Q2 2023 Novocure Ltd Earnings Call
Good day and thank you for standing by welcome to you didn't know procure Q2, 2023 earnings conference call.
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Yeah.
Good morning, everyone. Thank you for joining us to review <unk> second quarter 2023 performance I'm on the phone. This morning, with our executive Chairman Bill Doyle, our CEO of <unk> and our CFO Ashley Cordova other members of our executive leadership team are also on the call and available for Q&A.
For your reference slides accompanying this earnings release can be found on our website www dot novocure dot com on our Investor Relations page under quarterly reports before.
Before we start I would like to remind you that our discussions during this conference call will include forward looking statements and actual results could differ materially from those projected in these statements.
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.
Where appropriate we will refer to non-GAAP financial measures to evaluate our business specifically adjusted EBITDA a measure of earnings before interest taxes, 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 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.
These materials can also be accessed from the Investor Relations page of our website.
Following our prepared remarks today, we will open the line for your questions I'll now turn the call over to our executive Chairman Bill Doyle.
Thank you Andrew and good morning.
<unk> our mission is to extend survival in some of the most aggressive forms of cancer through the development and commercialization of tumor treating fields.
Since our founding our commercial efforts have focused on treating patients with glioblastoma.
The second quarter marked the beginning of a transformational period for <unk> as we moved beyond the brain with the presentation of data from our first randomized phase III trial inventory.
On today's call, we will begin with a discussion of the lunar trial and other upcoming clinical catalysts.
Following a review of our commercial and financial performance in the quarter.
In June we took a meaningful step towards bringing tumor treating fields therapy for patients with high unmet need in lung cancer.
At the American Society of clinical oncology annual meeting Dr. Leal of Emory University presented the results of the phase III lunar clinical trial.
The lunar trial studied to use a PC feel therapy together with standard of care therapies for the treatment of stage four metastatic non small cell lung cancer.
Owing platinum failure.
The lunar trial met its primary endpoint exhibiting.
Exhibiting a statistically significant improvement in overall survival from $9 nine months to $13 two months for patients treated with TT field and standard of care therapy compared to treatment with standard of care therapy alone.
The clinically meaningful three month survival improvement was achieved without increased systemic toxicity.
In addition to meeting its primary survival endpoint lunar also met a key secondary endpoint demonstrating 18 five months median overall survival for patients treated with TT field and immune checkpoint inhibitors.
This compares to a 10 eight months overall survival for patients treated with immune checkpoint inhibitors alone.
I wanted to highlight and directly address the most frequent questions. We've received from investors regarding the lunar trial results.
Globally TPS data was collected for 55% of patients enrolled and lunar and was balanced across all the four cohort.
And was consistent with expected wild type expression.
In the U S. GPS expression with measured for 83% of lunar enrollees and was balanced across the core cohorts and was consistent with expected wild type expression.
The Kaplan Meier curves for patients with measured TPS scores are nearly identical to the Kaplan Meier curves for patients without measure TPS scores underline.
Underlying the potency of the survival data, regardless of PD lone status.
We are also feel the questions regarding the difference between the effect size and overall survival and progression free survival.
The observed difference is not uncommon in trial studying immune checkpoint inhibitors and is in line with the results from a number of the leading immune checkpoint inhibitor trials in this setting.
Overall survival is generally considered the gold standard endpoint in oncology.
Finally, I would like to address the clinical applicability of aluminum results.
One of the most exciting and rewarding aspects of dedicating one's career to extending the lives of cancer patients.
Witnessing the improvements in outcomes with evolving standards of care.
While we have seen a shift in the first line treatment for patients with metastatic non small cell lung cancer to immune checkpoint inhibitors. There remains an unmet unmet need for effective low toxicity treatment option in the second line.
There are few differentiated therapeutic options for second line treatment of stage four non small cell lung cancer.
The most recent meaningful survival breakthrough occurred over seven years ago, when <unk> was introduced.
Since then there have been several clinical trials evaluating the efficacy of other immune checkpoint inhibitors, but none of these trials have meaningfully move the needle further.
Lunar is the first phase III clinical trial in over seven years to show a clinically meaningful extension and overall survival in second line treatment of stage four non small cell lung cancer.
