Q2 2019 Earnings Call
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Unknown Executive: Thank you for watching.
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They would have to air.
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Okay I'll be attending.
The event 10 is 1438 to four.
Unknown Executive: The event PIN is 1438824.
Unknown Executive: Perfect, thank you.
If I can get us buying of your first and last name.
Unknown Executive: KEVIN LAF, LA, MME.
and the company they are with.
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L.A.S.L.A.M.M. <unk>.
Unknown Executive: ARA, A-I-E-R-A
Unknown Executive: Okay, thank you. And the last piece of information that they're asking for is an email address.
On the company there with.
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And the last information that they're asking for as an email address.
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Evan era dotcom.
Unknown Executive: important milestones in the first half of 2019, and momentum continues into the third quarter After a multi-year process, in May, the Durable Medical Equipment Medicare Administrative Contractors, or DME MACs, issued a proposed local coverage determination that provides Medicare beneficiaries coverage of Optum for newly diagnosed GBM, subject to certain restrictions. The proposed LCD was subject to a 45-day public comment period, which closed in late June. Comments were provided to the DME MACS by more than 200 patients and caregivers, 80 healthcare providers, and 5 cancer advocates. In addition, 42 members of Congress sent a letter to the CMS administrator urging the removal of any coverage limitations that are not supported by FDA approvals or private market coverage policies. Last week, the DMA NACs released a final LCD and fee schedule amount that provides coverage and pricing of Optum for newly diagnosed GBM, effective September 1, 2019. In response to public comments, the final coverage criteria eliminated or revised many of the restrictive criteria originally proposed.
Thank you so much all go out and play sign to the conference call and it looks like they're currently in progress.
Welcome.
Important milestones in the first half of 2019 and momentum continues into the third quarter.
After a multi year process.
In may the durable medical equipment, Medicare administrative contractors or DMD Max.
We issued a proposed local coverage determination that provides Medicare beneficiaries coverage of optune for newly diagnosed GBM.
Subject to certain restrictions.
The proposed LCD was subject to a 45 day public comment period, which closed in late June .
Comments for provided to the DMD Max by more than 200 patients and caregivers 80 health care providers and five cancer advocacy groups. In addition, 42 members of Congress sent a letter to the CMS administrator urging the removal of any coverage limitations that are not supported by FDA approvals or private market coverage policies.
Last week, the DNA NACS released the final LCD and fee schedule amount that provides coverage and pricing of optune for newly diagnosed GBM effective September one 2019.
In response to public comments, the final coverage criteria eliminated or revise many of the restrictive criteria originally proposed.
Unknown Executive: This is a major milestone for Novocure. We are pleased to see the Medicare coverage process come to a conclusion and will continue to work to expand access to Optum for all patients who may benefit. In other progress during the quarter, our partner Xylab has submitted an application to the Chinese regulatory authorities to designate Optune as an innovative medical device and is pursuing a clinical trial waiver for the GBM indication in China. Should a clinical trial waiver be granted, Xi Lab intends to launch Optune in China before year-end. With that introduction, I'll hand the call over to Asaf.
This is a major milestone for no mature.
We are pleased to see the Medicare coverage process come to a conclusion and will continue to work to expand access to optune for all patients who may benefit.
In other progress during the quarter our partners III lab is submitted an application to the Chinese regulatory authorities to designate optune as an innovative medical devices.
And is pursuing a clinical trial waiver for the GBM indication in China.
Sure the clinical trial waiver be granted xylem intends to launch Optune in China before year end.
With that introduction I'll hand, the call over to us off.
Asaf Danziger: Thank you, Bill. The second quarter was transformative for Novocure. We achieved record quarterly net revenues of $86.7 million and a gross margin of 76%, generating our first ever quarter of positive operating income. In May, Novo-TTF-100L was approved by the FDA to treat patients with unresectable locally advanced or metastatic malignant pleural mesothelioma or MPM. MPM is a rare cancer that has been strongly linked to asbestos exposure. This approval represents the first FDA-approved treatment advance in over 15 years for the 3,000 Americans diagnosed with MPM annually. The approval also marks Novocure's first FDA-approved torso indication and we believe shows the promise of TT fields in multiple solid tumor types, including some of the most aggressive forms of cancer. We have initiated a phased launch for NPM, shaped by our learnings from our GBM rollout.
Thank you Bill the second quarter was transformative for Novo Q, we achieved record quarterly net revenues of $86.7 million and the gross margin of 76% generating our first as a quota of positive operating income.
In May novelty T. F 100, and was approved by the FDA to treat patients with unresectable locally advanced or metastatic malignant fluid mesothelioma, although NPM MPM is around cancer that has been strongly linked to asbestos exposure.
This approval represents the first FDA approved treatment advance in over 15 years for the 3000 Americans diagnosed with MPM annually.
The approval also maag snowmobiles first FD approved toso indication and we believe shows the promise of DT fields in multiple solid tumor types, including some of the most aggressive forms of cancer.
We have initiated a phase loans full MPM shaped by our learnings from our GBM rollout in 2019, we will focus on satisfying the Asian oncologist and driving adoption at approximately 30 centers that we believe see the majority of fuel MPN patients.
Asaf Danziger: In 2019, we will focus on certifying radiation oncologists and driving adoption at approximately 30 centers that we believe see the majority of US NPM patients. While the radiation oncologist will be the exclusive prescriber for MPM in the U.S., we know from our GBM experience that communication across the multidisciplinary teams at cancer treatment centers is critical to driving adoption. As such, our field teams are working to educate the surgeons, pulmonologists, and medical oncologists that see MPM patients to ensure they have the information needed to confidently recommend Novo-TTF-100L to patients. We are pleased with the early execution and positive initial response. We certified our first NPM prescribers in early June, less than two weeks after FDA approval. Certifications are ongoing, and information has been requested by multiple sites to support the required IRB approval.
