Final Results

GW Pharmaceuticals plc

Preliminary Results

Porton Down, UK, 22 November 2011: GW Pharmaceuticals plc (AIM: GWP, "GW" or "the Group"), the specialty pharmaceutical company focused on cannabinoid science, announces its preliminary results for the year ended 30 September 2011. 

COMMERCIAL HIGHLIGHTS

·; Sativex® successfully launched in UK, Germany, Spain and Denmark - strong initial uptake in key German market recently reported by marketing partner, Almirall

·; Licence agreement signed with Novartis to commercialise Sativex in Australasia, Asia (excluding Japan/China), Middle East (excluding Israel) and Africa. $5m upfront payment received. Regulatory submission filed in Australia.

·; Sativex approved in Czech Republic and further approvals in Italy, Sweden, and Austria expected in the coming months. Launches in these countries expected in 2012

·; Second European Mutual Recognition Procedure submission procedure now underway with aim to expand approvals to up to ten additional European countries in 2012 (see separate release today)

·; Expansion of facilities and staff to support sales growth and R&D activity

R&D HIGHLIGHTS

·; Two Sativex Phase III cancer pain trials recruiting on track. Third Phase III cancer pain trial in advanced stage of planning and due to commence H1 2012. All trials fully funded by US partner, Otsuka

·; Two important new patents granted to protect Sativex's formulation and its use in cancer pain

·; Three Phase IIa clinical trials of novel cannabinoid medicines (GWP42003 and GWP42004) in diabetes/metabolic disease now underway. First trial fully recruited.

·; Phase IIa clinical trial of novel cannabinoid medicine (GWP42003) in ulcerative colitis expected to commence Q1 2012

·; Positive pre-clinical data in epilepsy and cancer continue to be generated as part of Otsuka research collaboration

FINANCIAL HIGHLIGHTS

·; Sativex sales up by 59% to £4.4m (2010: £2.8m) and milestone income of £5.3m (2011: £11.2m). Total revenue of £29.6m (2010: £30.7m). 95% of revenue generated from overseas customers.

·; Net profit before tax of £2.5m (2010: £4.6m)

·; Cash and short term deposits at 30 September 2011 increased to £28.3m (2010: £25.2m)

Dr Geoffrey Guy, GW's Chairman, said, "GW has delivered a better than expected profit as a result of higher than anticipated Sativex sales and licence fee income from the recent Novartis agreement. The recent launch of Sativex in the key German market has been particularly encouraging and with the international commercial roll-out of Sativex gathering pace, we look forward to continued sales growth and further approvals and launches in Europe in the year ahead. Beyond Europe, we look forward to working with Novartis to commercialise Sativex in a number of key emerging markets.

"We remain confident that our ongoing research programme provides a wealth of opportunity for further growth and value creation. A substantial Phase III programme for Sativex in cancer pain is underway with the aim of addressing a major global market opportunity. In addition, we have multiple Phase II trials now underway and further trials planned across several areas of the pipeline with a view to signing new out-licensing agreements in due course. We look forward to building on these achievements during the year ahead."

An analyst presentation is being held today at 9.30am at FTI Consulting, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB. Please contact Mo Noonan at FTI Consulting on +44 20 7269 7116 for details. An audio webcast of the presentation will be available on GW's website at www.gwpharm.com later this afternoon.

Enquiries:

GW Pharmaceuticals plc

("GW" or "the Group")

Preliminary Results For The Year Ended 30 September 2011

INTRODUCTION

As the international commercialisation of Sativex® begins to gather pace and investment into the pipeline progresses, GW has this year matured into a company with three key components to its business: Sativex Commercial; Sativex R&D; and Cannabinoid Platform/Pipeline R&D.

1. Sativex Commercial

The commercial Sativex business already generates operating profits and provides a source of growing sales revenue. Near term sales growth will be driven by GW's recent regulatory successes and launches, additional approvals and launches for Sativex in Europe, and progress with the agreement signed this year with Novartis to commercialise Sativex in Australia, Asia, Middle-East and Africa.

2. Sativex R&D

We believe that the currently approved Multiple Sclerosis (MS) indication for Sativex represents only the start of Sativex's commercial life. GW is seeking to maximise the potential of Sativex through a comprehensive Phase III trials programme in cancer pain, funded by Otsuka Pharmaceutical Co. Ltd. This programme is targeted at the important United States (US) market but also provides an opportunity to address a major unmet need in other regions across the world.

3. Cannabinoid Platform / Pipeline R&D

GW now occupies a world leading position in cannabinoid science. We believe that there is significant opportunity to leverage this strategic position to develop a number of new medicines with a view to seeking new licensing partners in due course. A programme of Phase II trials is underway in metabolic disease and a Phase II trial is also due to commence in Ulcerative Colitis. Highly promising pre-clinical data is also being generated in epilepsy and cancer.

SATIVEX COMMERCIAL

In prior years, GW has entered into licensing agreements for the commercialisation of Sativex with Otsuka in the US, Almirall S.A. in Europe (excluding the United Kingdom), Bayer HealthCare AG in the UK and Canada, and Neopharm Group in Israel. Together with the Novartis agreement outlined below, GW has to date received £31m in signature fees and a further £28m in milestone payments. GW is entitled to receive up to a further £211m in additional milestone payments and also generates royalty/product supply income derived from sales by its commercial partners.

