Q2 2022 Novocure Ltd Earnings Call
Operator: Good day and welcome to the Novocure Q2 2022 earnings call.
Bill Doyle: Good morning.
Ashley Cordova: We have established payer terms. We have adjusted all of our processes to ensure compliance with these, and I do expect that, the patient starts and the patient mix will improve each quarter from here, and revenue will return over time. But this will play out over the course of several quarters, just given the duration, of therapy that we have.
Operator: After the speaker's presentation, there will be a question and answer session. As a reminder, this call is being recorded.
Operator: I would like to turn the call over to Ingrid Goldberg.
Operator: You may begin.
Ingrid Goldberg: Good morning, everyone, and thank you for joining us to review Novocure's second quarter 2022 performance.
Bill Doyle: This is Bill.
Ashley Cordova: That was a long-winded answer, Jason, but I think important to kind of walk through, so happy to take any questions if additional clarification is necessary.
The conference will begin shortly to raise your hand during Q&A you can dial star one.
Ingrid Goldberg: I'm joined on the phone by our Executive Chairman, Bill Doyle, our CEO, Asaf Danziger, and our CFO, Ashley Cordova.
Jason Bednar: Yeah, no, I'll head back in queue.
Okay.
Ingrid Goldberg: Other members of our executive leadership team are also on the call and available for Q&A.
Jason Bednar: That was very helpful, Ashley, and we can follow up offline with others.
Good day and welcome to the Q.
Q2, 2022 earnings call after the speaker's presentation there'll be a question answer session.
As a reminder, this call is being recorded.
Ingrid Goldberg: For your reference, slides accompanying this earnings release can be found on our website, www.novocure.com, under quarterly reports on our investor relations page.
I'd like to turn the call over to Ingrid Goldberg you may begin.
Bill Doyle: I'm going to just start by saying our team is gathered virtually today from points all over the world, so I'm going to be a little bit of the emcee, and I'm going to turn it over to Ashley to take your first question, and then Uri will talk about the gastric trial.
Jason Bednar: Thank you.
Good morning, everyone and thank you for joining us to review <unk> second quarter 2022 performance.
Ingrid Goldberg: Before we start, I would like to remind you that discussions during this conference call will include forward-looking statements, and actual results could differ materially from those projected in these statements.
I'm joined on the phone by our executive Chairman Bill Doyle, our CEO adopt onto GARP and our CFO Ashley Cordova.
Ingrid Goldberg: These statements involve a number of risks and uncertainties, some of which are beyond our control and are described from time to time in our SEC filings.
Other members of our executive leadership team are also on the call and available for Q&A.
Ingrid Goldberg: We do not intend to update publicly any forward-looking statement, except as required by law.
For your reference slides accompanying this earnings release can be found on our website www dot dot com under quarterly reports on our Investor Relations page.
Ingrid Goldberg: Where appropriate, we will refer to non-GAAP financial measures to evaluate our business, specifically adjusted EBITDA, a measure of earnings for tax, interest, depreciation, amortization, and share-based compensation. We believe adjusted EBITDA is an important metric as it removes the impact of earnings attributable to our capital structure, tax rate, and material non-cash items, and best reflects the financial value generated by our business.
Before we start I would.
I'd like to remind you that discussions during this conference call will include forward looking statements and actual results could differ materially from those projected in these statements.
These statements involve a number of risks and uncertainties some of which are beyond our control and are described from time to time in our SEC filings, we do not intend to update publicly any forward looking statement, except as required by law.
Ingrid Goldberg: Reconciliations of non-GAAP to GAAP financial measures are included in our press release, earnings slides, and in our Form 8K filed with the SEC today.
Where appropriate we will refer to non-GAAP financial measures to evaluate our business specifically adjusted EBITDA.
Ingrid Goldberg: These materials can also be accessed from our investor relations page of our website.
A measure of earnings before taxes interest depreciation amortization and share based compensation we.
Ingrid Goldberg: Following our prepared remarks today,
Bill Doyle: Perfect.
Jason Bednar: Perfect.
We believe adjusted EBITDA is an important metric as it removes the impact of earnings attributable to our capital structure tax rate and material noncash items and best reflects the financial value generated by our business reconciliations of non-GAAP to GAAP financial measures are included in our press release earnings slides and in our form 8-K filed with the SEC today.
Ingrid Goldberg: we will open the line for your questions.
Ashley Cordova: Thanks, Corey.
Operator: Thanks.
Ingrid Goldberg: I will now turn the call over to our Executive Chairman,
Bill Doyle: Bill Doyle.
Greg Frazier: Our next question comes from Greg Frazier with Truist.
Greg Frazier: Your line is open.
Greg Frazier: Good morning, folks.
These materials can also be accessed from our industrial relations page of our web site.
Following our prepared remarks today, we will open the line for your questions.
Greg Frazier: Thanks for taking the questions.
I will now turn the call over to our executive Chairman Bill Doyle.
Thank you Ingrid and good morning.
Bill Doyle: Thank you, Ingrid, and good morning.
Greg Frazier: Ashley, can you talk about what's driving the higher price in the U.S., and how should, we think about net revenue per month in the U.S. going forward?
Our mission is to extend survival in some of the most aggressive forms of cancer through the development and commercialization of our innovative therapy tumor treating fields.
Bill Doyle: Our mission at Novacure is to extend survival in some of the most aggressive forms of cancer through the development and commercialization of our innovative therapy tumor-treating fields.
<unk> quarter was a period of solid execution and progress.
<unk> were up 6% compared with the second quarter of 2021.
Ashley Cordova: So just to tee up, ex-Germany, our active patient growth year over year was 3 percent.
Ashley Cordova: I think your comments that you made were on a global basis, but if you could provide some, color on the U.S., that would be helpful.
We released encouraging phase II data in gastric cancer.
Ashley Cordova: Asian and other European markets remain strong and we're focused, as we've talked about, on a variety of commercial drivers in the U.S.
Ashley Cordova: But given the abrupt fluctuation in German active patient volumes, we are not providing forward-looking cover.
Ashley Cordova: It's just we don't have a clear enough line of sight as to the pace of recovery in Germany to reiterate that 2.5 percent.
And announced our second partnership with global oncology leader Mark.
Ashley Cordova: Yeah, again, thanks for the question, Greg.
Ashley Cordova: So if we look at the U.S. strength in price, it comes from two primary buckets. One is success on previously denied and appealed claims.
Ashley Cordova: This is about two-thirds of the strength in that U.S. price, if you look versus the Q4, 2021 baseline, which is our anchor price.
As we approach a series of pivotal milestones in the coming quarters, we feel of how much excitement at novocure as our teams work towards data Readouts and develop launch plans.
Ashley Cordova: And about the remaining third comes from fundamental improvements in expanding coverage, policies at the margin and just price negotiations with additional contract players over time.
Ashley Cordova: So I would say a third of it is durable and really related to just ongoing market access, work.
Ashley Cordova: And two-thirds is really the performance of our U.S. revenue operations teams as we continue, to go after those aged claims that we have in the pipeline.
Ashley Cordova: I will remind everybody that the predictability of those aged claims is not high, and so when, we look ahead, I would bank on the enduring improvements and not the aged claims.
Greg Frazier: On Japan, prescriptions declined, although the active patient number grew.
Greg Frazier: Can you talk about demand trends that you're seeing there, and are you seeing any new headwinds, to prescribing in Japan?
Ashley Cordova: Okay.
Pritesh Shah: Go ahead, Pritesh.
