March 2017 £000’s
Loss for the period		(62,665	)		(34,367	)
Items that may be reclassified subsequently to profit or loss
Exchange loss on retranslation of foreign operations		(753	)		(177	)
Other comprehensive loss for the period		(753	)		(177	)
Total comprehensive loss for the period		(63,418	)		(34,544	)

GW Pharmaceuticals plc

Condensed consolidated income statement

Six months ended 31 March 2018 and 2017

		Six months ended			Six months ended			Six months ended
		31 March			31 March			31 March
	Notes	2018			2018			2017
			$000’s			£000’s			£000’s
Revenue	3		11,404			8,117			3,683
Cost of sales			(2,877	)		(2,048	)		(1,402	)
Research and development expenditure			(88,594	)		(63,058	)		(52,071	)
Sales, general and administrative expenses			(49,211	)		(35,027	)		(15,974	)
Net foreign exchange (loss)/gain			(24,120	)		(17,168	)		7,827
Operating loss			(153,398	)		(109,184	)		(57,937	)
Interest expense			(660	)		(470	)		(243	)
Interest and other income			3,550			2,527			586
Loss before tax			(150,508	)		(107,127	)		(57,594	)
Tax (expense)/benefit	4		(3,497	)		(2,489	)		7,631
Loss for the period			(154,005	)		(109,616	)		(49,963	)

Loss per share – basic and diluted			(47.4c)			(33.7p)			(16.5p)
Loss per ADS – basic and diluted ⁽¹⁾			(568.8c)			(404.4p)			(198.0p)

Weighted average ordinary shares outstanding (in millions) – basic and diluted						325.0			303.2

All activities relate to continuing operations.

⁽¹⁾Each ADS represents 12 ordinary shares

Condensed consolidated statement of comprehensive loss

For the six months ended 31 March 2018 and 2017

	Six months ended 31 March 2018 £000’s			Six months ended 31 March 2017 £000’s
Loss for the period		(109,616	)		(49,963	)
Items that may be reclassified subsequently to profit or loss
Exchange (loss)/gain on retranslation of foreign operations		(940	)		241
Other comprehensive (loss)/gain for the period		(940	)		241
Total comprehensive loss for the period		(110,556	)		(49,722	)

GW Pharmaceuticals plc

Condensed consolidated statement of changes in equity

Six months ended 31 March 2018 and 2017

	Called-up		Share
	share		premium			Other			Accumulated
	capital		account			reserves			deficit			Total
		£000’s		£000’s			£000’s			£000’s			£000’s
Balance at 1 October 2016		302		556,477			19,538			(177,827	)		398,490
Exercise of share options		2		88			-			-			90
Share-based payment transactions		-		-			-			4,768			4,768
Loss for the period		-		-			-			(49,963	)		(49,963	)
Deferred tax attributable to unrealized share option gains		-		-			-			595			595
Other comprehensive income		-		-			241			-			241
Balance at 31 March 2017		304		556,565			19,779			(222,427	)		354,221



Balance at 1 October 2017		304		556,570			18,822			(297,521	)		278,175
Exercise of share options		2		-			-			-			2
Issue of share capital		33		223,037			-			-			223,070
Expense of new equity issue		-		(926	)		-			-			(926	)
Share-based payment transactions		-		-			-			8,969			8,969
Loss for the period		-		-			-			(109,616	)		(109,616	)
Deferred tax attributable to unrealized share option gains		-		-			-			675			675
Other comprehensive loss		-		-			(940	)		-			(940	)
Balance at 31 March 2018		339		778,681			17,882			(397,493	)		399,409

GW Pharmaceuticals plc

Condensed consolidated balance sheets

As at 31 March 2018 and 30 September 2017

			As at 31 March			As at 31 March			As at 30 September
	Notes		2018			2018			2017
Non-current assets				$000’s			£000’s			£000’s
Intangible assets - goodwill				7,320			5,210			5,210
Other intangible assets				2,723			1,938			1,049
Property, plant and equipment				67,862			48,302			43,666
Deferred tax asset				9,899			7,046			6,282
				87,804			62,496			56,207
Current assets
Inventories		5		4,896			3,485			4,244
Taxation recoverable				30,105			21,428			20,072
Trade receivables and other current assets				19,450			13,844			11,217
Cash and cash equivalents				487,235			346,798			241,175
				541,686			385,555			276,708
Total assets				629,490			448,051			332,915
Current liabilities
Trade and other payables		6		(43,071	)		(30,656	)		(33,119	)
Current tax liabilities				(3,333	)		(2,372	)		(838	)
Obligations under finance leases				(296	)		(211	)		(205	)
Deferred revenue				(1,145	)		(815	)		(2,307	)
				(47,845	)		(34,054	)		(36,469	)