We are pleased with the clinical outcome of the lunar study and believe <unk> fields will provide a much needed new treatment option for patients and thoracic oncologists in need of therapy that materially extend the overall survival without adding systemic toxicity.
We are confident TT fields therapy has a place in the current and future standards of care for second line treatment of stage four non small cell lung cancer.
We are pleased to announce that the lunar study results have been accepted to a high impact journal and we are now awaiting publication.
Further our regulatory team recently completed the lunar submission for CE Mark.
Our next step is to finalize our FDA PMA submission later this year.
We plan to pursue a label consistent with the primary endpoint of the trial.
Field together with standard therapies for second line treatment of stage four non small cell lung cancer.
To supplement the lunar results presented at Astro we're conducting.
Additional analyses, which will further elucidate many key aspects of the trial.
These analyses we will include in and out of field progression patterns and patient survival as a function of usage and TPS score.
Additional trial insights will further arm position with key data when evaluating the best opportunities to leverage our TT field therapy.
Once approved.
We expect to present these analyses before year end.
Insights gained from the lunar trial will serve as the foundation for the next large randomized clinical trials studying TT fields in non small cell lung cancer.
As announced at <unk>. So our next trials will explore the use of TT fields in earlier lines of therapy and in new therapeutic concomitant regime.
Specifically I would like to highlight the phase III lunar two trial, which will study. The first line use of TT fields, concomitant with <unk> and platinum based chemotherapy for patients with metastatic non small cell lung cancer.
The FDA approved the IV for lunar two and we are currently preparing sites for initiation.
Lunar two will be a randomized global trial designed to enroll 734 patients with a 21 month follow up period after the last patient enrolled.
Primary endpoint will be overall survival and progression free survival.
The lunar two trial is an important next step in our lung cancer program and we look forward to providing updates in the coming quarters as we work to bring tumor treating fields therapy to patients in need.
With that I will turn the call over to <unk> to discuss other clinical updates as well as our commercial performance in the second quarter.
Thank you Bill I would like to underline builds enthusiasm and confidence in the lunar trial results.
Data are the culmination of nearly a decade for effluence from patients investigators and the Novocure team <unk>.
The overall survival data presented at the <unk> have the potential to impact thousands of lives. We are eager to do everything in our power to reach those patients who can benefit.
As a reminder, Luna is defense a full phase III trials that are fully enrolled and we will read out over the next 18 months.
Later this summer we expect to release top line results from the phase III innovate three trial exploring the use of <unk> with weekly Paclitaxel in platinum resistant or volume comes at.
The innovate suite topline will be followed by a presentation of the full <unk> three data later this year.
In the first quarter of 2024, we expect to release the topline results from the phase III <unk> strive treating brain metastases from non small cell lung cancer.
And as we announced last week, the phase III, Panama Sui trial treating locally advanced pancreatic cancer are successfully cleared its interim analysis with no safety or futility concerns and we will continue to follow patients to completion.
We anticipate top line results from panel was three in the second half of 2020 for.
Each of these trials is designed to evaluate TT fields therapy in cancers with substantial unmet needs.
We look forward to sharing the results from these trials in the coming quarters.
As we design and loans, our next wave of clinical trials. It has never been more important for our commercial business to execute on its potential.
Our GBM business provides the financial strength to invest aggressively in our continued research and development excellence.
This quarter was another period of solid execution across our key global markets as we continue to see the fruits of our commercial efforts and 2022 organizational restructuring.
Increasing penetration in our leading markets is crucial to our long term success.
For the second quarter in a row, we achieved a record number of new prescriptions with 1556 globally. We also saw another strong quarter in the U S. We have 981 prescriptions written in the period U S. Prescriptions are now up 8% year to date compared to the.
First half of 2022.
We also delivered a strong quarter in EMEA with a record of 483, new prescriptions in Q2 one.
One of the key drivers to this quarter's strength was our successful launch of <unk> in France.
As a reminder in March of this year, we received national reimbursement in funds and began our commercial loans.
We continue to ramp activities and funds and we are very encouraged by the strong physician interest in <unk> therapy.
We believe the launching funds can serve as a blueprint for other major EMEA markets.