We exited the quarter with 3454 commercial active patients on <unk> therapy around the globe.
Corey Kasimov: Thank you.
Pritesh Shah: Thank you, Bill.
Steady patient volumes in the U S and increasing adoption in Japan, offset a decrease in German active patient numbers as a result of updated coverage criteria.
Corey Kasimov: Corey?
Pritesh Shah: Greg, thanks for the question.
Pritesh Shah: So the short answer is we're not seeing any new headwinds.
Corey Kasimov: Yeah, that's great.
Pritesh Shah: I would say that's just the cyclical nature of how we see within a rare disease like GBM, prescriptions flow through.
Pritesh Shah: So we would expect just based on the historical performance in Japan, the strength of our, data and our ongoing efforts there, the business will continue to be stable in Japan.
We are pushing a number of avenues intended to increase the adoption of <unk> therapy and reach more patients who may benefit from <unk> fields.
Pritesh Shah: Got it.
GBM, our focus is to drive greater adoption and academic institutions, where we see a significant share of GBM patient flow.
Greg Frazier: Thanks for taking the questions.
We are employing a multi pronged strategy to engage practitioners in the academic setting to ensure they understand and can communicate the broad benefits of TT fields.
Uri Weinberg: And then on the gastric side?
Operator: Our next question comes from Emily Bodnar with HC Wainwright.
Uri Weinberg: On the gastric side, so EF-31 was our first study in gastric cancer, which has high incidence, especially in Asia, of course, but incidence anticipated to rise also in the U.S. And the study was designed for patients with unrespectable disease who received their first-line therapy, concomitantly with TTCs to the abdominal region.
Emily Bodnar: Your line is open.
What is the most effective ways to drive greater adoption.
Emily Bodnar: Hi.
With the ongoing generation of clinical data.
Year to date, there are over 1500, Pubmed citations TT fields.
Emily Bodnar: Thanks for taking the questions.
So the increasing relevance of <unk> fields and the scientific community.
Also this quarter two key clinical datasets were presented which we would like to highlight.
External research intended to identify genomic factors associated with an increased response to October was published image June volume of neuro oncology.
Uri Weinberg: And beyond the very strong signal of efficacy which the study provided, we're always encouraged by the fact that we have another evidence supporting the broad applicability of TTCs and yet another malignancy.
Retrospective data were collected from 148 patients treated at six leading academic institutions.
Consistent with the findings of the EF 14, randomized phase III trial and other independent data sets presented to date the use of auction increased progression free and overall survival in all patient cohorts and demonstrated a clear dose response with increased usage.
Emily Bodnar: I just had one on your Next Generation Arrays that you plan to launch later this year in, Europe.
Emily Bodnar: I guess what are you looking to see with the initial launch to kind of determine if you, want to take that out more broadly, and what would you want to see in order to potentially implement that into the label for off-tune?
Beyond the broadly applicable benefit alterations in certain genetic signatures were associated with increased benefit from October .
Emily Bodnar: Thanks.
These results further validate the survival benefit for GBM patients shown in the EF 14 trial and shed light on potential predictive biomarkers associated with an even greater response.
Bill Doyle: Yeah.
Opening an interesting area for ongoing research.
At <unk> in June the charity University Hospital in Berlin presented a multi country registry analysis of GBM patients in Austria, Germany, and Switzerland. The charity analysis of real World evidence showed a median overall survival of 35 months for <unk>.
<unk> treated with <unk>, plus chemotherapy compared to 15 months for patients treated with chemotherapy alone.
These registry data further underlines the benefit of auction with real world experience and are consistent with the results. We have observed in more than 25000, GBM patients treated with auction to date.
Uri Weinberg: So we certainly anticipate a Phase III study in the coming time. We are considering the design of the study, given the fact that Nivolumab has demonstrated the efficacy in this malignancy, through the Checkmate 649 study.
The growing engagement and research, an opportune and <unk> fields emanating from leading academic centers is very encouraging.
And we believe indicative of the growing awareness and acceptance of tumor treating fields therapy.
While we are preparing to launch a new cancer indications, we are committed to investing in GBM treatment innovation.
Uri Weinberg: And we are seriously considering having another study incorporating immune checkpoint inhibitors in another malignancy, going to be the 607 study to involve the immune checkpoint inhibitors with Q136.
To this end in May we announced the second clinical collaboration with Merck.
Uri Weinberg: Okay.
We plan to conduct a double blind placebo controlled pivotal study of <unk>.
TT fields, together with timberlands, a mab and <unk> for the treatment of newly diagnosed GBM.
This study will build upon the research recently published in the journal of clinical investigation, and we will seek to confirm the promising data generated by Dr. David trends to the phase III study.
This latest collaboration between Novocure and Mark will continue the exploration of PPE fields together with Immunotherapies.
And Ah malignancy and in a region of the body, where checkpoint inhibitors have not previously shown a therapeutic benefit.
We are also exploring other new GBM treatment protocols.
Our pivotal Trident study is evaluating the benefits of start in TT fields therapy concurrently with radiation therapy.
Other than following radiation therapy.
Six clinical sites are actively recruiting patients for Trident.
Beyond clinical data and physician education patient awareness is also critical to expanding adoption.
We recently finalized.
A.
For October and social media campaign, which is scheduled to launch in the second half of this year.
Im gauging patients caregivers and physicians across the digital ecosystem. The art for opportune campaign is designed to instill confidence inspire courage and prepare guidance support patients on their GBM treatment journey.
Just as other physical treatment modalities evolved from their invention to their ultimate optimal use we are making significant investments in product development as we seek to further improve outcomes.
Our re lay out planning is an essential component of treatment with optum.
Is it allows the prescriber to optimize the intensity of therapy by adapting our reconfiguration for each patient.
Today, the Novotel system is used to create these individualized treatment plants.
Next point is our next generation array layout planning system Max.
<unk> point is designed to provide more precise targeting to increase the intensity of PT fields delivered to the tumor.
This quarter, we advanced Max point development with the initiation of an evidence generation program, which compares the dose volume metrics of Max point guided array layouts to novatel guided array layouts.
We look forward to sharing data from the Max point program in coming quarters.
Additionally, our next generation of race now known as the flex array remain on track for a limited market release in Europe . This year.
We believe these arrays have the ability to deliver a higher more consistent intensity to the tumor bed without meaningfully increasing seat.
Both the flex array and Max point represent meaningful milestones in our product development journey and highlight our commitment to ongoing investment and product development initiatives.
Beyond GBM.
We're exploring the use of TT fields, and a number of additional solid tumor indications in the torso and abdomen.
In June together with our partner XI lab, we presented data from the F 31 pilot study.
Yes, 31 evaluated the use of TT fields together with chemotherapy for the treatment of gastric cancer.
Gastric cancer is prevalent and deadly with five year survival rates below 20%.
We were excited by both the response rate and the durability of response is shown in the F 31 data.
Yes, 31 demonstrated an objective response rate of 50% and duration of response of 10 three months.
Notable improvements over historical controls.
We are very pleased with the signals generated for me F. 31, we are eager to continue exploring the potential benefit of TT fields together with standard of care therapies in a large randomized clinical study.
Looking to the future and turning to our clinical pipeline, we are entering a period of potential transformation.
We have four phase III clinical trials in new indications poised to read out in the near term.
If successful these readouts could increase the number of patients eligible for TT fields by approximately 14 fold.
Lunar is our next pivotal trial to readout as.