Novartis

In April 2011, GW announced that it had entered into an exclusive licence agreement for Novartis Pharma AG to commercialise Sativex in Australia and New Zealand, Asia (excluding Japan, China and Hong Kong), Middle East (excluding Israel and Palestine) and Africa.

Under the agreement, GW has received an upfront payment of $5m and will be eligible for additional payments totaling $28.75m upon the achievement of certain approval and commercial milestones. In addition, GW will receive royalties on net sales of Sativex. As one of the world's leading pharmaceutical companies with a strategic focus in both MS and oncology, GW believes that Novartis represents an excellent commercial partner for Sativex in these important and growing international markets.

Regulatory Progress

In Europe, Sativex received regulatory approval in 2010 in the UK and Spain for the indication of MS spasticity. This year, GW successfully completed a Mutual Recognition Procedure (MRP) to expand these approvals into six other European countries - Germany, Italy, Denmark, Sweden, Austria and the Czech Republic.

Following successful completion of the MRP, national licences have been granted in Germany, Denmark and the Czech Republic. Licences in each of the other countries are expected to be granted in the coming months in parallel with completion of national pricing and reimbursement processes.

A further MRP submission has now been initiated with a view to expanding the approval of Sativex to approximately ten additional European countries. This process should complete around mid 2012.

Beyond Europe, Sativex has received full regulatory approval for MS spasticity in Canada and New Zealand. Promotion in these two countries has yet to commence. GW has regulatory submissions ongoing in Australia and in Israel. Other filings are expected to be made during 2012, notably in the Middle East where the company has been approved as a Good Manufacturing Practice (GMP) manufacturer following an inspection of GW's manufacturing facility by the Gulf Cooperation Council (GCC) authority.

Commercialisation in Europe

As the marketing partner for Sativex across Europe (ex-UK), Almirall has a dedicated central European brand and marketing team for Sativex, as well as local teams for each individual country. In addition to significant sales force activity, Almirall sponsors booths and symposia at key national and international meetings. Most recently, at the European Congress of Multiple Sclerosis (ECTRIMS) in Amsterdam, data from three Phase III trials involving over 1,500 MS patients were presented. At this event, Almirall hosted a satellite symposium highlighting the key benefits of Sativex, attended by over 600 MS specialist physicians.

Almirall estimate that there are 700,000 patients with MS in Europe, of which 80% will present with spasticity. Of these patients, only around one third currently receive adequate treatment. Sativex is the first new therapeutic solution to treat MS symptoms in over ten years and is designed to treat those patients who do not gain adequate benefit from existing medication.

Since launch, Almirall report that the rollout is proceeding well and positive feedback has been received from physicians and patients in all territories. In view of the positive launch experience, Almirall now estimate Sativex will already have reached their top 15 product list during 2012.

Germany

Sativex was launched in Germany by Almirall in early July 2011. With over 120,000 people with MS, Germany represents the largest European market opportunity for Sativex.

Almirall report that there has been strong initial uptake in the German market. Almirall ex-factory sales in the first four months have reached €1.6m with solid monthly sales growth. Almirall have a full programme of activities and initiatives planned in 2012 to continue to drive this sales performance.

Spain

In March 2011, Sativex was launched in Spain following a determination by the Spanish Ministry of Health that Sativex should be made available as a fully reimbursed medicine under Spain's National Health System. The launch in Spain yielded a £2.5m milestone payment from Almirall. As Spain's largest domestic pharmaceutical company, Almirall is ideally placed to maximise the value of Sativex in the Spanish market.

Although the economic climate in Spain presents significant challenges, GW and Almirall are pleased with initial sales performance since launch. Ex-factory sales since March now exceed €1m. Sales growth in the coming year will largely be determined by progress in listing Sativex on the formulary of key hospitals around the country, a process which takes place on a hospital by hospital basis.

Denmark

Almirall recently established a wholly owned subsidiary in Scandinavia in anticipation of the launch of Sativex in Denmark. A "soft launch" took place during the summer and sales activities intended todrive sales during 2012 have recently begun.

UK

Sativex was launched in the UK in the summer 2010 by GW's UK marketing partner, Bayer HealthCare. In-market sales since launch have now reached approximately £3.3 million.

As previously discussed, sales evolution in the UK is affected by the challenging market access environment which faces all newly introduced medicines in the UK. In addition, MS is a disease area in which the UK has fallen well behind other European countries in providing access to treatment. With significant support from patient interest groups and clinicians, GW and Bayer are working to secure NHS funding for Sativex from local Primary Care Trusts (PCTs) and this will remain the focus for activities during 2012. As previously guided, due to the structural reasons outlined, GW expects the UK market to be characterised by steady growth rather than rapid market uptake.