While the radiation oncologists will be the exclusive prescriber for NPM in the U.S., we know from our GBM experience that communication across the multi disciplinary teams at cancer treatment centers is critical to driving adoption as such our field teams are working to educate the surgeons pulmonologist and medical oncologists that see NPM patients to ensure they have the information needed to confidently recommend novelty T. F 100 L. Two patients.
We are pleased with the early execution and positive initial response, we certified our first MPM prescribers in early June less than two weeks after FDA approval.
Certifications are ongoing and information has been requested by multiple sites to support the required I'll be approval.
Asaf Danziger: We expect our first NPM patient to start therapy in the third quarter. Moving to GBM, more than 2,700 patients were on Optune at quarter's end, and the number of prescriptions for patients with newly diagnosed GBM continued to grow. $86.7 million in Q2 net revenues represent an increase of more than 40% versus the same period last year.
We expect our first MPM patients to start therapy in the third quarter.
Moving to GBM more than 2700 patients were on Optune at quarter's end the number of prescriptions for patients with newly diagnosed GBM continued to grow $86.7 million in Q2 net revenues represent an increase of more than 40% versus the same period last year.
Asaf Danziger: We continue to believe the strength of prescribers' recommendations often influences whether or not a patient will start Optium. The confidence and communication skills of individual prescribers can have a noticeable impact on our prescription flow. We have strengthened our physician speaker programs to encourage communication across the multidisciplinary teams at GBM treatment centers and to prepare prescribers to confidently recommend Optium to patients. We have also launched a tool to help physicians introduce Optium in a patient-friendly manner intended to increase patient acceptance. The early feedback from both our sales force and physicians has been overwhelmingly positive. I will now hand the call over to Eli for an update on our advancing clinical pipeline.
We continue to believe the strength of prescribers recommendation, often influences whether or not a patient will start optune the confidence and communication skills of individual prescribers can have a noticeable impact on our prescription flow we have strengthened our physician speaker programs to encourage communication across the multidisciplinary teams at GBM treatment centers and to prepare prescribers to confidently recommend optune to patients. We have also launched a tool to help physicians introduce opportune in a patient friendly manner intended to increase patient acceptance. The early feedback from both our sales force and physicians has been overwhelmingly positive.
I will now hand, the call over to Ellie for an update on our advancing clinical pipeline.
Eli: Thank you, Asaf, and good morning, everyone. Tumor treating fields therapy has shown promise across a variety of solid tumor cancers. Phase 3 pivotal trials are ongoing in four indications, Brain Metastasis, Lung Cancer, Pancreatic Cancer, and Ovarian Cancer, creating the potential for substantial revenue growth driven by a cadence flow of new indication launches commencing as early as 2022. We also have a Phase II trial open in living cancer and an additional 12 solid tumor cell lines with preclinical data that have shown a response to tumor treating features. On today's call, I will give a brief update on the progress of each of our programs, beginning with MED-X. MED-IS is our Phase III pivotal trial testing the effectiveness of stereotactic radiosurgery plus tumor-trigging fields compared to stereotactic radiosurgery alone in patients with brain metastasis resulting from non-small-cell lung cancer.
Thank you, Sir and good morning, everyone tumor treating fields therapy as shown promise across a variety of solid tumor cancers.
Phase three pivotal trials are ongoing in four indications brain metastasis lung cancer pancreatic cancer and ovarian cancer.
Creating the potential for substantial revenue growth driven by a cadence flow of new indication launches commencing as early as 2022.
We also have a phase two trial opening leaving cancer and an additional 12 solid tumor cell lines with preclinical data that have shown a response to tumor treating fields.
On today's call I will give a brief update on the purpose of each of our programs beginning with med.
Matters is our phase three pivotal trial testing the effectiveness.
Oh, stereotactic radio surgery, plus tumor treating fields compare to stereotactic radio surgery alone in patients with brain metastasis, resulting from non small cell lung cancer.
Eli: We have opened the trial to 270 patients, and enrollment is ongoing at more than 85 sites across North America, Europe, and Israel. We anticipate data will be available from Medicine 2021. Lunar is our Phase III pivotal trial testing the effectiveness of tumor-treating fields in combination with immune checkpoint inhibitors, or docetaxel, versus immune checkpoint inhibitors, or docetaxelolone, for patients with non-small-cell lung cancer who progress during
We have opened the trial to 270 patients and enrollment is ongoing at more than 85 sites across North America, Europe and Israel.
We anticipate data will be available from medicine 2021.
Lunar is our phase three pivotal trial testing the effectiveness of tumor treating fields in combination with immune checkpoint inhibitors or does it taxes versus immune checkpoint inhibitors or toxic taxolo for patients with non small cell lung cancer, we progressed during or after platinum based there.
Eli: or after.
Eli: PlatinumBaseTherapy We have opened the trial to 534 patients, and enrollment is ongoing at more than 65 sites across North America and Europe. We now expect the interim analysis in the second half of 2020 with final data from Lunar in 2022.
We have opened the trial to 534 patients and enrollment is ongoing at more than 65 sites across North America and Europe . We now expect the interim analysis in the second half of 2020.
With final data from lunar in 2022.
Eli: PANOVA3, our pancreatic cancer trial, and INNOVATE3, our recurrent ovarian cancer trial, are performing well in their ramp-up phase. We anticipate final data from these trials will be available in 2022 and 2024, respectively. We are also working to finalize the protocol for our next randomized trial in GBM, intended to support possible label expansion, studying the potential benefit of initiating option concurrently with radiation therapy versus initiating option post radiation. We will provide updates on these trials as they develop. Beyond our clinical pipeline, there is an increasing interest from the scientific community driving external research on tumor treating fields broadly. We have 29 investigator-sponsored trials open studying a range of topics and 30 ongoing in vitro preclinical studies. The in vitro is a bench research system that enables independent researchers to study the effects of tumor treating fields in vitro. We awarded the inaugural AACR Novocure Tumor Treating Fields Research Grant in April. And we're committed to expanding the program in 2020. We're working to develop similar partnerships with other organizations that share our desire to support and expand innovative research. With that, I'll turn the call over to Wilco to review our financials.