As a reminder, lunar is the first randomized study in our thoracic program and evaluates the use of TT fields, together with Docetaxel or physician's choice PD, one inhibitor for the treatment of stage for second line non small cell lung cancer.
We completed enrollment of lunar and commence the final patients 12 month follow up in November of 2021.
Given feedback received from all interested parties, we recognize a pivotal trial data released during the final work week of the year is not ideal for investigators clinicians investors or potential patients for that reason, we will be moving the top line data announcement too early.
Q1 2023.
To be clear, our clinical operations and data collection efforts remain on track. This decision to push the announcement was made to ensure optimal visibility and convenience for all audiences.
Bill Doyle: The second quarter was a period of solid execution and progress. Revenues were up 6% compared with the second quarter of 2021.
Uri Weinberg: That's helpful.
Innovate three our pivotal study in recurrent ovarian cancer is on track for our 2023 data release following an eight month 18 months follow up from last patient enrolled.
Uri Weinberg: Thank you.
Bill Doyle: We released encouraging Phase 2 data in gastric cancer and announced a second partnership with global oncology leader, Merck.
Operator: Our next question comes from Jason Bednar with Piper Sandler.
As a reminder, we announced the completion of enrolment of innovate three during our Q3 2021 earnings call.
Bill Doyle: As we approach a series of pivotal milestones in the coming quarters, we feel a hum of excitement at Novacure as our teams work toward data readouts and develop launch plans. We exited the quarter with 3,454 commercial active patients on TT Field's therapy around the globe. Steady patient volumes in the U.S. and increasing adoption in Japan offset a decrease in German, active patient numbers as a result of updated coverage criteria. We are pushing a number of avenues intended to increase the adoption of TT Field's therapy and reach more patients who may benefit from TT Field's therapy.
Bill Doyle: In GBM, our focus is to drive greater adoption in academic institutions where we see a significant, share of GBM patient flow. We are employing a multi-pronged strategy to engage practitioners in the academic setting to ensure they understand and can communicate the broad benefits of TT fields. One of the most effective ways to drive greater adoption is with the ongoing, generation of clinical data.
Bill Doyle: So thank you, Emily.
<unk> and <unk> continue to enroll patients in line with expectations.
Bill Doyle: Year to date, there are over 1,500 PubMed citations of TT fields, pointing to the increasing relevance of TT fields in the scientific community. Also this quarter, two key clinical data sets were presented, which we would like to highlight.
Jason Bednar: Your line is open.
Bill Doyle: Again, taking a step back, with device-delivered therapies, the first incarnation of the device, is almost never the final incarnation. The changes can be made through engineering to optimize the usability and the therapeutic, benefit.
We are pleased with the progress made in the second quarter.
Bill Doyle: External research intended to identify genomic factors associated with an increased response, to Optune was published in the June volume of Neuro-Oncology. Retrospective data were collected from 148 patients treated at six leading academic institutions.
Bill Doyle: Consistent with the findings of the EF14 randomized phase three trial and other independent data sets presented to date, the use of Optune increased progression-free and overall survival in all patient cohorts and demonstrated a clear dose response with increased usage.
Bill Doyle: Beyond the broadly applicable benefit, alterations in certain genetic signatures were associated, with increased benefit from Optune. These results further validate the survival benefit for GBM patients shown in the EF14 trial and shed light on potential predictive biomarkers associated with an even greater response, opening an interesting area for ongoing research.
Bill Doyle: At ASCO in June, the Charité University Hospital in Berlin presented a multi-country registry, analysis of GBM patients in Austria, Germany, and Switzerland. The Charité analysis of real-world evidence showed a median overall survival of 35 months for patients treated with Optune plus chemotherapy compared to 15 months for patients treated with chemotherapy alone.
The updates this period represent deliberate steps to strengthen the fundamentals of our business and to plan for pending data releases and potential expansion into new large indications.
Bill Doyle: These registry data further underline the benefit of Optune with real-world experience, and are consistent with the results we have observed in more than 25,000 GBM patients treated with Optune to date.
Jason Bednar: Hey, good morning.
Bill Doyle: You can think of almost any medical technology, and you can see the progression.
We remain excited and inspired by the prospect of treating many more patients in the near term.
Jason Bednar: Thanks for taking the questions here.
Bill Doyle: We believe we're in the earlier innings in terms of the form factor and the ability of, our device to help patients.
Bill Doyle: The next major step forward is with the new arrays that we anticipate to launch in Europe, later this year.
I will now pass the call over to Ashley to run through our second quarter financial performance.
Thank you Bill.
The second quarter was another period of strong financial performance with gross profits from the core GBM business funding investments in clinical and product development as we advance with tumor treating fields platform.
Jason Bednar: I wanted to start with the Lunar update.
Bill Doyle: What we're looking for, really, is to test all of our systems.
Bill Doyle: This is a major change in form factor, so we have to update all of our manufacturing, capabilities so that we can serve all of our markets.
Bill Doyle: We are going to look to patient user factors to make sure that we have the right instructions, for use and that our people are well-trained to bring this new therapy to patients.
Jason Bednar: This really sounds like just entirely wanting to make sure the top-line data gets as much attention as possible, and isn't it all related to data issues or data collection?
Jason Bednar: But if I can push you a little bit, and just to be a little blunt, if this is just top-line data and not the full data set comparing all the different arms of the study, does the timing of the headline data really matter?
Bill Doyle: And you always look for surprises.
I know you have seen our press release and 10-Q. This morning. So let me provide a few brief highlights regarding the financials.
Revenue was strong up 6% with 3454 global active patients on therapy as of June 30.
Bill spoke to the broader adoption trends earlier on this call. So I will focus now on revenue and in particular the dynamics in Germany.
As a reminder, in Q4 of last year, we announced that we reached agreement with the largest public German payers on a price for Atkins.
This year, we formalized turns with payers that represent approximately 70% of the covered lives in Germany.
These contracts will enable price stability and provide a strong pricing foundation as we pursue reimbursement in additional European markets.
Jason Bednar: And maybe you can talk about what changed in your view to drive the shift in timing that's been in place now for several months.
The negotiations impacted our net revenues at some payers withheld approval for new patients and began to deny approval for many active patients under the coverage criteria established in the BMA listening.
We expect revenue to grow over time as more patients are treated under the updated contractor.
In the U S. The exceptional execution of collections processes provided a material tailwind.
To revenue in the second quarter.
Revenue operations as a core competency at <unk> and the U S benefit business is benefiting both from collections on previously denied claims and from an increase in the average price realized for current active patient advisors.
Strength in the U S price was more than sufficient to offset the headwinds from Germany and foreign exchange.
Gross margin for the second quarter was 80%.
Excluding purchases made by <unk> lab, our cost of revenues per active patient per month was down 5% year over year as any impact from broader economic challenges was more than offset by continued proactive work to optimize our supply chain alongside other cost reduction initiatives.
We did not experience a material impact to our cost of revenues from inflation in the second quarter.
SG&A expenses for the second quarter totaled $76 million.
An increase of 14% year over year.
G&A expenses decreased year over year due to lower spending on corporate enabling functions, while sales and marketing expenses increased to support geographical expansion and early commercial marketing activities as we approach multiple pivotal data readouts.
We invested $57 million and research and development in the second quarter, an increase of 13% from the same period in 2021.
R&D dollars are one of our best uses of capital and we are investing aggressively in projects across our preclinical research clinical and product development vertical.
Our net loss for the second quarter was <unk> 23 per share for $24 million.