The medium and long term prospects for Sativex in the UK have been enhanced by the decision of the National Institute for Clinical Excellence (NICE) to consider Sativex as part of NICE MS Treatment Guidelines. Since announcing this decision, NICE has not yet appointed the committee to update these guidelines and the timing of their publication is uncertain. The prospect of updated NICE guidelines featuring Sativex can be expected to assist in gaining PCT formulary access for the medicine.

Italy / Sweden / Austria / Czech Republic

These four countries all participated in the successful MRP earlier this year and recommended approval of Sativex. A national licence has since been granted in the Czech Republic and similar licences are awaited in the other countries. In all cases, Sativex requires pricing and reimbursement to be agreed with the national authorities prior to launch. This process is formally underway in Italy and the Czech Republic and should commence in Sweden and Austria in the very near future. Launches in all four countries are expected in calendar Q2/Q3 2012.

Other European Countries

Several additional European countries will be participating in the second MRP which has recently been initiated. The final list of countries in this process will be agreed during the process. This next MRP is expected to complete around mid 2012. Following this, we expect several further national approvals from the latter part of 2012 onwards and launches from early 2013.

SATIVEX R&D

Phase III Cancer Pain Trials Programme

Expanding Sativex to additional indications in order to maximise the product's potential and drive future sales growth is a key focus for GW. The near term priority for GW is the development of Sativex as a treatment for cancer pain and a comprehensive Phase III programme is now underway in this indication. The market potential for this indication is substantial with studies suggesting that more than one-third of patients with cancer, and more than three-quarters of those with advanced disease, suffer from chronic pain. Large surveys indicate that optimal opioid therapy does not yield sufficient relief in a substantial proportion of these patients. 

GW's cancer pain clinical programme is being wholly funded by Otsuka, which has licensed the US commercialisation rights to this product. The cancer pain trials are designed to obtain approval in this indication from the Food & Drug Administration (FDA) in the US, and these data will also be used by GW for future regulatory applications in this indication in Europe and around the world.

Prior to commencing the Phase III programme, GW has completed two Phase II studies with positive results including over 500 patients in total. The most recent Phase IIb study reported results in March 2010.

Two Core Phase III Trials

The core Phase III programme comprises two Phase III randomised placebo-controlled multi-centre multinational trials as well as a long term extension study. Each Phase III trial is intended to recruit 380 patients and will evaluate the efficacy and safety of Sativex versus placebo over a 5 week treatment period. The primary efficacy analysis is the continuous response analysis, the same analysis that has yielded statistically significant results in both Phase II trials.

Following the commencement of the first Phase III trial in December 2010, GW received a $4m milestone payment from Otsuka. The second Phase III study started as planned in mid-2011. Patient recruitment for both studies is on track.

The Phase III programme is expected to include patients in Europe, North America, Latin America and Asia. Recruitment for the two Phase III studies is initially taking place at sites in Europe. Professor Marie Fallon, Professor of Palliative Care, University of Edinburgh, is principal investigator of the first study. The principal investigator of the second study is Dr. Russell K. Portenoy, Chairman of the Department of Pain Medicine and Palliative Care at Beth Israel Medical Center in New York City.

Third Phase III Trial

Otsuka has requested that GW advance plans to initiate a third Phase III trial (funded by Otsuka) and preparations for this additional trial are progressing. Current expectations are for the study to commence in H1 2012. The purpose of this trial is to provide as needed supplementary data to that generated in the first two studies. In the event that data from the first two studies are sufficient for regulatory filing purposes, there is no intention to await the outcome of the third study prior to such filing.

The third Phase III trial differs in design from the first two studies, employing an "enriched study design" akin to that which was successfully employed in the MS spasticity trials programme. The study involves exposing patients to Sativex in a single blind phase of two weeks duration ("Phase A"), following which responders will be randomised either to stay on Sativex or switch to placebo in a double blind phase for a five week treatment period ("Phase B"). The primary efficacy analysis will be the mean change from baseline in Phase B. The study will aim to recruit 540 patients into Phase A and target 216 patients to enter Phase B.

New Sativex Indication

Beyond MS and cancer pain, Sativex has in recent years also yielded positive results from clinical trials in a range of indications, including various types of pain, as well as other symptoms of MS. GW is currently evaluating these opportunities in conjunction with its marketing partners to determine whether a new target indication should be formally developed at this time. Discussions on this matter are ongoing.

As with any new medicine, the availability of Sativex has provoked interest in its potential for other neurological conditions, particularly motor disorders. GW is working with a number of leading academic centres around Europe studying Sativex in conditions such as amyotrophic lateral sclerosis (motor neurone disease), cervical dystonia and Tourette's syndrome.

Strengthened Patent Position

GW continues to build the intellectual property base for Sativex with two new patents secured this year. In November 2011, the European Patent Office granted a patent which protects the composition of the Sativex® formulation. This patent has already been granted in the United States. The patent, entitled "Cannabinoid Liquid Formulations for Mucosal Administration", provides an exclusivity period until August 2023.

In addition, the development of Sativex in cancer pain was the subject of a new US patent granted in April 2011. The patent, entitled "Pharmaceutical Compositions for the Treatment of Pain", provides an exclusivity period until April 2025, and specifically covers a method of treating cancer related pain by administering a combination of the cannabinoids cannabidiol (CBD) and delta-9 tetrahydrocannabinol (THC), the two principal cannabinoids in Sativex.