Non-current liabilities
Trade and other payables		6		(11,744	)		(8,359	)		(9,256	)
Obligations under finance leases				(6,530	)		(4,648	)		(4,755	)
Deferred revenue				(2,221	)		(1,581	)		(4,260	)
Total liabilities				(68,340	)		(48,642	)		(54,740	)
Net assets				561,150			399,409			278,175

Equity
Share capital				476			339			304
Share premium account				1,094,010			778,681			556,570
Other reserves				25,123			17,882			18,822
Accumulated deficit				(558,459	)		(397,493	)		(297,521	)

Total equity				561,150			399,409			278,175

GW Pharmaceuticals plc

Condensed consolidated cash flow statements

For the six months ended 31 March 2018 and 2017

	Six months ended			Six months ended			Six months ended
	31 March			31 March			31 March
	2018			2018			2017
		$000’s			£000’s			£000’s
Loss for the period		(154,005	)		(109,616	)		(49,963	)
Adjustments for:
Interest and other income		(3,550	)		(2,527	)		(586	)
Interest expense		660			470			243
Tax expense/(benefit)		3,497			2,489			(7,631	)
Depreciation of property, plant and equipment		4,350			3,096			2,310
Impairment of property, plant and equipment		-			-			95
Reversal of impairment of property, plant and equipment		-			-			(216	)
Amortization of intangible assets		270			192			87
Net foreign exchange losses/(gains)		24,120			17,168			(7,827	)
Increase in provision for inventories		5,292			3,767			47
Decrease in deferred signature fees		(4,159	)		(2,960	)		(823	)
Share-based payment charge		12,601			8,969			4,768
Loss on disposal of property, plant and equipment		6			4			564
		(110,918	)		(78,948	)		(58,932	)
Increase in inventories		(4,228	)		(3,009	)		(442	)
Increase in trade receivables and other assets		(586	)		(417	)		(1,667	)
Decrease in trade and other payables and deferred revenue		(5,165	)		(3,676	)		(4,108	)
Research and development tax credits received		242			172			-
Income taxes paid		(1,710	)		(1,217	)		(828	)
Net cash outflow from operating activities		(122,365	)		(87,095	)		(65,977	)
Investing activities
Interest received		1,439			1,024			437
Purchases of property, plant and equipment		(15,034	)		(10,701	)		(8,995	)
Purchases of intangible assets		(1,201	)		(855	)		(428	)
Net cash outflow from investing activities		(14,796	)		(10,532	)		(8,986	)
Financing activities
Proceeds on exercise of share options		1			1			90
Proceeds of new equity issue		313,403			223,070			-
Expenses of new equity issue		(1,203	)		(856	)		(134	)
Interest paid		(660	)		(470	)		(462	)
Repayments of fit out funding		(270	)		(192	)		(656	)
Repayment of obligations under finance leases		(142	)		(101	)		(82	)
Net cash inflow/(outflow) from financing activities		311,129			221,452			(1,244	)
Effect of foreign exchange rate changes on cash and cash equivalents		(25,573	)		(18,202	)		8,100
Net increase/(decrease) in cash and cash equivalents		148,395			105,623			(68,107	)
Cash and cash equivalents at beginning of the period		338,840			241,175			374,392
Cash and cash equivalents at end of the period		487,235			346,798			306,285

GW Pharmaceuticals plc

Notes to the condensed consolidated financial statements

Three and six months ended 31 March 2018

1. Significant accounting policies

Basis of preparation

These unaudited condensed consolidated interim financial statements for the three and six-month periods ended 31 March 2018 and 31 March 2017 of GW Pharmaceuticals plc and subsidiaries (collectively, the “Group”) have been prepared in accordance with International Accounting Standard 34 – “Interim Financial Reporting”, as issued by the International Accounting Standards Board (“IASB”) and as endorsed by the European Union. These statements were approved by the Board on 8 May 2018.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB and as adopted by the European Union have been condensed or omitted as permitted by IAS 34. The balance sheet as at 30 September 2017 was derived from the audited financial statements.