Adjusted EBITDA was $7 million and we finished the period with $949 million in cash and short term investments on the balance sheet.
Bill Doyle: Good morning, Jason.
We believe our cash position ensures we can pursue growth opportunities across the business with maximum flexibility.
Bill Doyle: Thanks for the question.
Bill Doyle: The growing engagement and research on Optune and TT fields emanating from leading academic centers is very encouraging, and we believe, indicative of the growing awareness and acceptance of tumor-treating fields therapy.
Bill Doyle: I want to underline what I said in the prepared remarks that this slight shift has nothing to do with any trial issues or operational issues.
Novocure Financial Foundation is strong and our commercial execution is secure and stable.
Bill Doyle: While we are preparing to launch in new cancer indications, we are committed to investing in GBM, treatment innovation. To this end in May, we announced a second clinical collaboration with Merck. Together, we plan to conduct a double-blind, placebo-controlled pivotal study of TT fields, together with pembrolizumab and temozolomide for the treatment of newly diagnosed GBM patients.
Bill Doyle: This study will build upon the research recently published in the Journal of Clinical Investigation, and will seek to confirm the promising data generated by Dr. David Tran's to-the-top, Phase II study.
Bill Doyle: This latest collaboration between Novocure and Merck will continue the exploration of, TT fields together with immunotherapies in a malignancy and in a region of the body where checkpoint inhibitors have not previously shown a therapeutic benefit.
Bill Doyle: We are also exploring other new GBM treatment protocols. Our pivotal Trident study is evaluating the benefits of starting TT fields therapy concurrently, with radiation therapy rather than following radiation therapy. Ninety-six clinical sites are actively recruiting patients for Trident.
We will continue investing aggressively in the tumor treating fields platform. So that we are prepared to fully leverage the outcome of multiple pivotal trials and potential subsequent launches in the coming quarters.
With that I will pass the call to Asaf.
Thank you Ashley this quarter, we continued to advance our mission of extending survival in some of the most aggressive forms of cancer. Our commercial team is focused on driving adoption of <unk>.
Bill Doyle: Beyond clinical data and physician education, patient awareness is also critical to expanding, adoption.
Bill Doyle: We recently finalized a Opt for Optune social media campaign, which is scheduled to launch, in the second half of this year. By engaging patients, caregivers, and physicians across the digital ecosystem, the Opt for, Optune campaign is designed to instill confidence, inspire courage, and prepare, guide, and support patients on their GBM treatment journey.
Bill Doyle: Just as other physical treatment modalities evolved from their invention to their ultimate, optimal use, we are making significant investments in product development as we seek to further improve outcomes. Array layout planning is an essential component of treatment with Optune, as it allows the, prescriber to optimize the intensity of therapy by adapting array configuration for each patient. Today, the Novatel system is used to create these individualized treatment plans.
Bill Doyle: MaxPoint is our next-generation array layout planning system. MaxPoint is designed to provide more precise targeting to increase the intensity of PT, fields delivered to the tumor. This quarter, we advanced MaxPoint development with the initiation of an evidence generation, program, which compares the dose volume metrics of MaxPoint guided array layouts to Novatel guided array layouts.
Bill Doyle: We look forward to sharing data from the MaxPoint program in coming quarters.
Bill Doyle: Additionally, our next-generation arrays, now known as the FlexArray, remain on track for a, limited market release in Europe this year. We believe these arrays have the ability to deliver a higher, more consistent intensity to the, tumor bed without meaningfully increasing heat.
Bill Doyle: Beyond GBM, we are exploring the use of PT fields in a number of additional solid tumor, indications in the torso and abdomen, abdomen.
Bill Doyle: Both the FlexArray and MaxPoint represent meaningful milestones in our product development, journey and highlight our commitment to ongoing investment in product development initiatives.
We see mounting clinical support for our therapy, both from internal and external researchers.
As we approach readout from several pivotal studies over the next few we are motivated by the prospect of sweeping many thousands more patients in the near future.
I would like to thank my <unk> colleagues for their passion and determination in advancing the science and the adoption of <unk>. We have made in Maine strides in recent years, but we have only just begun our journey.
I know as we move forward you will all keep our patient forward mission in your Hearts and minds.
To close I would like to share a patient story in.
In 2019, Dj's to US was an avid skateboarder, who spent his free time surrounded by family and friends D.
BJ was set to start a new job had just become engaged in both the house and Kansas City in.
In May of 2019 D. J had a seizure and was rushed to University of Kansas Medical Center, where he was diagnosed with GBM and prescribed opt in DG.
<unk> GBM Joni is the focus of the the commentary rare enough.
As all of you to watch this short film.
Fair enough takes you saw bj's diagnosis and treatment and includes candidates reflections on his GBM, Joni, which are both hard braking and inspiration on DJ recently joined hedged for the Q a chair with a focus on inspiring hope in the brain constant community <unk>.
Ladies patients like DJ that drive our company forward every day.
With that I will now turn the call over to the operator for Q&A.
As a reminder, if you'd like to ask a question. Please press star one one.
Our first question comes from Cory <unk> with Jpmorgan. Your line is open.
Hey, good morning, guys. Thanks for taking the questions I had two of them for you.
Bill Doyle: In June, together with our partner Xi Lab, we presented data from the EF31 pilot study. EF31 evaluated the use of TT fields together with chemotherapy for the treatment of gastric cancer. Gastric cancer is prevalent and deadly, with five-year survival rates below 20%. We were excited by both the response rate and the durability of responses shown in the EF31 data. EF31 demonstrated an objective response rate of 50% and duration of response of 10.3 months, both notable improvements over historical controls. We are very pleased with the signals generated from EF31.
Bill Doyle: We don't anticipate any, but that's the nature of the word surprise.
Bill Doyle: They're not anticipated, and if we do see something that's surprising, we can take whatever, steps are needed in instructions for use or in manufacturing to overcome whatever the surprise may be.
Bill Doyle: So I can't overstate how excited I am about this development, and as soon as we get the, experience from the initial launch, we'll incorporate that into our regulatory plan throughout the world.
The primary driver of a reacceleration in the second half and then secondly on the clinical side just in terms of next steps for gastric cancer.
Operator: Our next question comes from Jason Witt with Luke Capital.
Any comments, yet and what a pivotal trial might look like and the breadth of it would you be looking to target just her two positive patients or do you have a broader strategy for this indication in mind. Thank you.
Bill Doyle: We are eager to continue exploring the potential benefit of TT fields together with standard of care therapies in a large, randomized clinical study.
Bill Doyle: Looking to the future and turning to our clinical pipeline, we are entering a period of potential transformation. We have four Phase III clinical trials in new indications poised to read out in the near term. If successful, these readouts could increase the number of patients eligible for TT fields by approximately 14-fold.
Greg if I recall last time this is bill.
I'd just start by saying.
<unk> has gathered virtually today.
One point.
All over the world, so I'm going to be a little bit up.
<unk>.
Im going to turn it over.
Thanks for your first question and then <unk> will talk about the gastric trial.
Perfect. Thanks, Cory so.
Just if you have X, Germany or active patient growth year over year was 3%.
Jason Witt: Your line is open.
Jason Witt: Hi, thanks for taking the questions.
Asia and in other European markets remained strong and more focus that we talked about on a variety of commercial drivers in the U S. But given the abrupt fluctuation in German active patient volumes, we are not providing forward looking cover. It's just we don't have a clear enough line of sight as to the pace of recovery in Germany to reiterate that 215%.