CANNABINOID PLATFORM / PIPELINE R&D

GW now occupies a world leading position in cannabinoid science. The company has developed a proprietary and validated cannabinoid technology platform and formed constructive collaborations with leading international scientists, universities and institutions in the field. In addition to this expanding research network, GW also supports clinicians who approach the company in seeking to explore the potential of cannabinoids in the clinic through investigator initiated studies. GW's extensive research continues to yield highly promising data and new intellectual property across a range of therapeutic areas and provides GW with the potential to develop and license several new cannabinoid drug candidates in the coming years.

GW's understanding of the pure and applied pharmacology of new cannabinoids continues to be illuminated under the direction of two of the world's most eminent cannabinoid scientists, Professor Roger Pertwee at the University of Aberdeen and Professor Vincenzo di Marzo at Institute of Biomolecular Chemistry of the National Research Council, Naples.

GW's early stage research in diabetes/metabolic disease and inflammatory conditions is funded in-house and research in the field of CNS and oncology is funded by Otsuka under a global research collaboration agreement.

In-House Funded Research

The principal areas of GW's investment are in diabetes/metabolic disease and inflammatory conditions. GW is selectively investing its resources to advance this part of the cannabinoid pipeline with a view to signing new out-licensing agreements in due course.

Diabetes/Metabolic Disease

GW has embarked on a programme of three Phase IIa clinical studies evaluating GW's cannabinoids as potential treatments in the field of type diabetes and metabolic syndrome. Simultaneously, GW continues pre-clinical work aimed at better defining the mechanism of action of the cannabinoids in metabolic syndrome. Very recent findings include the observation in a rodent model of diabetes, that cannabinoids are able to protect the insulin-producing cells of the pancreatic islets [Cawthorne et al. submitted World Diabetes Congress, Dubai, Dec 2011]. This finding is consistent with the earlier observation that cannabinoid treatment in animal models of diabetes is associated with a reduction in fasting plasma insulin. Islet cell preservation is seen as a highly desirable feature of a new anti-diabetic medicine.

This pre-clinical work is carried out in formal collaboration with Professor Mike Cawthorne at the University of Buckingham, and with Professor Jimmy Bell, at Imperial College London. Work at both centres is exploring different aspects of the molecular mechanisms of this cytoprotective effect [Nunn et al. 2010].  

The clinical study programme comprises three Phase IIa studies and seeks to build upon pre-clinical data which demonstrate the desirable effects of a number of GW cannabinoids on various features of the metabolic disease, notably plasma insulin, cholesterol and liver fat. These three studies are as follows:

·; The first study is a multi-centre, randomised, double blind, placebo controlled, parallel group pilot study examining the effects on plasma lipid status of GWP42003 and GWP42004 at varying doses and at different ratios in patients with insulin resistance. This study is now fully recruited with a total of 62 patients.

·; In the second randomised controlled study, which commenced in the summer of this year, we are exploring the effect of GWP42003 on liver fat in 24 patients with Non-alcoholic Fatty Liver Disease.

·; The third Phase IIa study is now underway and is investigating whether GWP42003 and GWP42004 can prevent weight gain in 60 patients taking anti-psychotic therapy.

In each of these studies, a range of secondary measures are also being investigated. The objective of this early clinical development programme is to define the optimal therapeutic role for cannabinoids in metabolic syndrome. As part of GW's research effort in this therapeutic area, GW is working to set up clinical trials in the Gulf, a region with a high prevalence of diabetes.

Inflammation

Several GW cannabinoids have shown anti-inflammatory properties in a number of models of inflammation [Bolognini et al. 2010; Maione et al. 2011, Costa et al. 2007], and have the capacity to inhibit the production in tissues of chemical mediators of inflammation.

GW is on track to commence a Phase IIa study in the inflammatory diseases area in early 2012. This study will investigate the efficacy and safety of GWP42003 in the treatment of ulcerative colitis and will include 62 patients. The chief investigator will be Dr Peter Irving at Guy's and St Thomas's Hospital, London. Cannabinoids have shown potential in the treatment of IBD in standard in vivo models [Borrelli et al. 2009, Jamontt et al. 2010].

Separately, GW has entered a formal research collaboration with Professor Clive Page at King's College London focused on the effect of cannabinoids on various models of airways inflammation.

Otsuka Funded Research

GW's research activities in the earlier stage pipeline are supported by income from the global cannabinoid research collaboration with Otsuka. This collaboration was originally signed in July 2007 with a three year term, and was extended for a further three years to June 2013. Under this agreement, Otsuka funds GW's research into a range of cannabinoids as potential new drug candidates in the field of CNS disorders and oncology. To date, Otsuka's total investment in GW's research activities under this collaboration exceeds £15m.