We also had a strong quarter in Germany, we have 499 active patients on therapy in Germany.
Rewarding to see the German active patient count on track and recovering as expected.
In addition to our efforts to increase penetration and enter new markets. The rollout of our next generation arrays continues in earnest patients in Austria, and Sweden have been using the new arrays for several months now and feedback continues to be positive.
Consistent with last quarter patients have experienced fewer alone and then you always provide a more comfortable therapy experience.
The positive data we have collected all informing next steps for the new arrays.
We are on track to release and Youre, raising Germany in coming months, the first of our large anchor markets.
In the U S. We are on track to file a PMA supplement in the second half of this year.
Our new arrays have the potential to meaningfully improve the TT fields therapy experience and we are eager to get them to all of our patients globally as soon as possible.
Before we turn to the second quarter financial results I would like to thank my Novocure colleagues I know.
So this has been an exciting and challenging quarter on many fronts, but I would like to applaud your dedication to our mission and most importantly, our patients.
With that I will turn to Ashley to discuss our financial performance in the quarter.
Thank you.
Many of the themes from the first quarter have remained consistent through June .
We continue to see early positive indications of growth in our GBM business.
Our clinical trials are progressing our pipeline is expanding and we are working to solidify our infrastructure ahead of multiple potential future launches in new indications.
We generated $126 million of net revenues in the quarter.
The period with 3571 active patients on therapy.
Q2 continued the positive momentum we saw in the first quarter, yet the year with another quarter of year over year prescription growth.
We did two notable net revenue headwinds in the quarter in the U S compared to Q2 of 2020 Q as last year, we benefited from $13 million in collections from previously denied our appeal claims as well as a $6 million catch up benefit due to variations in approval rates.
In Germany, we continue to see the expected recovery in active patients and reimbursement rates.
We ended the quarter with 499 active patients on therapy are high watermarks and payer negotiations were finalized last year and we expect this recovery to continue through year end.
The second quarter did include a catch up revenue benefit of $5 million in Germany due to variations of approval rates as more patients are meeting coverage criteria in the market.
As mentioned earlier, we are off to a strong start in France.
We are very encouraged by the launch, especially the prescription flow from Paris.
We believe the investment made in prelaunch commercial infrastructure, including market access and pre commercial physician and patient engagement function.
A strong blueprint for future launches in new markets.
Given the reimbursement process and collection cycle timing, we expect spreads to contribute to revenue beginning in the second half of this year.
As a reminder, it will take several quarters for the collection cycle in France to reach full reimbursement rate, which will impact our net revenue per active patient per month in EMEA during the transition.
Gross margin for the second quarter was 73%.
Our cost of revenues increased $4 million due to incremental spending to expand patient support capacity and preparation of trading larger patient populations and new geographies and new indications in the near future.
While we expect gross margins to be impacted by product enhancements in the near term such as the ongoing launch of the new array.
We remain focused on opportunities to increase efficiencies and scale within our supply chain and expect cost optimization over time.
It's the lunar to trial for which we recently received investigational device exemption approval from the U S S. Yet.
We expect moderate growth and R&D cost more phase two and phase three trials lunch and as we continue to invest in product development.
With multiple trials in various stages of design and regulatory approval.
Look forward to updating you a new clinical development later this year.
Cash and short term investments total $941 million as of June 30th 2023.
Our net loss for the first quarter with 54 cents per share $57 million and adjusted EBITDA with negative $27 million.
We are in a period of transformation and preparation as we I the opportunity to treat patients and indications that are multiple times the five G. B M.
We are investing strategically to ensure we are optimizing our lunch potential to meet upcoming opportunities.
All of these investments are supported by our sustainable and strengthening commercial business and G. D M.
I'd like to close today by highlighting one of our very first opt to users in Canada Joelle Berry.
<unk> has been writing and performing with the acoustic guitar in Quebec for more than 40 years.
Last year, Joe L began having trouble remembering song and started to lose sensitivity in your fingers.
Following an MRI joelle with diagnosed with Glioblastoma.
After a successful surgery journals radiation oncologist told him about <unk>, which health, Canada had just recently approved weeks earlier.