And number three our pancreatic cancer trial, and innovate tree, our recurrent ovarian cancer trial.
Are performing well in their ramp up phase.
We anticipate final data from these trials will be available in 2022 and 2024, respectively.
We are also working to finalize the protocol for our next randomized trial in GBM.
Intended to support possible label expansion study in the potential benefit of initiating optune concurrent with radiation therapy.
Versus initiating upturn.
Post radiation, we will provide updates on these trials as they develop.
Beyond our clinical pipeline there is an increasing interest from the scientific community driving external research on tumor treating fields broadly.
We have 29 investigator sponsored trials open stand in a range of topics and 30 ongoing innovation through preclinical studies the vitro the C bench research system, which enables independent researchers to study the effect of tumor treating fields in vitro we awarded the in now girl AC our novocure tumor treating fields research grant in April .
And are committed to expanding the programming 2020.
We're working to develop similar partnership.
With other organizations that share our desire to support and expand innovative research on tumor treating fields with that I'll turn the call over to Wilco to review our financials.
Wilco: Thank you, Ali, and thanks to everyone for joining us on the call this morning. Novocure ended the second quarter in a strong financial position. With more than 2,700 GBM patients on Optum as of June 30, 2019, the number of active patients has grown for 18 consecutive quarters since the initial presentation of EO14 data in newly diagnosed GBM. More than 12,000 patients have been treated to date globally, and trailing 12-month net revenues now exceed $290 million. Second quarter net revenues were $86.7 million, growing 41% year-over-year and growing 18% quarter-over-quarter. Revenue growth was driven by an increase in active patients and an increase in net revenues per active patient. The increase in net revenues per active patient was primarily driven by improved reimbursement rates, which we believe are sustainable. The improved reimbursement rates also resulted in an additional benefit of approximately $5 million to second-quarter net revenues that we do not expect to be as significant in future quarters. Gross profit in the quarter was $65.6 million, reflecting a 76% gross margin.
Thank you Ashley and thanks to everyone for joining us on the call. This morning.
Novocure ended the second quarter in a strong financial position with more than 27, hundred's JPM patients on Optune as of June Thirtyth 2019, the number of active patients has grown for 18 consecutive quarters. Since the initial presentation of a 14 data in newly diagnosed GBM.
More than 12000 patients have been treated today globally and trailing 12 month net revenues now exceed $290 million.
Second quarter net revenues were 86.7 million growing 41% year over year, and growing 18% quarter over quarter.
Revenue growth frustration by increasing active patients and an increase in net revenues per active patient.
The increase in net revenue per active patient was primarily driven by improved reimbursement rates, which we believe are sustainable.
The improved reimbursement rates also resulted in an additional benefit of approximately $5 million to second quarter net revenues that we do not expect to be a significant in future quarters.
Gross profit in the quarter was 65.6 million, reflecting a 76% gross margin.
Wilco: ProSmarting continues to benefit from ongoing efficiency initiatives and increasing scale. We believe that the reduction in cost per revenue per active patient is sustainable, and we remain focused on improving this key metric. Moving down the income statement, we continue to increase investments in research and development with 19.5 million in R&D expenses in a quarter, up more than 71% versus the second quarter of 2018. This increase is primarily driven by an increase in clinical trial and personnel expenses for our Phase III pivotal trials and an increase in costs associated with medical affairs, regulatory, and engineering. As we work to enroll patients across four Phase III clinical programs, we anticipate that R&D expenses will continue to increase in future quarters. Our second quarter SG&A expenses were $45 million, an increase of 20% versus the second quarter of 2018, driven primarily by increased marketing expenses related to the launch of Novo TTF 100L for NPM and increased personnel costs. That loss for the quarter was $1.3 million, or one cent per share.
Gross margin continues to benefit from ongoing efficiency initiatives and increasing scale.
We believe that a reduction in cost per revenues per active patient is sustainable and we remain focused on improving this key metric.
Moving down the income statement, we continue to see increasing investments in research and development, but 90.5 million in R&D expenses in the quarter up more than 71% versus the second quarter of 2018.
This growth is primarily driven by an increase in clinical trial and personnel expenses for our phase three pivotal trials and an increase in costs associated with medical affairs regulatory and engineering.
As we work to enroll patients across four phase three clinical programs, we anticipate that R&D expenses will continue to increase in future quarters.
Our second quarter as DNA expenses were $45 million, an increase of 20% versus the second quarter of 2018, driven primarily by increased marketing expenses related to the launch of Novo TTF 100, L for MPM and increased personnel costs.
Net loss for the quarter was 1.3 million or one cents per share.
Wilco: Cash flow from operations was $9.1 million. Cash flow from the GBM business is funding increased investments in our clinical pipeline and technology development. We ended the second quarter with $284.6 million in cash, cash equivalents, and short-term investments, an increase of $28 million from the prior quarter. Our strengthening financial performance, coupled with our cash on hand, provides stability and flexibility as we strive to extend survival in some of the most aggressive forms of cancer. Novocure is a global oncology company with proprietary platform therapy, positive cash flow from an established and growing commercial business, and a significant market expansion opportunity from an advancing pipeline in multiple indications. Our focus is unwavering on disciplined execution intended to deliver both sustainable near-term growth from existing indications and significant long-term shareholder value from our pipeline. Thank you for your time this morning. Now, I will turn the call back over to the operator for questions.
Cash flow from operations was 9.1 million cash flow from the GBM business is funding increased investments in our clinical pipeline and technology development.