Cancer

A major focus of the GW-Otsuka research collaboration lies in the area of cancer treatment. Pre-clinical studies are most advanced in the specific areas of glioma and breast cancer, where research into the proposed mechanism of action has been a main focus. In glioma, the mechanism of action for GWs cannabinoids has been identified. This inhibition in turn stimulates the process of autophagy, with the consequence that the malignant cell dies [Torres et al. 2011]. This mechanism also appears to be operating in models of other cancers, offering potential additional targets [Vara et al. 2011, Mirzoeva et al. 2011]. Additional research is now being actively pursued to identify the optimum anti-proliferative cannabinoids to take into the clinic.

In the area of breast cancer, the development by GW research collaborators of sophisticated new transgenic animal models means that we have been able to study the effect of cannabinoids both on local spread and distant spread of various types of therapy-resistant breast cancer. In Her2 positive breast cancer, cannabinoids have shown the ability to inhibit not only local spread, but also the occurrence of distant metastases [Caffarel et al. 2010, Ligresti et al., 2006, Marcu et al. 2010, McAllister et al. 2007, 2011]. Efforts are now focussed on identifying the precise molecular mechanism of action of cannabinoids in breast cancer, and to define the optimum cannabinoid treatment regimen.

Neuroscience

The second major area of focus in the GW-Otsuka research collaboration lies in nervous system disorders, primarily epilepsy and psychiatric illness. GW compounds have shown promise in the area of epilepsy in standard models of seizure [Jones et al. 2010, Hill et al. 2010]. As in the field of cancer, confirmation of the lead cannabinoid candidate, and of the type of epilepsy to target, are subject to intensive pre-clinical development.

In the field of schizophrenia, GW cannabinoids have shown notable anti-psychotic effects in accepted pre-clinical models of schizophrenia [Gururajan et al. 2011] and importantly have also demonstrated the ability to reduce the characteristic movement disorders induced by currently available anti-psychotic agents.

Neurodegenerative diseases are known to be associated with abnormalities of the endocannabinoid system [Fernandez-Ruiz 2009; Blázquez et al. 2011; Bisogno & Di Marzo 2011]. Studies in Huntington's Disease have shown that both the CB1 and CB2 receptors have a role in disease progression, and cannabinoids are neuroprotective in animal models of Huntington's Disease. A small preliminary clinical study programme looking at the impact of treatment with cannabinoids in Huntington's Disease has now started in collaboration with the Spanish network for the study of neurodegenerative diseases. In addition, cannabinoids have symptom-relieving and neuroprotective activity in models of Parkinson's Disease [Garcia et al. 2011].

FINANCIAL REVIEW

GW is pleased to report a healthy set of financial results for the year and a strong and improved cash position.

Revenues

Total revenues, at £29.6m, were marginally lower than the £30.7m recorded in 2010 due to the lower value of milestones received in 2011. 95% (2010: 94%) of GW's revenues are generated from overseas customers.

Sativex sales increased 59% to £4.4m (2010: £2.8m). Sales to Almirall for the Spanish and German markets, launched in March 2011 and July 2011 respectively, totalled £1.9m (2010: £Nil). Sales to Bayer for the UK and Canada increased to £2.2m (2010: £1.6m including a £1.2m UK launch order). GW's sales represent the value of stock sold by GW to Almirall and Bayer.

Milestone income in 2011, totalling £5.3m (2011: £11.2m) includes milestones of £2.75m from Almirall on the achievement of launches in Spain and Germany and £2.6m received from Otsuka upon commencement of the cancer pain Phase III trial programme. The prior year comprised £11.2m of Sativex approval milestones from Bayer for the UK and Canada.

Signature and technical access fee revenues of £3.8m includes £1.9m of revenue recognised from the signature fees received from Almirall and Otsuka in previous years, and £1.9m of revenue resulting from the £3.1m upfront payment received from the Novartis licence agreement signed in April. The remaining £1.2m of this upfront payment will be recognised in future periods.

Research and development fee revenues have increased to £16.0m (2010: £14.8m). These fees consist of research and development costs incurred by GW and charged to Otsuka under the Sativex US development agreement, totalling £10.8m (2010: £10.2m) and the global cannabinoid research collaboration agreement of £5.2m (2010: £4.6m).

Research & Development Expenditure

In order to maximise the commercial opportunity for Sativex, GW and its partners continue to invest in Sativex R&D. The majority of this expenditure is funded by Otsuka and relates to the Phase III cancer pain programme. At the same time, both GW and Otsuka are investing in GW's pipeline of potential products in order to advance them to the point of outlicensing.

Total research and development expenditure, which is expensed as incurred, was £22.3m (2010: £21.8m), of which £16.0m (2010: £14.8m) was funded by Otsuka. GW-funded research totalled £6.3m (2010: £7.0m) representing 28% (2010: 32%) of overall research and development spend.

Segmental results

This year, for the first time, we have provided a segmental analysis of our business (see Note 2) showing the profit and loss account split into three activities: Sativex Commercial, Sativex R&D and Pipeline R&D.

The Sativex commercial business generated a contribution of £12.5m (2010: £15.2m) from product sales, milestones and license fee revenues received from commercial partners.

Investment in Sativex R&D was £14.8m (2010: £14.5m), of which £10.8m (£10.4m) was Otsuka funded phase three cancer pain expenditure. The remaining £3.9m (2010: £4.1m) was funded by GW.