In November he began using out to you within weeks of receiving treatment Joelle was back playing the guitar.
People like Joelle are a constant reminder of why we are here.
To extend survival and some of the most aggressive forms of cancer.
<unk> to get patient flight joelle the opportunity to continue doing what they love.
With that I will turn it back to the operator for question.
Thank you.
Reminder, to ask you a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please stand by while we compiled a Q and a roster.
And our first question comes from Jason Bedner Piper Sandler. Please proceed.
Thanks for taking my question here.
Wanted to start with maybe a multipolar on lunar too.
Really large study longer patient portal machine from mill mature in the past with your other other phase three trials.
Talk about how you're thinking about maybe the pieces enrollment number of recruiting slides here and I don't mean to be inserted at all but one of the challenges literally ran into with lunar was you said it was a competitive market for lung cancer trials.
Reach the original enrollment targeted even after several years. So why is lunar two different and then you know as a follow up there can you address bulldozers as interim analysis at any point in this study during or after enrollment and then again sorry consultant Carter, but is this using your new high intensity you raised in the study.
Jason. Thank you for that question. This is protests I'd like to remind everybody about a minute or two.
So this is our next randomize global study that will explore tumor treating feels can commonly with <unk> in the.
First <unk> first line metastatic non small cell lung cancer setting. This was an important study because we have now shown that tumor treating feels work along with an immune checkpoint inhibitor in the second line settings. So S. Typical development would go we would look to bring to therapy earlier in the in the.
Treatment algorithm to be able to have a broader impact on patients.
And as you heard of the prepared remarks. This study is designed to enrolled 734 patients over 21 months follow up period, and one of the things that we learned in the lung cancer setting today is that the most commonly used immune checkpoint inhibitor is pamela lose a map that is the standard of care today, and we're looking to add onto.
That standard of care to extend survival and help these patients.
So we will help the help you understand as the trial opens up we're looking at sites right now in the hopes to get our first sign up and running and ruling the first patient and we will keep you on the updated on how the the study progresses there on forward.
Okay, sorry, just and maybe some of those.
Can you say, whether there is an interim analysis very pointless study and also whether it's using your new Huntington heroes.
Yes. Thank you for reminding me about that so on the interim analysis, there's not an interim analysis plan and on the newer rays I'll remind you that the newer rays today are for patients with G. B M and we're working on other array innovation for the torso and abdomen patients.
Okay, Alright understood.
And then maybe actually I'm trying to reconcile if I could.
Margin in the quarter.
It was below our model and <unk>.
You mentioned.
The newer rays that you have might be lower margin and the older generation, Yeah, I guess that I hear that right and then are there other factors influencing gross margin like you're treating patients in France, or Canada or other markets, but you're not you're getting paid for those patients.
Yeah, Jason. Thank you for the question. The short answer is yes to everything that she ran down but if we look at this a little bit more in detail or gross margin is now steady I would say in a stable right. If you look at the actual cost per.
Cogs per asked a patient if you look at what most impact at the margin year over year, you have to look at the net revenues. So as we took the benefit of the aged cleaned out of the top line you saw that flow through to the March a number and then additionally, you saw the impact us an increase investments and patient support.
That we made at the beginning of this year to ensure we were ready for new geographies and for potential future indications. So I would expect that you know that investment has now stabilised, we're at where we need to be but it did it affect margins both in the quarter and year over year. As we look ahead, we are signaling that.
You may have some slight downward pressure on margin as me introduce the newer rays as with any new product enhancement, there's a period of kind of may.
Manufacturing efficiencies in scale it takes a little bit of time to get there and we are committed to getting these arrays rolled out as quickly as possible Wyoming why are we optimize the supply chain, but I would say that is just a slight pressure and we will certainly be working to optimize that overtime.
And those patient support investments you mentioned, both had gross margin they don't fall into SG&A.
They do much of our patient support flows into our cops.
Okay, Great I'll go back to you. Thank you.
Thank you one moment for next question.
And our next question comes from Emily partner is H C. Wainwright. Please proceed.
Hi, good morning, and thanks for taking my question I'm curious on the lunar new lunar Sunday that you're planning to evaluate and the second line setting with G. T field checkpoint inhibitors post chemo I O did you see any risk with the F. D. A potentially wanting to wait to see results from that study.