We ended the second quarter were 284.6 million in cash cash equivalents and short term investments an increase of $28 million from the prior quarter.
Our strengthening financial performance, coupled with our cash on hand provides stability and flexibility as we strive to extend survival in some of the most aggressive forms of cancer.
Novocure is a global oncology company with proprietary platform therapy positive cash flow from an established and growing commercial business and a significant market expansion opportunity from an advancing pipeline in multiple indications.
Our focus is unwavering on disciplined execution intended to deliver both sustainable near term growth from existing indications and significant long term shareholder value from our pipeline.
Thank you for your time. This morning, now I will turn the call back over to the operator for questions.
Operator: Thank you. Ladies and gentlemen, if you have a question at this time, please press the star followed by the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Once again, to ask a question, please press star and then one now. And our first question comes from Vijay Kumar from Evercore. Your line is open.
Thank you.
Ladies and gentlemen, if you have a question at this time. Please press the star followed by the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key once again to ask a question. Please press star and then one now.
And our first question comes from Vijay Kumar from Evercore. Your line is open.
Vijay Kumar: Thanks guys for taking my question and congrats on a nice revenue beat here. I just want to understand, or maybe you could clarify on the revenue beat, the $5 million improved reimbursement, this is sustainable, right? All that you're saying is, do not expect a similar incremental increase of $5 million going forward. The magnitude is going to be smaller, but this $5 million, what we saw was sustainable.
Thanks, guys for taking my question and congrats on a nice revenue beat here I just want to understand or maybe if you could clarify on the revenue beat the 5 million improve reimbursement. This is sustainable right. All that you are saying and do not expect a similar incremental increase of 5 million going forward. The magnitude is going to be smaller, but this 5 million what we saw was sustainable.
Morning, PJ this is wilco.
Wilco: Morning VJ, this is Wilco. Let me try to give you a little bit extra color on the 5 million. As we stated in the script, we saw a substantial improvement in reimbursement rates. So, first of all, you have the benefit of revenue from that improvement. But secondly, under the applicable revenue recognition policy, which is ASC 606, you also have to take a look at the estimated collection rates within your portfolio. And we were able to update those estimations as well. And that's particularly what's driving that 5 million. So it's driven by a substantial uptick in collections, also leading to an adjustment in anticipated collection rates in our portfolio. And we think it will continue at some level, but it's not going to be as sustainable at that 5 million level. And I think from a comparative perspective, 82 million net revenue was probably the right number to compare quarterly performance.
Let me try to give a little bit extra color on on the $5 million as we stated in the script, we saw substantial improvement in reimbursement rates. So first of all you have the benefit in revenue from that.
That improvement, but secondly, under the applicable revenue recognition.
Policy, which is 86. So six you also then have to take a look at the estimated collection rates within your portfolio and we were able to update those estimations as well and that's particularly what's driving that.
That 5 million. So it's driven by the subsea substantial uptick in collection also leading to an adjustment in anticipated collection rates in our portfolio and we think it will continue at some level, but it's not going to be a sustainable in as it.
At at that 5 million level, and I think former from a comparative perspective 82 million net revenue is probably the right number to compare quarterly performance too.
Vijay Kumar: I see. Okay, that's more. So what you're saying is this $5 million was more of a one-off because you had a catch-up payment?
I see okay. That's that's more so what you're saying is the 5 million as it was more of a one off because you had a catch up payment.
Wilco: Yeah, that's another way to describe it, probably shorter and more efficient. Thanks, Vijay.
Yeah, that's another way to describe it probably shorter more efficiently yes. Thanks Ricky.
Vijay Kumar: Okay, and then a couple of other quick follow-ups for me. One, you know, I know strip volumes is something that The Street focuses on. It was good to see a sequential increase, up 4%. I think, you know, you said first meso patient in 3Q, so that implies no strip from mesothelioma in 2Q, is that correct? And, you know, could you just break down the performance of a new GBM patient versus recurrent GBM?
Okay, and then a couple of other quick follow ups from me one now I know a strip volumes or something that a the street focus on it was good to see up sequential increase of 4% I think you said first me so patient entry queue today in place no scrip.
From mesothelioma into Okay is that correct or not.
In a could you just break break down the performance new GBM patient versus record in GBM.
So first of all you're absolutely right that we have not received a needle healy OMA prescription yet we expect that in Q3 and services.
Unknown Executive: So, first of all, you're absolutely right that we have not received a mesothelioma prescription yet. We expect that in Q3. And so this is entirely... GBM, and during the quarter, we saw 1,041 newly diagnosed groups.
Entirely.
GBM.
And during the quarter, we saw 1041 newly diagnosed scripts.
Unknown Executive: The End.
Unknown Executive: And that's a 5% increase from Q1.
And that's a 5% increase from Q1.
Unknown Executive: That's helpful, Bill. And then maybe one last one on the interim readout on non-small cell. Well, my understanding was the second half readout, you know, there was no change in timeline versus, you know, maybe the prior queue versus one queue. The expectation was it would be second half 2021. Can you confirm that the timeline did not change? And as a follow-up to that, what is the end point here, Bill, on the interim readout? Is there a chance that, you know, if you have a positive signal, this trial could be stopped, or I'm just curious about what the pre-specified end points are here. Yeah, so I think with all
That's helpful and then maybe one last one on Ah.
The interim read out on non small cell.
My understanding was the second half read out you know there was no.
A change in timeline a worse is.
No maybe the prior Q versus one Q the expectation was it would be second half.
2021 can you confirm that.
Timeline did not change.
And then as a follow up to that the.
What is the endpoint here bill on the East room I read out is there a chance that you know if you have a positive signal to us that trial could be stopped or.
Im just curious on what the pre specified endpoints are here.
Yes, so I think with all read us there's three possibilities interim readout.