Investment in Pipeline R&D was £7.8m (2010: £7.4m), of which Otsuka funded £5.2m (2010: £4.4m). The remaining £2.6m (2010:£3.0m) was funded by GW.

Profitability

Pre-tax profit for the year was £2.5m (2010: £4.6m). This is ahead of previous guidance, principally due to higher than anticipated Sativex sales and fees earned from the new Novartis agreement.

Expenditure

Management and administration expenditure decreased modestly to £2.9m (2010: £3.0m) whilst the share-based payment charge increased slightly to £0.8m (2010: £0.6m). Interest income of £0.3m in 2011 (2010: £0.1m) reflects the combined effects of an increasing cash balance and improving rates of interest. GW continues to take a very conservative approach to managing counterparty credit risk on its cash deposits.

Taxation

The Group has not claimed a research and development tax credit for the year ended 30 September 2011 (2010: nil). The £0.2m tax credit in 2011 represents the successful outcome of a 2010 R&D tax credit claim which resulted in receipt of a repayment that had not been accrued in the 2010 accounts.

GW welcomes the recently announced improvements to the UK R&D tax credit scheme and we also expect to benefit significantly from the Government's patent box scheme proposals when implemented. The combination of these two measures should result in GW claiming increased R&D tax credits in the near term as well as a long term low rate of corporation tax.

Cash Flow

Net cash inflow for the year was £3.1m (2010: £4.6m).

Receipts include £5.3m of milestone income (2010: £11.2m), £3.1m (2010: £Nil) of fees arising from the Novartis licence agreement and the exercise of share options by GW staff which generated proceeds of £1.4m (2010: £0.7m).

Capital expenditure of £0.9m (2010: £0.4m) consisted mainly of laboratory equipment.

Balance Sheet

The Group's net funds comprise cash balances together with amounts held on short term deposit of £28.3m (2010: £25.2m).

Inventory of £1.4m (2010: £0.8m) consists of finished goods, consumable items and work in progress and is stated net of a realisable value provision of £3.4m (2010:£3.9m). This provision is calculated in accordance with the inventory accounting policy set out in Note 2.

Trade and other receivables at 30 September 2011 were £2.3m (2010: £1.2m), consisting of £1.5m (2010: £0.6m) of trade debtors (from sales of Sativex) and £0.8m (2010: £0.6m) of other receivables and prepayments.

At 30 September 2011 the Group had received £2.2m (2010: £3.2m) of advance payments for research activities to be carried out on behalf of Otsuka in the next six months. This has been disclosed as an advance payment received, within deferred revenue due within one year.

Deferred signature & technical access fee revenue amounts to £12.7m (2010: £13.5m), of which £1.3m (2010: £1.9m) is shown as due within one year. £11.4m (2010: £11.6m) is shown as due after more than one year and represents the balance of non-refundable Sativex licence agreement fees. These will be recognised as revenue in future periods.

In 2011 the Group capitalised a £65m intercompany loan from the Company to GW Pharma Limited (the Group's main operating subsidiary) into an equity investment. This has eliminated the deficit on GW Pharma Limited's profit and loss reserve and will enable the Group to pay dividends in the future if the Board determine such payments are appropriate.

Average headcount of the Group for the year was 152 (2010: 120). The increase in staff numbers reflects the expansion of operations necessary to support the commercial growth of Sativex as well as the Phase III and Phase II trials programmes now underway.

2012 Guidance:

Sales

As Sativex increases its market penetration and undergoes further launches, GW can look forward to growing in-market sales. GW's sales revenues are generated as sales of bulk product to licensing partners. As a result, and as previously indicated, the rate of GW's product sales growth in the next few years is likely to be influenced by a variety of factors, including the timing of new commercial launches, the timing of delivery of batches to partners, partner stock-holding policies and the rate of market uptake. Until the pattern of batch deliveries becomes more regular, we are likely to see variability in the level of GW's Sativex sales from one half year period to the next.

We expect product launches in 2012 in Italy, Sweden, Austria and the Czech Republic. Having now commenced the second round of Mutual Recognition Procedure in Europe, we expect further approvals in Europe from calendar mid-2012. Such approvals should lead to further commercial launches by Almirall in Europe from early fiscal 2013 onwards, driving continued sales growth in future years.

R&D Spend

As a result of GW's strategic decision to advance its cannabinoid pipeline into a programme of Phase II trials in metabolic and inflammatory diseases, we expect GW-funded R&D spend for the coming year to increase by 40-50% over the 2011 figure of £6.3m. This investment is intended to generate important clinical data on novel cannabinoid drug candidates in both metabolic and inflammatory diseases and help drive future growth.

Milestones

In 2012, Sativex pricing approval in Italy is expected to result in a £250,000 milestone payment from Almirall. There are no other milestones currently expected during the 2012 financial year.