Okay.
Yes, that's great and then on the gastric sorry.
On the gastric side. So yes, 31 was our first study in gastric cancer, which.
As a high incidence.
Specialty in Asia of course, but.
With me today is anticipated to rise also in the U S and the study was designed for patients with Unresectable disease, who received their first line therapy concomitantly with PTC with abdominal region and beyond the very strong signal of efficacy, which the study provided we're always encouraged by the fact that we have another evidence.
Supporting the broad applicability of CPC is in yet another.
Malignancies, So we certainly.
Anticipate the phase III study.
In the coming time, we are considering the design of the study given the fact that <unk>.
The volume knob.
Demonstrated efficacy in this malignancy.
Checkmate 649 study.
We are seriously considering I think another study incorporating <unk> and checkpoint inhibitors.
Bill Doyle: LUNR is our next pivotal trial to read out. As a reminder, LUNR is the first randomized, study in our thoracic program and evaluates the use of TT fields together with docetaxel or physician's choice PD-1 inhibitor for the treatment of stage IV, second line, non-small cell lung cancer. We completed enrollment of LUNR and commenced the final patient's 12-month follow-up in November of 2021.
And then other malignancy.
B the seek those seven study.
Study to.
Involved with immune checkpoint inhibitors.
Do you want to.
Okay. That's helpful. Thank you.
Our next question comes from Jason Bednar with Piper Sandler Your line is open.
Hey, good morning, Thanks for taking the questions here wanted to start with the lunar update.
Bill Doyle: Given feedback received from all interested parties, we recognize a pivotal trial data release during the final week of the year is not ideal for investigators, clinicians, investors, or potential patients. For that reason, we will be moving the top-line data announcement to early Q1 2023. To be clear, our clinical operations and data collection efforts remain on track.
It sounded like just entirely wanting to make sure the topline data gets as much attention as possible.
Is it all related to data issues or data collection, but if I can push you a little bit and just to be a little blind.
Bill Doyle: This decision to push the announcement was made to ensure optimal visibility and convenience for all audiences.
Bill Doyle: We heard loud and clear from essentially all of our constituents that any data announcement between Christmas and New Year just is not desirable.
This is just topline data in non preferred datasets comparing all of the different arms of the study the timing of the headline data really matters and maybe you can talk about what changed.
Bill Doyle: Innovate III, our pivotal study in recurrent ovarian cancer, is on track for a 2023 data, release following an 18-month follow-up from last patient enrolled. As a reminder, we announced the completion of enrollment of Innovate III during our Q3 2021 earnings call.
Bill Doyle: And so this is purely for the convenience of our stakeholders to push this into early Q1.
In your view to drive the shift in timing.
Bill Doyle: MEDIS and, PANOVA III continue to enroll patients in line with expectations.
Bill Doyle: We are pleased with the progress made in the second quarter. The updates this period represent, deliberate steps to strengthen the fundamentals of our business and to plan for pending data releases and potential expansion into new, large indications.
Bill Doyle: We remain excited and inspired by the prospect of treating many more patients in the near future.
And in place now for several months.
Yes, good morning, Jason So thanks for the question.
I want to underline what I said in the prepared remarks.
Bill Doyle: Okay.
This slight shifts.
Nothing to do with any.
Trial issues or operational issues.
We heard loud and clear.
Essentially all of our constituents.
Any data announcement between Christmas and new year, just was not desirable.
And so this is this is purely for the.
The convenience of our stakeholders to push this early Q1.
Okay, all right understood.
Yes.
<unk> two in here on a follow up.
First I just need a quick housekeeping item absolutely.
On the revenue side can you can you size. The previously nine Medicare claims that you referenced what impact was that in the second quarter, and then maybe bigger picture on Germany.
Can you expand on what's changed.
More specifically with respect to reimbursement dynamics in that market and the coverage dynamics.
Is it just newly diagnosed patients that are being treated and covered in the recurrent GBM patients that are no longer covered by some payers just.
Bill Doyle: I will now pass the call over to Ashley to run through our second quarter financial performance.
Jason Bednar: All right.
What shifted in those coverage dynamics that youre de alluded to.
Ashley Cordova: Thank you, Bill.
Jason Bednar: Understood.
Jason Witt: Just first a clarification on the U.S. strength
And then for the active patients that are now being denied therapy in care can those come back into the fold is treated patients. It doesn't sound like they can just from the way you answered <unk> question, but.
Ashley Cordova: The second quarter was another period of strong financial performance, with gross profits from the core GBN business, funding investments, and clinical and product development as we advance the tumor-treating field platform. I know you have seen our press release and 10Q this morning, so let me provide a few brief highlights regarding the financials. Revenue was strong, up 6%, with 3,454 global active patients on therapy as of June 30.
Jason Bednar: I guess I'll squeeze two in here on a follow-up.
Jason Witt: in the denied claims.
Jason Witt: Was that all Medicare or was that a mix of Medicare and private
I guess really just what's the best way to think of the current active patients figure in Germany with respect to the run rate here going forward. Thank you.
Jason Witt: insurance?
Ashley Cordova: Or could you give some indication of where those denied claims that were remedied came from?
Yes, Thanks, Jason I appreciate the question because it is important for everybody to understand these puts and takes so I'll start with the U S strength, which is a bit of a.
Ashley Cordova: Bill spoke to the broader adoption trends earlier on this call, so I will focus now on revenue and, in particular, the dynamics in Germany. As a reminder, in Q4 of last year, we announced that we reached agreement, with the largest public German payers on a price for Optum. This year, we formalized terms with payers that represent approximately 70% of the covered lives in Germany. These contracts will enable price stability and provide a strong pricing foundation, as we pursue reimbursement in additional European markets. The negotiations impacted our net revenues as some payers withheld approval for new patients, and began to deny approval for many active patients under the coverage criteria established in the DME listing.
Jason Bednar: First
<unk> story right. So we anchor to everybody I'll remind you to the Q4 2021 prices are stable and durable price. So if we look at the.
Ashley Cordova: We expect revenue to grow over time as more patients are treated under the updated contract terms.
Jason Bednar: is just an easy, quick housekeeping item.
Ashley Cordova: In the U.S., the exceptional execution of collections processes, provided a material tailwind to revenue in the second quarter. Revenue operations is a core competency at Novacure, and the U.S. business is benefiting both from collections on previously denied and appealed claims and from an increase in the average price realized for current active patient volumes. Strength in the U.S. price was more than sufficient to offset the headwinds from Germany and foreign exchange.
Jason Bednar: Ashley, on the revenue side, can you size the previously denied Medicare claims that you referenced?
Ashley Cordova: Growth margin for the second quarter was 80%. Excluding purchases made by Xylab, our cost of revenues per active patient per month was down 5% year over year, as any impact from broader economic challenges was more than offset by continued proactive work to optimize our supply chain alongside other cost reduction initiatives.
If we look at the tailwind for us as that price in the U S. In the second quarter I would put about two thirds of it to aged and previously denied claims and about one third to strengthen our fundamental business. So that's how I would split it out relative to Q4 of last year, which is a good baseline.
Ashley Cordova: We did not experience a material impact to our cost of revenues from inflation in the second quarter.
Ashley Cordova: SG&A expenses for the second quarter totaled $76 million, an increase of 14% year over year.
So then if we shift over to Germany, Let me open a bit more time on this question because I know, it's new this quarter important for everybody to understand.
Jason Witt: It's a mix, but it's largely Medicare.