Unknown Executive: There are three possibilities, interim readouts. One is a futility signal. That's something that we've never seen in any of our clinical trials, of course. The second step is to continue the trial because it's moving on target. And then, in exceptional circumstances, the trial can be stopped for success. You'll recall that our GBM phase three trial was, in fact, stopped for success at the interim, but I wouldn't want to set the expectation that every single one of our trials will be stopped at the interim for success.
No one is a futility signal or that's something that we've never seen in any of our clinical trials of course.
Second is to continue the trial because its moving on target and then in exceptional circumstances. The trial to be stopped for success, you'll recall that our GBM phase three trial wasn't fast offer success at the interim but I wouldn't want to set the expectation.
That every single one of our trials will be stopped theater or for success.
Vijay Kumar: That's helpful. Thank you, guys.
That's helpful. Thank you guys.
Thank you.
Operator: Thank you. And our next question comes from Esther Rajavalu of Oppenheimer. Your line is open.
And our next question comes from Esther.
Roger Ballou from Oppenheimer. Your line is open.
Esther Rajavalu: Good morning. Thank you for taking my questions. I had a question on gross margin. Now with Medicare reimbursement for GBM and the long
Good morning, Thank you for taking my questions.
I had a question on gross margin now with Medicare reimbursement for TBM and the launch of <unk>.
Esther Rajavalu: Launching in mesothelioma, can you help us understand the pushes and pulls on gross margin and when you would expect to get coverage for mesothelioma from Medicare?
Lunch in mesothelioma can you help us understand the pushes and pulls on gross margin and when you expect to get coverage for mesothelioma from Medicare.
That's a whole bunch of question asked the good morning, Rocco, let let's start with gross margin as we stated in a in our disclosure in our spreads were very pleased with the continued to progress in improving the gross margin both through revenue growth as well as through efficiency and scale benefits that we see in our in our cost of cost of goods.
Wilco: That's a whole bunch of questions, Esther. Good morning, this is Wilco.
Wilco: Let's start with gross margin. As we stated in our disclosure in our script, we're very pleased with the continued progress in improving gross margin, both for revenue growth as well as for efficiency and scale benefits that we see in our cost of goods. You probably recall that we've been treating a medic patient all along, and that was one of the commitments we made as a company to make the therapy available to all patients, including Medicare patients, while we were entering into the long dialogue we had with Medicare to come up with coverage and fees. So the costs, the operating expenses are all in our P&L.
Well, you probably recall that weve been treating emetic patients. So all along and that was one of the commitments. We made as a company to make a therapy available to all patients, including Medicare patients. While we were entering into long dialogue, we've had with Medicare to come to coverage and fee. So the Cox. The operating expenses are all in our in our PML. So any additional revenue that we will now expect to receive from the coverage and a fee that has been published by Medicare will benefit both our topline but will also benefit.
Wilco: So the additional revenue that we will now expect to receive from the coverage and the fee that has been published by Medicare will benefit both our top line and our gross margin. NPM is a little bit too early to call. I guess that depends on volume and on the progress in reimbursement. Initially, we'll probably put a little bit of pressure on NPM, but really, it's too early to make any meaningful comment on it.
Our our gross margin and becomes a little bit too early to call I guess that depends on on volume. It it depends on the progress in reimbursement initially, we'll probably put a little bit pressure along on MPN, but really it's it's too early to make any meaningful comment on it.
Gotcha, but overall it to me it sounds like we should expect Ah Hey, we should expect that Medicare reimbursement benefits offset add the mesothelioma hit on the gross margin line.
Esther Rajavalu: Gotcha. But overall, to me, it sounds like we should expect it.
Esther Rajavalu: We should expect...
Wilco: Care Reimbursement Benefit to offset the mesothelioma hit on the gross margin line.
Esther Rajavalu: Yeah, I think that's a safe assumption.
Yeah, I think thats, a safe assumption, yes, Okay got you.
Yep.
Esther Rajavalu: Okay, gotcha. Okay, and then in terms of getting reimbursement for the historical claims over the last several years, you had mentioned in your press release about reimbursement that there is a process that you can go through. Can you help us understand that process a little bit better?
Okay, and and then in terms of getting.
Reimbursement for the historically for the historical claims over the last several years I've you'd mentioned in your press release with their reimbursement that there is a process that you can go to can you help us understand that process a little bit better.
Unknown Executive: Yeah, so, you know, from the beginning, as Wilco said, we made the strategic decision to provide our therapy to Medicare beneficiaries while our discussions with Medicare were unfolding. Throughout that period, we appealed all denials through the heavily backlogged ALJ process with CMS. We expect to continue to do that, and there's no doubt that the recent approval will likely help our appeals through the ALJ process. And, you know, I don't think it's appropriate for us to talk about any potential settlement discussions at this time.
Yes, So you know from the beginning or as Wilco said, we've made the.
Strategic decision to provide.
Our therapy to Medicare beneficiaries, while our discussions with Medicare were unfolding.
HM throughout that period, we appealed it all denials through the heavily backlog.
Lj process with CMS, we expect to continue.
To do that.
And.
There is no doubt that the.
The recent approval will likely help power.
Appeals through the L.J. process.
And.
I don't think it's appropriate for us to talk about any potential settlement discussions at this time.
Gotcha and then my last question is on the international frightened.
Esther Rajavalu: And then my last question is on the international front, the Japanese market, about what proportion of patients treated in Japan are medical tourists from China. Do you have any estimates on that, or are they all sorts of Japanese nationals?
In the Japanese market about what proportion of patients treated in Japan are our medical tourists from China do you have any estimates on that are they all sort of Japanese nationals.
Unknown Executive: It's a good question. All our Japanese patients, all the patients that we see in Japan, they're all Japanese.
I, it's a it's a good question I to staff all of our Japanese patient Oh, the patient that we did in Japan I know they are all Japanese patients.
Unknown Executive: Gotcha. Thank you very much.
Gotcha. Thank you very much.
Well.