Profitability

In contrast to the last few years, in which significant milestone income from Sativex licence agreements has been a key feature, this forthcoming year is expected to see a change in the balance of revenue streams away from milestone income and towards a greater emphasis on product sales revenue. As discussed above, R&D spend will also increase in 2012 as we invest in progressing the pipeline. As a consequence, and consistent with current market expectations, we expect to report a loss for the 2012 financial year. It should be noted that this should enable the Group to claim an R&D tax credit for the year.

OUTLOOK

As the commercialisation of Sativex continues to extend to more countries, Sativex sales growth can be expected to be a key driver of GW's revenue stream. In parallel we believe that further investment in Sativex as a treatment for cancer pain, as well as investment in the pipeline will be a major driver of future growth and new income streams. With a world leading position in cannabinoid science, a promising pipeline, partnership track record, and a prudent financial model focused on revenue growth and partner funded R&D, we are confident that GW is well placed to continue to build a dynamic and successful biopharmaceutical business.

This news release may contain forward-looking statements that reflect GWs current expectations regarding future events, including development and regulatory clearance of the GW's products. Forward-looking statements involve risks and uncertainties. Actual events could differ materially from those projected herein and depend on a number of factors, including (inter alia), the success of the GW's research strategies, the applicability of the discoveries made therein, the successful and timely completion of uncertainties related to the regulatory process, and the acceptance of Sativex® and other products by consumer and medical professionals.

GW Pharmaceuticals plc

Consolidated income statement

For the year ended 30 September 2011

All activities relate to continuing operations.

The Group has no gains or losses other than those shown above and therefore no separate statement of recognised income and expense has been presented.

 GW Pharmaceuticals plc

Consolidated balance sheet

As at 30 September 2011

This announcement was approved by the Board of Directors on 21 November 2011.

GW Pharmaceuticals plc

Consolidated statement of changes in equity

For the year ended 30 September 2011

GW Pharmaceuticals plc

Consolidated cash flow statement

For the year ended 30 September 2011

1. General information

The financial information set out above does not constitute the company's statutory accounts for the years ended 30 September 2011 or 2010, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under section s498(2) or (3) Companies Act 2006.

The Board of Directors of the Company approved this statement on 21 November 2011.

2. Accounting policies

a) Basis of accounting

This statement has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted for use in the European Union and is an abbreviated form of the 2011 statutory accounts which will be issued to shareholders shortly. Although the statutory accounts are fully compliant with IFRS, this abbreviated announcement does not itself contain all of the disclosures required for full IFRS compliance.

The full financial statements will be published on the Group website at www.gwpharm.com.

This statement has been prepared under the historical cost convention.

The Directors have considered the financial position of the Group, its cash position and future cash flows when considering going concern. They have also considered the Group's business activities, the key policies for managing financial risks and the key factors affecting the likely development of the business in 2012. In light of this review, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 September each year. Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies of the entity concerned, generally accompanying a shareholding of more than one half of the voting rights. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Acquisitions are accounted for under the acquisition method.

c) Revenue

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of trade discounts, value added tax and other sales-related taxes. No revenue is recognised for consideration, the value or receipt of which is dependent on future events, future performance or refund obligations. The Group's principal revenue streams and their respective accounting treatments are set out below:

i) Product sales

Revenue from the sale of products is recognised upon collection by customers or at the time of delivery depending on the terms of sale.

ii) Research and development fees

Revenue from contract research and development agreements is recognised as the services are performed.

iii) Licensing fees

Licensing fees represent revenues derived from product out-licensing agreements and from contract research and development agreements.

Signature fees received in connection with product out-licensing agreements, even where such fees are non-refundable and not creditable against future royalty payments, are deferred and recognized over the period of the license term, or the period of the associated collaborative assistance if that period is reasonably estimable.

Technical access fees are fees charged to licensing partners to have access to and to commercially exploit data that GW already possesses or which can be expected to result from GW research programmes that are already in progress. Such fees are recognised upon delivery of data to the partner or, in the event that the research programme is on-going, over the period taken to complete the research and to provide the data.

iv) Development and approval milestones

During the term of certain contract research and development agreements and licensing agreements, the Group is eligible to receive non-refundable development and approval milestone payments when certain clinical or regulatory results are achieved or upon the occurrence of certain milestone events. These milestones are recognised upon achievement of the relevant result or upon the occurrence of the milestone event when they become receivable.

d) Research and Development

Research and Development expenditure is recognised as an intangible asset only when the Group has achieved reasonable certainty that future economic benefits will flow to the Group and then only to the extent that the asset created is separately identifiable and the costs of which can be measured reliably.

All Research and development expenditure incurred prior to achieving regulatory approval is therefore expensed as incurred.

R&D expenditure incurred subsequent to regulatory approval is only recognised as an intangible asset if there is reasonable certainty that additional future economic benefits will flow to the group as a direct result of that research.

e) Taxation

The tax expense represents the sum of the tax currently payable or recoverable and deferred tax.

The tax payable or recoverable is based upon amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised only to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.

f) Intangible Assets - Goodwill

Goodwill arising on the acquisition of the subsidiary undertakings, representing the excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, is recognised as an asset and shown separately on the face of the balance sheet. Goodwill is tested for impairment at least annually and, where appropriate, an impairment charge is reflected in the income statement.