If we take a step back I'll just.
Ashley Cordova: That's where our largest opportunity is in the backlog.
Remind everybody that we've been working purposely towards coverage and pricing in Germany and established reimbursement pathway for years. Now this is important because having coverage and contracts with major payers in Germany will enable price stability.
Jason Witt: Great.
Ashley Cordova: G&A expenses decreased year over year due to lower spending on corporate enabling functions, while sales and marketing expenses increased to support geographical expansion and early commercial marketing activities as we approach multiple pivotal data readouts.
Jason Bednar: What impact was that in the second quarter?
Jason Witt: That's fair.
Ashley Cordova: We invested $57 million in research and development in the second quarter, an increase of 13% from the same period in 2021. R&D dollars are one of our best uses of capital, and we are investing aggressively in projects, across our preclinical research, clinical, and product development verticals.
Jason Witt: And on the Merck trial for GBM with checkpoint inhibitors, as you, mentioned, checkpoint inhibitors have not been effective for GBM.
Ashley Cordova: Our net loss for the second quarter was $0.23 per share, or $24 million. Adjusted EBITDA was $7 million, and we finished the period with $949 million in cash and short-term, investments on the balance sheet.
Jason Witt: I take it there's evidence that they do pass the blood-brain barrier and they are present around the tumor.
Ashley Cordova: We believe our cash position ensures we can pursue growth opportunities across the business, with maximal flexibility.
And a strong pricing foundation as we pursue reimbursement in other European markets and in Germany and other indications.
Ashley Cordova: Novocure's financial foundation is strong, and our commercial execution is secure and, stable.
Ashley Cordova: We will continue investing aggressively in the tumor treating field's platform so that, we are prepared to fully leverage the outcome of multiple pivotal trials and potential subsequent launches in the coming quarters.
Jason Bednar: And then maybe a bigger picture on Germany, maybe expand on what's changed more specifically with respect to reimbursement dynamics in that market and the coverage dynamics.
Jason Witt: Is that the right assumption?
Uri Weinberg: Uri, do you want to just give a little background on our work with checkpoint inhibitors in, the brain?
Similar to Medicare. This is a significant milestone as we are the first life saving life, extending oncologic therapy to seek a DMA listing in Germany.
Uri Weinberg: Yes, of course.
So if we look at the milestones along the way and March 2020, the GBA issued a directive mandating coverage for Optum in line with the 14 protocol.
Ashley Cordova: With that, I will pass the call to Asaf.
Jason Bednar: Is it just newly diagnosed patients that are being treated and covered?
Uri Weinberg: So, as you remember, there is a growing level of evidence demonstrating, that concomitant use of tumor-treating shields and immune checkpoint inhibitors actually lead to a greater inflammatory anti-tumor reaction against the tumor.
Asaf Danziger: Thank you, Ashley.
Uri Weinberg: And this has been demonstrated throughout the work of our own in-house lab, but also through the work of other external collaborators, one of which is Dr. David Trent from the University of Florida, and his publication at JCI really showed how you could potentially achieve innate, immune response, later adaptive immune response with the generation of memory response against the cancer.
Uri Weinberg: So, that's on the scientific preclinical side, but at the same time, there is more and more evidence that, on the clinical side, we see that effect, and one such preliminary evidence is coming from the TUDATOP study, where the concomitant use of Keytruda temporalizumab with TT shields led to a significant increase in median overall survival.
Uri Weinberg: This is a single-arm study, but the concomitant matched control comparison already showed that, while the TUDATOP study population achieved a median overall survival of 25.2 months, on the EF14, matched controls, it was about 10 months less.
Uri Weinberg: So, the incorporation of immune checkpoint inhibitors to option in the intended use or approved indication led to a significant improvement.
Asaf Danziger: This quarter, we continue to advance our mission of extending survival in some of the most, aggressive forms of cancer.
Jason Bednar: Is it the recurrent, GBM patients that are no longer covered by some payers?
Uri Weinberg: So, it's true that immune checkpoint inhibitors unfortunately failed to demonstrate efficacy in newly diagnosed and recurrent GBM, but it seems that their potential penetration across the blood-brain barrier, be it lower or decreased, still results in a very significant immune response and leads to a clear clinical benefit coming from this study, and that is the basis for the planned Keynote D58, our second clinical collaboration with Merck, with MSB.
Uri Weinberg: And the first was in non-small cell lung cancer, and we're looking forward to conducting this phase three pivotal study.
Jason Witt: I think I heard correctly that you mentioned for the gastric trial that you did look at, genetic differences.
Uri Weinberg: Is that something that may lead to future screening for potential patients for TGF, or could you expand upon what the indications were when you looked at that criteria?
Q4 of last year, we announced that we had reached agreement on a price for up to <unk> with the largest German payers and then importantly earlier. This year. We now have they show Dnb listings and as of the end of the quarter, we have formalized contract terms with payers.
Uri Weinberg: So, the EF31 gastric study was a small, single-arm study for about 25 patients, and we did not, take the opportunity to look into genetic variations in this patient population because of the preliminary nature of the study design and the number of patients included in the study.
Jason Bednar: What shifted in those coverage dynamics that you alluded to?
Uri Weinberg: Despite the fact that we see this, especially in GBM to date, of course, that TGF is effective in a really broad patient population.
Uri Weinberg: As you recall, in 2014, we broke, it down to different subpopulations, whether it's MGMT promoter, methylated or unmethylated, older patient population, younger patient population.
Uri Weinberg: At the same time, we always try to see if there are subpopulations that could benefit more from TGF, and we are planning to do this on the immune response front, collecting more data and trying to characterize the immune response and see how we could potentially increase it.
Uri Weinberg: And also, when it comes to genetic variations and alterations at the level of the tumor, itself, one key project that came actually from the post-approval setting and was published in Advances in Neuro-Oncology recently, demonstrating by independent investigators in the U.S. in several different centers that certain genetic alterations correlate very well with improved outcome in newly diagnosed GBM.
Uri Weinberg: So, again, the treatment itself is effective in the broader population, but we are always trying to find biomarkers and other findings that will support the identification of patient populations that could generate and improve the outcome from applying TGF.
Jason Witt: Thank you very much.
Jason Bednar: And then for the active patients that are now being denied therapy and care, can those come back into the fold as treated patients?
Representing 70% of covered lives in Germany.
So that's the background context, but then when we looked at what specifically happened in the quarter prior to the DNA listing many of our payers. We're approving opportune on a case by case basis and they were not confirming coverage criteria in line with the 14 protocol with this newly established steamy listing we had many payers withhold approval for new <unk>.
<unk> and begin to deny approval for existing aster patients. If they did not cleanly match. The EF 14 protocol and that did represent a material portion of our existing active patient business. We did not take any of those patients off therapy of course, but we adjusted our process in Germany during the second quarter.
Jason Bednar: It doesn't sound like they can just from the way you answered Cori's question, but I guess really just what's the best way to think of the current active patient figure in Germany with respect to the run rate here going forward?
Added to ensure compliance with the dnb criteria.
Jason Bednar: Thank you.
Ashley Cordova: Yeah.
To Ah patients start, but given the recurring revenue stream, we have and the duration of therapy, which can extend a year or more we now have a challenging patient mix as less than 15% of our active patients started under this new coverage review process and as a result, we have both the updated price, but also a lower portion of our <unk>.
Ashley Cordova: Thanks, Jason.
Ashley Cordova: I appreciate the question because it is important for everybody to understand these puts and takes.