Operator: Thank you. Our next question comes from Corey Casimov from JP Morgan. Your line is open.
Thank you.
Our next question comes from Cory Kasimov from JP Morgan Your line is open.
Corey Langer: Hey, good morning, guys. Thanks for taking my questions. First one is just going back to reimbursement, trying to understand the dynamics a little bit better for 2Q and, more importantly, going forward. So you obviously had a nice uptick in revenue per patient in the quarter, even excluding that $5 million one-time payment. This is obviously before Medicare is kicking in, so can you talk a little bit about this run rate from prior quarters to 2Q and then how we should be thinking about it going forward?
Hey, good morning, guys. Thanks for taking my questions first one is just going back to reimbursement trying to understand the dynamics.
A little bit better for Twoq, you and more importantly, going forward. So you obviously had a nice uptick in revenue per patient in the quarter, even excluding that $5 million onetime payments is obviously before medicare's kicking in so can you talk a little bit about this run rate from prior quarters two to Q and then how we should be thinking about it going forward.
Yes, overall and as we said, we see overall improvement in reimbursement rates. So Corey good morning by the way.
Wilco: Yeah, overall, as we said, we see overall improvement in reimbursement rates. So, Corey, good morning, by the way.
Wilco: Net revenues per active patient in the quarter were about $10,000 per month. And we've seen, for instance, in the U.S., a 7% year-over-year improvement in that. So the 5 million and the substantial improvement in reimbursement rates are predominantly a result of improved reimbursement in the United States.
Net revenues for active patient in the in the quarter were about $10000 per month.
And we've seen for instance in the U.S., a 7% year over year improvement in that so is that the the 5 million and assist the substantial improvement the reimbursement rates is predominantly.
As a result of improved reimbursement in the United States.
Corey Langer: Okay, and then with Medicare reimbursement kicking in on September 1st, can you just remind us of the percent of patients within your approved indications that will fall within this channel?
Okay, and then with Medicare reimbursement kicking in on September 1st can you just remind us of the percent of patients within Europe proved indications that will fall within this channel.
Unknown Executive: Sure, so, you know, we've consistently said that about 25% of our patients are Medicare patients. The approval of coverage is for newly diagnosed patients, and approximately 75% of those 25% are newly diagnosed, and we would expect the substantial majority of those to be covered under the new policy.
Sure. So you know we've consistently said that about 25% of our patients are Medicare patients. The approval of coverage is for newly diagnosed patients and approximately 75% of those 25% are newly diagnosed and we would expect the substantial majority of those to be covered under the new policy.
Corey Langer: Okay, that's helpful. And then the last question is, with regard to the narrowing and refining of timelines for some of those key upcoming trials and Lunar in particular, is that being driven by initial event accrual or pace of enrollment going from 2020 to 2H20 for that interim period?
Okay. That's helpful. And then the last question is with regard to the narrowing and and refining of timelines for some of those key upcoming trials and lunar in particular is that being driven by initial event accrual or pace of enrollment going from 2022 to two age 20 for that interim.
Unknown Executive: Yeah, it's principally the pace of accrual. You know, as we are getting further into trials, we're able to refine the recruitment patterns a little more specifically, and that's why we updated that particular number.
Yeah, it's principally the pace of of accrual or you know as we are getting further into trials were able to refine the the referral patterns a little more specifically and that's why we updated that particular number.
Corey Langer: Okay, great. Thanks for taking the questions.
Okay, great. Thanks for taking the questions.
Operator: Thank you. Our next question comes from Greg Gilbert from SunTrust. Your line is open.
Thank you. Our next question comes from Gregg Gilbert from Suntrust. Your line is open.
Gregory Daniel Fraser: Yes, hi. On the lunar question, a follow-up on that, are you finding...
Yes, hi on the the loan or a question a follow up on that are you finding finding any issues with the number of patients that are rapidly moving to PD ones in the front line and.
Gregory Daniel Fraser: Are you finding any issues with the number of patients that are rapidly moving to PD-1s in the front line? Is that slowing enrollment, and what drove the push out on the PANOVA? Timeline as well, and then I have a couple follow-ups.
Is that slowing enrollment and and what drove the push out on the PANOVA.
Timeline as well and then I have a couple of follow ups.
Unknown Executive: Yeah, so first of all, the PANOVA timeline has not been adjusted. The only adjustment was to Lunar.
Yeah, So first of all but the Nova timeline has not been adjusted.
The only adjustment was on longer.
Unknown Executive: We don't see any particular difficulty in recruiting patients as a result of, you know, any one particular factor. It is a busy area, though, as you know, because there are other combination trials ongoing, and that, you know, may have some net effect. But, you know, it's really not a big deal.
We don't see any particular difficulty in recruiting patients as a result of.
Any one particular factor. It is it is the area, though as you know because there are other combination trials ongoing.
And that May have some net effect, but.
It's really not a big deal.
Okay I apologize if up another was adjusted versus a prior timeline, maybe I have all the info there and then as it relates to that the trends in Europe can you can you talk about demand trends there given the sequential decline in prescriptions and I think active patients were relatively flattish quarter on quarter and anything we should be aware of in Europe .
Gregory Daniel Fraser: Okay, I apologize; I thought Panova was adjusted versus a prior timeline. Maybe I have old info there.
Unknown Executive: And then, as it relates to the trends in Europe, can you talk about demand trends there given the sequential decline in prescriptions? And I think active patients were relatively flattish, quarter on quarter. Anything we should be aware of in Europe?
Unknown Executive: I am here to stop. Thank you for your question. So, let's talk about, you know, the big picture in Germany. Our prescriptions year over year grew by 18%, and last quarter was a relatively short quarter of selling by 6%. We still believe that there are many... patients in Europe that can benefit from the therapy, and we will continue to, you know, push our business forward. We don't see any significant events besides the thing that I just mentioned.