Determination of whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which the goodwill has been allocated. The value in use calculation requires an estimate of the present value of expected future cash flows discounted at an appropriate discount rate. Where appropriate, provision is then made to ensure that the carrying value does not exceed this value in use estimate.

g) Property, plant and equipment

Fixtures and equipment are stated at cost, net of accumulated depreciation and any provision for impairment. Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost of each asset on a straight-line basis over its expected useful life commencing upon the satisfactory completion of installation such that assets are ready for their intended use, as follows:

h) Inventory

Inventory is stated at the lower of cost and net realisable value. Cost is calculated using the average weighted cost method. Cost includes materials, direct labour and an attributable proportion of manufacturing overheads based on normal levels of activity. Net realisable value is the estimated selling price in the ordinary course of business, less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Provision is made for obsolete, slow moving or defective items where appropriate. Inventory is also provided for where the level of inventory held is in excess of the amount required to manufacture projected future sales volumes based on the current regulatory status of the relevant product. The provision ensures that the carrying value of inventory does not exceed expected net realisable value.

Prior to achieving territorial regulatory approvals, the sales volume projections for each territory, used to estimate the required level of inventory provision, are derived by applying historic growth rates to the current volumes being sold via named patient sales programmes. Once a territorial approval is achieved, volume projections are revised to take account of expected commercial sales volumes for that territory, based upon projections provided by commercial partners, adjusted to take into account other factors such as historic experience of sales growth rates and expected market penetration.

i) Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

j) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and deposits held at call with banks and other short term highly liquid investments with an original maturity of three months or less.

k) Foreign currency

Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated at the rates of exchange prevailing at that date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the income statement.

l) Share-based payment

The Group issues equity-settled share-based payments to employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions.

Fair value is measured by use of the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

3. Business segments

Previously, the Directors have considered GW's business to consist of a single operating segment, being pharmaceutical development.

The Directors now consider that GW's business consists of three operating segments, being:

Sativex Commercial operations

Sativex - Research and development

Pipeline - Research and Development

The management information used by the GW Board for monitoring performance and allocating resources now focuses upon the financial results of these three segments.

This reflects the fact that, following the series of Sativex commercial launches during 2011, the importance and value of GW's Sativex commercial business has increased significantly.

At the same time, the Board recognise that it is essential that we and our partners continue to invest in further Sativex R&D, in order to maximise the commercial opportunity for Sativex by seeking approvals for a broader range of clinical indications, whilst also moving forward the development of our pipeline product candidates to a licensable stage. Management information has therefore been adapted to allow decisions to be made about resource allocation between these two important activities.

The Board continues to make operational decisions and to assess performance against our strategic plan using cash flow and balance sheet information for the Group as a single operating entity. Therefore, no segmental analysis of net assets or cashflows has been provided.

Geographical analysis of revenue:

All revenue and profits before taxation originated in the UK. All assets and liabilities are held in the UK.

4. Research and development expenditure

5. Tax credit

The UK Corporation tax credit relates to research and development expenditure claimed under the Finance Act 2000.

At 30 September 2011 there were tax losses available to carry forward of approximately £46.0m (2010: £44.3m).

Net deferred tax assets, relating to carried forward losses, of approximately £11.9m (2010: £11.9m) have not been recognised as there is insufficient evidence at this stage that the assets will be recovered. These assets would be utilised if the Group were to make future taxable profits.

6. Earnings per share

The calculations of earnings per share are based on the following profits and numbers of shares.

7. Inventory

Inventory is stated net of a realisable value provision of £3.4m (2010 £3.9m)

8. Financial Assets

Trade and other receivables

9. Financial Liabilities

Trade and other payables

10. Deferred revenue

Deferred signature fee income represents the balance of the non-refundable signature fees received from Almirall and Otsuka. These amounts will be recognised as revenue in future periods.

For Almirall the £12m signature fee is being recognised at the rate of £0.8m per year over 15 years from December 2005. In the case of Otsuka, where the Group's obligations under the agreement are weighted towards the earlier years, the $18m (£9.2m) signature has been recognised from 1 April 2007 to 30 September 2011 at the rate of £1.1m per year and will be recognised at the rate of £0.28m per year for the following 15 years.

The Novartis up-front payment of £3.1m consisted of both a signature fee and technical access fees. £1.9m of this has been earned and recognised during 2011. The remaining £1.2m has been deferred and will be recognised over the estimated 10 year term of the license, at the rate of £0.2m per year for the period from 1 October 2011 to 31 March 2015 and thereafter at the rate of £0.1m per year until 31 March 2021.

Advance payments received represents payments for research and development activities to be carried out in the next financial year on behalf of Otsuka. These amounts will be recognised as revenue in future periods.

11. Share Capital

As at 30 September 2011 the authorised share capital of the Company and the allotted, called-up and fully paid amounts were as follows:

During the year the following ordinary shares of 0.1p each were issued by the Company:

12. Availability of information

A copy of this statement is available from the company website at www.gwpharm.com or from the Company Secretary at Porton Down Science Park, Salisbury, Wiltshire, SP4 0JQ.