Patients covered under the new terms.
So that's that's the background in the quarter, but just looking ahead now we have clear line of sight to which patients will be approved we have established <unk> policy. We have established payer terms, we've adjusted all of our processes to ensure compliance with these and I do expect that the patient starts and the patient mix will improve each quarter from here.
Jason Witt: I'll jump back in queue.
Asaf Danziger: Our commercial team is focused on driving adoption of CT fields. We see mounting clinical support for our therapy, both from internal and external researchers. As we approach readouts from several pivotal studies over the next year, we are motivated, by the prospect of treating many thousands more patients in the near future.
Operator: Our next question comes from Vijay Kumar with Evacor.
And revenue will return over over time, but this will play out over the course of several quarters just given the duration of therapy that we have that was a long winded answer Jason but I think important to kind of walk through so we're happy to take any questions.
Vijay Kumar: Your line is open.
Asaf Danziger: I would like to thank my Novocure colleagues for their passion and determination in advancing, the science and adoption of CT fields.
Vijay Kumar: Vijay, I don't think we can hear you.
Asaf Danziger: We have made immense strides in recent years, but we have only just begun our journey.
Asaf Danziger: To close, I would like to share a patient story.
Operator: It's not operating.
Asaf Danziger: I know as we move forward, you will all keep our patient-forward mission in your hearts, and minds.
Asaf Danziger: In 2019, DJ Stewart was an avid skateboarder who spent his free time surrounded by family, and friends. DJ was set to start a new job, had just become engaged, and bought a house in Kansas City. In May of 2019, DJ had a seizure and was rushed to the University of Kansas Medical, Center, where he was diagnosed with GBM and prescribed Optum.
Ashley Cordova: So I'll start with the U.S, strength, which is a bit of an easier story.
Operator: Perhaps we'll go back to the queue.
Asaf Danziger: DJ's GBM journey is the focus of the documentary, Rare Enough.
Asaf Danziger: I encourage all of you to watch this short film, Rare Enough Takes You, through DJ's, diagnosis and treatment, and includes candid reflections on his GBM journey, which are both heartbreaking and inspirational. DJ recently joined Head for the Cure, a charity focused on inspiring hope in the brain cancer, community.
Asaf Danziger: It is patients like DJ that drive our company forward every day.
If additional clarification as necessary.
Yeah, No I'll hop back in queue that was very helpful actually and we can follow up offline with others. Thank you.
Asaf Danziger: With that, I will now turn the call over to the operator for Q&A.
Ashley Cordova: So we anchored everybody, I'll remind you, to the Q4 2021 price as a stable and durable price. So if we look at the tailwinds versus that price in the U.S. in the second quarter, I would put about two-thirds of it to aged and previously denied claims and about one-third to the strength in the fundamental business.
Operator: All right, Michelle, we can go back to the queue.
Operator: As a reminder, if you would like to ask a question, please press star 11.
Perfect. Thanks.
Operator: Our first question comes from Corey Kasimov with J.P. Morgan.
Operator: There are no further questions.
Okay.
Our next question comes from Greg Fraser with choice Youre line is open.
Ashley Cordova: So that's how I'd put it out relative to Q4 of last year, which is a good baseline.
Good morning folks thanks for taking the questions.
Ashley can you talk about what's driving the higher priced in the U S.
And how should we think about net revenue per month in the U S. Going forward I think your comments that you made were on a global basis, but if you could provide some color on the U S that would be helpful.
Yeah again, thanks for the question Greg. So if we look at the U S strength in price. It comes from two primary buckets. One is success on previously denied <unk> appeal claims. This is about two thirds of the strength in that U S. Price. If you look versus the Q4 2021 baseline, which is our anchor price and about the remaining <unk>.
Third comes from fundamental improvements in.
Expanding coverage policies at the margin and just price negotiations with additional contracts players over time, So I would say a third of it is durable and really related to just ongoing market access work and two thirds is really the performance of our U S revenue operations teams as we continue to go after those aged claims that we have in.
Operator: I'd like to turn the call back over to Bill Duell for
Corey Kasimov: Your line is open.
Bill Doyle: any further remarks.
The pipeline.
I will remind everybody that the predictability of those aged claims is not high and so I wouldn't when we look at when we look ahead I would bank on the enduring improvements had not be edge claims.
Corey Kasimov: Hey, good morning, guys.
Ashley Cordova: So then if we shift over to Germany, let me, I'll spend a bit more time on this question because I know it's new this quarter and important for everybody to understand.
Bill Doyle: Thanks, Michelle.
Corey Kasimov: Thanks for taking the questions.
Bill Doyle: I'd like to thank everyone on the line for joining us this morning.
Bill Doyle: I'd also like to join Asaf and extend my thanks to the Novocure employees who have dialed in.
Bill Doyle: I know I speak for myself, Asaf, and for the entire management team when I say we appreciate your, hard work and dedication.
Bill Doyle: We're very pleased with the progress this quarter.
Bill Doyle: We continue to take deliberate action to strengthen the fundamentals of our business and prepare for the future.
Bill Doyle: The science behind tumor-treating fields continues to grow, and in the coming quarters, we will have pivotal data from a number of our late-stage trials.
Bill Doyle: This is an exciting time at
Bill Doyle: Novocure, and we look forward to updating you on progress in the coming months.
Understood on Japan prescriptions declined although the agitation number group could you talk about demand trends that youre seeing there and are you seeing any new headwinds to prescribing in Japan.
Okay great.
Sure.
Go ahead.
Corey Kasimov: I have two of them for you.
Bill Doyle: Thanks again.
Thank you Bill Gregg Thanks for the question. So the short answer is we're not seeing any new headwinds I would say that's just the cyclical nature of how we see within a rare disease like GBM prescriptions flow through so we would expect just based on the historical performance in Japan, the strength of our data and our <unk>.
Corey Kasimov: First, on the commercial side, I believe you previously guided to 2 to 5 percent active patient growth for fiscal year 22. Are you still confident in that number?
Operator: This concludes the program.
Operator: You may now disconnect.
Corey Kasimov: And if so, what do you expect to be the primary driver of reacceleration in the second half?
Ongoing efforts there the business will continue to be stable in Japan.
Got it thanks for taking the questions.
Yeah.
Yes.
Ashley Cordova: If we take a step back, I'll just remind everybody that we've been working purposely towards coverage and pricing in Germany via an established reimbursement pathway for years now. This is important because having coverage and contracts with major payers in Germany will enable price stability and a strong pricing foundation as we pursue reimbursement in other European markets and in Germany and other indications.
Ashley Cordova: Similar to Medicare, this is, a significant milestone as we are the first life-saving, life-extending oncologic therapy to seek a DME listing in Germany.
Ashley Cordova: So if we look at the milestones along the way, in March 2020, the GBA issued a directive mandating coverage for Optune in line with the EF14 protocol. In Q4 of last year, we announced that we had reached agreement on a price for Optune with, the largest German payers.
Our next question comes from Emily Bodner with HC Wainwright Your line is open.
Hi, Thanks for taking the question.
Just had one on your next generation areas that you plan to launch later this year in Europe I guess, what are you looking to see what the initial launch to kind of determine if you want to take that out more broadly and what would you want to see in order to potentially implement that into the label for <unk>.
Yes, so thank you Emily.
Again, taking a step back.
Ashley Cordova: And then importantly, earlier this year, we now have official DME listings.
Ashley Cordova: And as of the end of the quarter, we have formalized contract terms with payers representing 70% of covered lives in Germany.