I if assessed Ah. Thank you for your question so <unk>.
Let's talk about you know, that's a big picture or in Germany, or you know our prescription you have where you grow by 18%.
All right last quarter was a short quarter relatively or selling day by 6%, we still believe that these many ER.
Patient in Europe that can benefit from the therapy, and we will continue to.
Who show business forward.
We don't see any add significant events beside the thing that I just mentioned.
Gregory Daniel Fraser: And then lastly, I don't think you answered this part, that the process and the timeline for Medicare reimbursement for mesothelioma, is that something you can walk us through?
Okay.
And then lastly, I don't think you answered this part that the process and the timeline for Medicare reimbursement for me. So feel the alma is that something you can walk us through.
Unknown Executive: Sure, so Specifically, the coverage policy takes effect on September 1. Oh, miso. I'm sorry. Yes, for miso.
Sure so.
Specifically the coverage policy takes effect on September one.
Oh I'm sorry.
Yes for me.
Yeah.
You don't get that one for free right.
Unknown Executive: ... You don't get that one for free, right?
Yeah, So I I would take it so we always say that we will approach Medicare since 75% of the meet the patient to our Medicaid population. We always at you know I mentioned that we will approach Medicare for coverage and pricing got a after our.
Unknown Executive: I will take it. So, we always say that we will approach Medicare since 75% of the measles patients are in the Medicaid population. We always, you know, mentioned that we would approach Medicare for coverage and pricing after our... Approval, [inaudible]
Approval.
On the PBM so.
You know, we we will continue to open Medicare a and it's very similar to our process with the GPM. So we cannot define any time and right now.
Gregory Daniel Fraser: Okay, thanks guys.
Okay. Thanks, guys.
Thank you.
Operator: Thank you. Our next question comes from Defea Yang from Mizuho Securities. Your line is open.
Our next question comes from Difei Yang from Mizuho Securities. Your line is open.
Defea Yang: Hi, good morning, and thanks for taking my question. So a quick one with regard to methicillioma commercial coverage. Would you walk us through the process you are expecting and the rough timeline to get this side of the population covered?
Hi, good morning, and thanks for taking my question. So a quick one with regards to met the Si deal no commercial coverage would you walk us through the process you are expecting and the rough timeline to get this side of the population cologuard.
Unknown Executive: Yeah, sure. This time, I realized the question was about mesothelioma. I've been so focused on GBM for the last five years. So, this will also follow the same process that GBM followed initially. So, clinicians will prescribe the therapy to patients, and if they're privately insured, we'll then approach their carriers on a named patient basis. And then when volumes become at a certain level, we can then work to establish coverage policies in those carriers. So this will... Take us through, you know, sort of a standard policy just for everyone on the line. You know, we don't expect material revenue in 2019 as we work through this process.
Yes sure. This time I realize the question is about easily affiliate right. So focused on GBS. These last five years [laughter] okay.
So.
This will also follow the same process that GBM, followed initially so oh clinicians will prescribe the therapy to patients.
And if they're privately insured a wheel then approach their carriers on a named patient basis, and then when volumes become had a certain level. We can then work to establish a coverage policies and those carrier. So this this will.
Take us through you have sort of a standard policy just for everyone. On the line are we don't expect a material revenue in 2019 as we work through this process.
Unknown Executive: So, Leal, from your experience with GBM, if something like this is a lengthy process, maybe it takes two to three years to get the majority of the patients covered.
So Neil from.
From your experience with GBM isn't this Sunday like this is a lengthy process maybe it takes two to three years to get majority of the up patient hub right.
Unknown Executive: So, I don't think it's going to take three years, but it really is a function of getting the patients on therapy and then applying to the carriers. I think the fact that this is a small indication with relatively few patients compared to other areas in which we're working actually makes it a little bit easier than some of the larger indications.
So I don't think its going to take three years.
But it really is a function of getting the patients on therapy, and then applying to the carriers I think the fact that this is a small indication with relatively few patients compared to other areas in which we're working actually makes it a little bit easier than than some of the larger indications.
Unknown Executive: Okay, thank you. Then, I wonder if you could make comments with regard to the timeline for the decision from the Chinese side as to whether the GBM trial can be waived. Is this a 2019 decision?
Okay. Thank you and then if I wonder if you pull down make comments with regard to the timeline to be a decision from time aside a webex the TBM child can be ways.
Well said plenty 19 decision.
So our expectation is the decision is 2019 decision.
Unknown Executive: So our expectation is that the decision is a 2019 decision.
Defea Yang: Okay, thank you.
Okay. Thank you.
Operator: Thank you. Our next question comes from David Nierengarten from Wedbush Securities. Your line is open.
Thank you.
Our next question comes from David Nierengarten from Wedbush Securities. Your line is open.
David Nierengarten: Thanks for taking my question. It's on GBM.
Hi, Thanks for taking my question that's on GBM.
David Nierengarten: According to my math, the duration of treatment would have had to increase a bit for the quarter. I know you don't generally talk about that. Going forward with Medicare reimbursement, patients, of course, are older; would you anticipate a change in trend in duration of therapy or maybe, to put it another way, have, if you could remind us if there are any differences in duration of treatment in a clinical trial by age, you know, going on prior data or real-world data that you've disclosed in scientific meetings? Thanks.
[laughter] According to my <unk>.
According to my math net duration of treatment you know what does that do your increased for the quarter.
I know you don't generally talk about that but.
Going forward with Medicare reimbursement the patients of course are older would you anticipate a change in trend and duration of therapy or maybe to put it. Another way have you could remind us if there are any differences and duration on on treatment in a clinical trial by age that's going on prior data or real world data that you have them not disclose some scientific meetings. Thanks.
I think if a question. So we we are not expecting or.
Unknown Executive: So we are not expecting at all, and we were not talking about exact mitigation, but from our experience in different tribes, there is no meaningful mitigation.