The significant accounting policies and methods of computation adopted in the preparation of these condensed consolidated interim financial statements are consistent with those used in the preparation of the Group’s annual audited financial statements for the year ended 30 September 2017 in accordance with IFRS. These condensed consolidated interim financial statements include all adjustments necessary to fairly state the results of the interim period and the Group believes that the disclosures are adequate to make the information presented not misleading. Interim results are not necessarily indicative of results to be expected for the full year.

The Group has not adopted early any standard, interpretation or amendment that was issued but is not yet effective.

Solely for the convenience of the reader, unless otherwise indicated, all pound sterling amounts stated in the Condensed Consolidated Balance Sheet as at 31 March 2018, the Condensed Consolidated Income Statement and the Condensed Consolidated Cash Flow Statement for the three and six months ended 31 March 2018 have been translated into U.S. dollars at the rate on 31 March 2018 of $1.40495 to £1.0000. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange rate as at that or any other date.

The Directors do not consider the business to be seasonal or cyclical.

Going concern

At 31 March 2018 the Group had cash and cash equivalents of £346.8 million. The Directors have considered the financial position of the Group, its cash position and forecast cash flows for the 12-month period from the date of this report when considering going concern. They have also considered the Group’s key risks and uncertainties affecting the likely development of the business. In the light of this review, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for at least a 12-month period from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.

2. Segmental Information

Operating Segments

In accordance with IFRS 8 – “Operating Segments”, the chief operating decision maker (CODM), who is responsible for allocating resources and assessing performance of the Group, has been identified as a sub-group of the Executive Leadership Team (ELT), consisting of those members charged with executive management of the Group’s business activities.

GW Pharmaceuticals plc

Notes to the condensed consolidated financial statements

Three and six months ended 31 March 2018

2. Segmental Information (continued)

Operating Segments

During the first quarter of financial year 2018, the Group’s research and collaboration agreement with Otsuka Pharmaceuticals was terminated by mutual agreement. As part of this process, the rights to develop and commercialize Sativex in the United States were returned to the Group. As a result of this, the recognition of certain advance payments and deferred signature fee income balances in the Income Statement was accelerated on the basis that no further obligations remain to be fulfilled by the Group. The Group’s CODM considered that, following this termination, the nature of the Group’s operations has changed such that a review of operating segments was performed. The results of this identified that reporting a single operating segment has become appropriate, and reflects the Group’s strategy of discovering, developing and commercializing novel therapeutics from its proprietary cannabinoid product platform in a broad range of disease areas. Accordingly, the information required under IFRS 8 “Operating Segments”, including the respective comparative information, has been presented for the single operating segment in Note 3 below.

The Group has licensing agreements for the commercialization of Sativex® with Almirall S.A. in Europe (excluding the United Kingdom) and Mexico, Bayer HealthCare AG in the United Kingdom and Canada, Neopharm Group in Israel, Emerge Health Pty. Ltd. in Australasia and Malaysia and Ipsen Biopharm Ltd. in Latin America (excluding Mexico and the Islands of the Caribbean). Revenues include product sales, royalties, license, collaboration and technical access fees, and development and approval milestone fees.

3. Revenue

Revenues arising from the Group’s activities during the period were as follows:

	Three months ended		Three months ended		Six months ended		Six months ended
	31 March		31 March		31 March		31 March
	2018		2017		2018		2017

	£000’s		£000’s		£000’s		£000’s
Product sales		2,015		1,165		3,690		2,637
Research and development fees		55		69		1,356		223
License, collaboration and technical access fees		204		393		2,960		823
Development milestones		111		-		111		-
		2,385		1,627		8,117		3,683

GW Pharmaceuticals plc

Notes to the condensed consolidated financial statements

Three and six months ended 31 March 2018

Revenues from the Group’s major customers are included within revenue as follows:

	Three months ended		Three months ended		Six months ended		Six months ended
	31 March		31 March		31 March		31 March
	2018		2017		2018		2017
		£000’s		£000’s		£000’s		£000’s
Customer A		53		138		3,905		363
Customer B		1,572		863		2,834		2,021
Customer C		471		380		933		776
Customer D		145		4		222		7