Ashley Cordova: So that's the background context, but then when we look at what specifically happened, in the quarter, prior to the DME listing, many of our payers were approving Optune on a case-by-case basis, and they were not confirming coverage criteria in line with the EF-14 protocol.
With.
Ashley Cordova: With this newly established DME listing, we had many payers withhold approval for new, patients and begin to deny approval for existing active patients if they did not cleanly match the EF-14 protocol, and that did represent a material portion of our existing active patient business. We did not take any of those patients off therapy, of course, but we adjusted our process, in Germany during the second quarter to ensure compliance with the DME criteria prior to a patient start.
Device.
Ashley Cordova: But given the recurring revenue stream we have and the duration of therapy, which can, extend a year or more, we now have a challenging patient mix as less than 15% of our active patients started under this new coverage review process, and as a result, we have both the updated price but also a lower portion of our active patients covered under the new terms.
Deliberate therapies.
The first incarnation of the devices is almost never the the final inclination.
Ashley Cordova: So that's the background in the quarter, but just looking ahead now, we have clear line, of sight to which patients will be approved.
Movements can be made.
Through engineering to optimize.
The usability and the <unk>.
Therapeutic benefit and you can think of almost any medical technology and you can see both the <unk>.
We believe we are in the earlier innings.
<unk>.
Form factor and the.
The ability of our device to help patients.
The next major steps forward is.
With the new arrays.
We anticipate too.
So the launch in Europe later this year.
What we're looking for really is to test all of our system.
This is a major change in form factor so we have to.
Update all of our manufacturing.
Capability, so that we can serve all of our markets.
We are going to look to.
Issue user factors to make sure that we have the right.
Instructions for use and that our people.
Our well trained to to bring this new therapy.
And while we will put surprises.
We don't anticipate any but.
The nature of the word surprise theyre not anticipated and if we can see something that's surprising.
We can take.
Take whatever steps are needed.
Hum.
Instructions for use and manufacturing too.
Overcome that was a surprise.
Okay.
<unk> state how excited I am about this development.
And.
As soon as we do.
The experience from the initial launch.
We'll incorporate that into our regulatory plan.
Throughout the world.
Okay got it thank you.
Our next question comes from Jason Wittes with loop capital. Your line is open alright. Thanks for taking the questions first is a clarification on the U S strengthen that.
The denied claims.
Was that all Medicare or was that a mix of Medicare and private or could you give us some indication of.
Were those denied claims.
That were permitted came from.
Yes.
But it's largely Medicare, that's where our largest opportunity is in the backlog.
Great Thats fair.
And on the Merck trial for GBM with checkpoint inhibitors.
As you mentioned and checkpoint inhibitors have not been effective for GBM I take it there is evidence that.
They do pass the blood brain barrier and they are present.
Around the tumor.
Is that is that the right assumption.
Okay.
200, <unk>, just give a little background on our work with checkpoint inhibitors in the brain.
Yes of course, so as you remember there is a growing level of evidence demonstrating that concomitant use of tumor treating fields and immune checkpoint inhibitors actually leads to greater inflammatory antitumor reaction against the tumor and this is.
<unk> demonstrated that throughout.
Throughout the work of our own in house.
Also through the work of father.
Online collaborator is one of which is David Trent.
From de Levered steel.
Florida is a publication that ACI really showed.
You could.
Potentially achieve.
Immune response later adaptive immune response with <unk>.
Generation of memory.
Response against that.
So that's on the scientific preclinical side.
But at the same time.
Is there more and more evidence that on the clinical side, we see.
In fact in one such grilling and all the evidence is coming from the two desktop study.
We're and the concomitant use of Keytruda in bromine.
With DTE fields and led to.
Significant increase in the median overall survival the stat was.
Single this is a single arm study about the concomitant matched control.
Compare is already showed that.
While the two that's all.
<unk>.
Paddy population achieved a median overall survival of 25 to two months.
On the <unk> matched controls that was about 10 months less so.
Incorporation of immune.
Immune checkpoint inhibitors to opportunity.
Intended use or a good indication led to a significant improvement. So it is true that immune checkpoint inhibitors.
Fortunately failed to demonstrate efficacy in the newly diagnosed and recurrent GBM.
But it seems that there.
Sure.
Potential penetration.
The blood brain barrier there.
Beat.
Lower or decreased still results in very significant immune response, and do you need to do at year end.
Corey Kasimov: And then secondly, on the clinical side, just in terms of next steps for gastric cancer, any comments yet on what a pivotal trial might look like and the breadth of it?
Any color benefit coming from.
This study and that is the basis for them.
Planned chemo D 58, our second clinical collaboration with Merck with MSP.
Corey Kasimov: Would you be looking to target just HER2-positive patients, or do you have a broader strategy for this indication in mind?
The first was.
Non small cell lung cancer.
We're look we're looking forward to conducting this phase III pivotal study.
Great. That's very helpful. And also I think I heard correctly that you mentioned for the <unk> trial that you did look at genetic differences.
Is that something that may lead to future screening for potential patients for TGF or could you expand upon.
Kind of what the indications where when you look at the criteria.
So that yes.
One gastric study was small single arm study.
25 patients and we did not take took the opportunity to look into genetic variations in that patient population.
Because of.
Preliminary nature of the study design and the number of patients is included in the study and despite the fact that we.
See the SaaS, especially in GBM to date of SCOR has said that DTC is.
He's effect easing really broad patient population.
As you recall in 2014, we broke it down to different sub populations, whether it's MGMT promoter.
Elected or unmet delayed.
Older patient population younger patient population.
Same time, we always try to see if there are sub population that could benefit more.
From <unk>, we are planning to do this on the immune response from collecting more data and trying to characterize the immune responses and see how we could potentially increase it and also when it comes to genetic variations on that duration that the level of debt humira itself and one key.
Project that came actually from.
Both the global setting and was published in advances the nano oncology recently.
Demonstrating goodbye.
Independent investigators in the U S in several different centers and that certain genetic test durations correlate very well with <unk>.
Improve the outcome in newly diagnosed GBM so again.
Jason I think Chelsea is effective in the broader population, but we are always trying to find biomarkers and other.
The findings that will support it.
The identification of patient population that could generate even improve that outcome from our clients.
Yeah.
Got it thank you very much I'll jump back in queue.
Our next question comes from Vijay Kumar with Evercore. Your line is open.
Operator: Everyone, have a great day.
P. J I don't think we can hear you.
Nonoperating, perhaps we'll go back to the queue.
Alright.
Got it.
Alright, Michelle we can go back to the queue. There are no further questions I'd like to turn the call back over to Bill Doyle for any further remarks.
Thanks Michelle.
Thanks, everyone on the line for joining us this morning.
I'd also like to join Us ops and extend my thanks to the Novocure employees who've dialed in.
I know I speak for myself of Sox and for the entire management team when I say, we appreciate the hard work and dedication.
We're very pleased with the progress this quarter, we continued to take deliberate actions to strengthen the fundamentals of our business and prepare for the future.
Corey Kasimov: Thank you.
Ashley Cordova: We have established DME policy.
Operator: The conference will begin shortly.
Operator: To raise your hand during Q&A, you can dial star 11.
The science behind tumor treating fields continues to grow.
In the coming quarters, we will have pivotal data from a number of our late stage trials. This is an exciting time at Novocure. We look forward to updating you on progress in the coming months. Thanks again.
This concludes the program you may now disconnect everyone have a great day.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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