A quick treatment duration different.
At all and we were not talking about the exact within the duration and but from our expansion in.
Different drive there is no meaningful treatment duration different between ages.
Unknown Executive: And remember, David, we have been treating this patient population for years. Okay, thank you.
I remember, okay pay but we haven't you haven't treating at this patient population for years.
David Nierengarten: Thank you.
Yep, Okay. Thank you.
Operator: Thank you. And again, ladies and gentlemen, to ask a question, please press star and then one now. And we do have a follow-up from Vijay Kumar from Evercore. Your line is open.
Thank you.
And again, ladies and gentlemen to ask a question. Please press star and then one now.
And we do have a follow up from BJ Vijay Kumar from Evercore. Your line is open.
Vijay Kumar: Hey guys, just one quick clarification. The reimbursement, you step up the $5 million that you mentioned, was this related to the commercial side or the Medicare side?
Hey, guys just one quick clarification.
The reimbursement you step up the 5 million now that you mention local was this was this related to the commercial side or on the Medicare side.
Wilco: Thanks, Vijay, for the follow-up question. It is related to the commercial side, and it is a result, as I said, of improved reimbursement performance. We hope that performance will continue to improve, and that's why we stated that we don't think it's going to be as significant as we saw in the second quarter.
Thanks, PJ for the for the follow up question.
It is it is related to the commercial side and it is a result as I said have improved reimbursement a performance. We hope that the performance. We've continued to improve and that's why we stated that we don't think its going to be a significant this as we saw in the second quarter.
Wilco: But we are working very hard to get better and better at reimbursement. And then your question about Medicare. We do think that with billing starting and the coverage and the fee being effective on September 1st, our experience with commercial payers and Medicare is not going to be any different that you have to go through, let's call it an administrative ramp-up process where it takes a certain period.
But we are working very hard to get better and better at at reimbursement and then your question on on Medicare Uh Huh.
We do think that with with billing starting at the end of the coverage and the fee being effective on September 1st and our experience with commercial payers in Medicare is not going to be any different that you have to go through and let's call. It half minutes, if a ramp up process, where it takes a certain period of time before paperwork processing fees everything has been has been ironed out. So we do expect that to affect that to a certain extent, which is difficult to predict to be honest in Q3, and probably also somewhat in Q4. So it's not like flip the switch and 75% of 25% are being reimbursed at 13.2, it's going to take a little while before all these processes are owned and working smoothly.
Unknown Executive: Unknown Executive, Asaf Danziger, Unknown Executive, Asaf Danziger,
Vijay Kumar: This is very helpful. Thank you.
That's helpful. Thank you.
Operator: Thank you. And we do have a follow-up from Greg Gilbert from SunTrust. Your line is open.
Thank you.
And we do have a follow up from Gregg Gilbert from Suntrust. Your line is open.
Gregory Daniel Fraser: Perhaps premature, but in the lung setting, your population is obviously not the large frontline setting, but maybe you could give us a little color on how many years you think it would take to be able to access the frontline setting, assuming your current trial goes as you hope. Thanks.
Thanks, perhaps premature but in the lung setting your <unk>. Your population is obviously not the large frontline setting, but maybe you could give us a little color on how many years you think it would take to be able to access the front line setting.
Assuming your current trial goes as you hope thanks.
Sure so.
Unknown Executive: Sure. So, Greg, I think it would. You know, it will require another clinical trial and so it's probably three to four years, you know, or more to move to frontline. This is an area that we haven't really planned out in detail yet. So I'd say it's, you know, typical with any one of our indications.
Greg I think it would.
You know, we will require another clinical trial and.
So it's probably three to four years.
Now for more or two to move to frontline.
This is an area that we haven't really played out in detail yet so I'd say, it's typical with our with any one of our indications.
Gregory Daniel Fraser: Okay, thanks.
Okay.
Thank you.
Operator: Thank you. And I am showing no further questions from our phone lines. And I'd like to turn the conference back over.
And I am showing no further questions from our phone lines I'd now like to turn the conference back over to Bill Doyle for any closing remarks.
Unknown Executive: Sure, so first of all, I want to thank everybody on the line and thank you for your continued interest in Novocure. As Asaf said during his remarks, Q2 really was a transformative quarter for Novocure.
Sure. So first of all I want to thank everybody on the line and thank you for your continued interest in Novocure has established said during his remarks Q2 really was a transformative quarter for an overture.
Unknown Executive: We received Medicare coverage and reimbursement. I think, as you know, this is something that we've been working on for years. We received FDA approval for mesothelioma, our first torso indication. We've increased our gross margin and had strong revenue growth, which resulted in our first ever quarter of positive operating income. I think this is particularly important given that the backdrop here is continued growth in funding for our R&D and our technology development, and we're still generating positive operating income. We made continued progress in our Phase III clinical program, which is clearly the driver of our long-term value expansion. And we couldn't be more thankful for the contributions of our team. We couldn't be more thankful for the contributions of our clinicians and our patients. And we feel particularly well positioned today as we drive forward with our core strategies. So thank you all.
We receive Medicare coverage and reimbursement I think as you know this is something that we've been working on for years. We see we received FDA approval for mesothelioma, our first torso indication, we've increased our gross margin or <unk> and had strong revenue growth, which resulted in our first ever quarter of positive operating income I think this is particularly important given that this is the backdrop here is continued growth in funding for our R&D and our technology development.
And we're still generating positive operating income we made continued progress in our phase three clinical program, which is clearly the driver of our long term value expansion.
And you know, we all couldn't be more thankful for the contributions of our team and we couldn't be more thankful for the contributions of our clinicians and our patients and Ah, we feel particularly well positioned today as we drive forward in our core strategies. So thank you all.
Operator: Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a wonderful day.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program you may all disconnect everyone have a wonderful day.
Unknown Executive: BF-WATCH TV 2021