Geographical analysis of turnover by destination of customer:

	Three months ended		Three months ended		Six months ended		Six months ended
	31 March		31 March		31 March		31 March
	2018		2017		2018		2017
	£000’s		£000’s		£000’s		£000’s
UK		546		506		959		822
Europe (excluding UK)		1,571		983		2,834		2,319
United States		-		12		3,693		104
Canada		196		-		385		180
Asia		72		126		246		258
		2,385		1,627		8,117		3,683

4. Tax (expense)/benefit

	Three months ended			Three months ended			Six months ended			Six months ended
	31 March			31 March			31 March			31 March
	2018			2017			2018			2017
	£000’s			£000’s			£000’s			£000’s
Current period research and development tax credit		-			(4,827	)		-			(7,221	)
Adjustments in respect of prior year tax		-			(191	)		-			(191	)
Deferred tax expense/(benefit)		432			280			(1,072	)		-
Reclassification of amounts previously recognized in equity		(206	)		255			254			-
Current period tax (benefit)/expense		(283	)		(485	)		3,307			(219	)
Total (benefit)/expense for the period		(57	)		(4,968	)		2,489			(7,631	)

In the six months ended 31 March 2018, the Group recognized the impact of The Tax Cuts and Jobs Act (the Act), which was signed into law on 22 December 2017, and thus substantively enacted at this date.

GW Pharmaceuticals plc

Notes to the condensed consolidated financial statements

Three and six months ended 31 March 2018

With effect from 1 October 2017, the Group is also no longer able to qualify tax credits in respect of the Small and Medium sized enterprises (SME) R&D relief under the Finance Act 2000. The Group now qualifies for the Research and Development Expenditure Credit (RDEC), available to large enterprises in the UK. An above-the-line RDEC credit of £0.8 million has been recorded within Interest and Other Income for the three months ended 31 March 2018 and £1.5 million within Interest and Other Income for the six months ended 31 March 2018.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the asset to be recovered.

5. Inventories

	31 March		30 September
	2018		2017
	£000’s		£000’s
Raw materials		323		199
Work in progress		2,753		3,379
Finished goods		409		666
		3,485		4,244

Inventory is stated net of a provision for inventories, calculated in accordance with the Group’s accounting policy. The movement in the provision for inventories is as follows:

	£000’s
Opening balance – as at 1 October 2016		118
Write-down of inventories to net realizable value		76
Write off of inventories included in the provision		(82	)
Reversal of write-down of inventories		(27	)
Closing balance as at 31 March 2017		85


Opening balance – as at 1 October 2017	41
Write-down of inventories to net realizable value	4,051
Write off of inventories included in the provision	(141	)
Reversal of write-down of inventories	(2	)
Closing balance as at 31 March 2018	3,949

During the current quarter, and after notification by the FDA of the Group’s successful submission of a New Drug Application, capitalization of Epidiolex-related plant material commenced. This inventory is subject to a full provision as at 31 March 2018 until the FDA approval process has made sufficient progress to indicate that there is clear evidence of an increase in the net realizable value and the provision can be reversed. We currently expect that the receipt of FDA regulatory approval will be a critical factor in that assessment.

6. Trade and other payables

	31 March		30 September
	2018		2017
	£000’s		£000’s
Amounts falling due within one year
Other creditors and accruals		18,977		19,335
Trade payables		5,063		5,807
Clinical trial accruals		4,173		5,520
Other taxation and social security		2,013		2,032
Fit out funding		403		389
Onerous lease provision		27		36
		30,656		33,119
Amounts falling due after one year
Fit out funding		7,751		7,957
Other creditors and accruals		608		1,288
Onerous lease provision		-		11
		8,359		9,256

Fit out funding represents £8.2 million (30 September 2017: £8.3 million) owed to the Group’s landlord reflecting the liability to repay the £7.8 million of fit out funding received to fund the expansion and upgrades to manufacturing facilities and associated interest of £2.4 million (30 September 2017: £2.2 million), net of payments to date of £2.0 million (30 September 2017: £1.7 million). Repayments will continue over the remainder of the 15-year term.