Prior to approval.
In that setting and can you also discuss any timelines for the other lunar studies that you're planning to initiate.
Plans for those.
Yeah. So this is bill.
Good morning, Emily Thanks for the question.
With the regulatory question and I'll turn it back to protest to talk about the other trials.
But the simple answer is no we don't expect any.
Issues like the issue you described with the F D a.
Again lunar it's primary 10 point it was a large randomized trial.
David B cohorts for all well balanced.
And we should B I T T alright, and we will be seeking a label that is consistent.
With the primary endpoint and so we don't expect any.
Firemen for waiting for additional trials.
Described.
Yeah. Thank you Bill and at what I would close with with regards to the next set of trials that this is a really important opportunity for us to expand on the label that we expect to get with lunar and continuing to build the evidence and non small cell lung cancer setting so with that we already talked about lunar.
<unk>, which is a again a first line metastatic non small cell lung cancer trial exploring tumor treating fields with pember loser ma'am.
Second study, we're looking to initiate is a tumor treating fields with immune checkpoint inhibitor. Following chemo radiation in the first line locally advanced metastatic non smartphone lung cancer setting again, our strategy here is to ensure that the data that we see with tumor treating fields in Iowa, and the second line setting to move.
The therapy in the earlier settings. So that we can have an even bigger benefit for patients and really impact those patients with non small cell lung cancer.
And.
This is this is consistent with the way progress is typically made and these cancers remind everyone that this was where <unk> started.
And ladies.
In the district lines and then over time conducted additional studies and move to the earlier lives. So we're we're following the same strategic pathway that is typical in the industry.
Alright, just wanted to confirm R. R. D is all planned to initiate this year.
Okay.
Yeah, So I would say as soon as possible because we are looking forward to get these trials up and running in enrolling patients in getting to the data readouts.
There's always a regulatory step here and we're always.
Hesitant to predict when the FDA will provide the I D. We were very pleased in this quarter to announce B I D for lunar too. So that's that's a very important step for us that may not have been emphasizing.
Okay. Thank you.
Thank you one moment for next question.
And our next question comes from Vijay Kumar of Evercore ISI. Please proceed.
Alright. This is Kevin on for just one.
Prescriptions and active patients on treatment and other market.
Can you talk to the performance this quarter.
Was brand Cherokee driver or did the reclassification of Canada into other markets have anything to do with the performance this quarter of any factory and call. It would be helpful. Thanks.
Kevin This is Ashley and I can take that question to ask as noted we were pleased what kind of the continued positive momentum that we saw in G. B N with a solid quarter I would say around the globe with maintained momentum in the U S. A steadying recovery in Germany, and then as you noted a very.
<unk> launch in France, So France was a key driver of the growth in our international markets you can see in our 10-Q, which we did publish this morning that break out of the prescription by region, but we did see a significant early strong position interest into more training in France. It is.
Not yet contributing to revenue I will note that we would expect France to begin to contribute to revenue in the second half of this year and given the timeline to reimbursement in collections cycle.
I think that answered your question because you asked about the other markets, but I would like to highlight again the amount maintains momentum in the U S. The U S is our largest and our most important market and again I would say we were very pleased to be able to see the continued strength from the from the back of our transition to a franchise model last year.
There.
And have you size, Canada at all from an application.
Per second.
Yes of course, as we make those investments were doing all the associate analysis on the market, but I will say that is not a material driver of watching C. D. Yet because we are still pending reimbursement in Canada.
Thank you.
Thank you I would now like to turn the conference back to Bill Doyle for closing remarks.
Oh, Thank you everyone on the phone for your continued interest and support.
Indoor richer.
We have entered a period of transformation and expansion that kicked off earlier this year with the presentation of the successful lunar phase III trial data.
Over the next 18 months, we will have data readouts from three more phase three trials, making a total of six phase III trials for which we will have data readouts, all and difficult to treat cancers with great unmet need.
The possibility of treating thousands of additional patients is becoming a reality.
And we look forward to updating you on our progress throughout the year. Thanks again.
This concludes today's conference call. Thank you for participating and you may now disconnect.
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