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spk02: Good day, and thank you for standing by. Welcome to the NovoCure Q1 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ingrid Goldberg. Please go ahead.
spk10: Good morning, everyone. Thank you for joining us to review Novocear's first quarter 2023 performance. I'm on the phone this morning with our Executive Chairman, Bill Doyle, our CEO, Asaf Danziger, 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 the earnings release can be found on our website, www.novacure.com, on the Investor Relations page under Quarterly Reports. 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. 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. 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 attributed to our capital structure, tax rate, and material non-cash items, and best reflects the financial value generated by our business. Reconciliations of non-gap-to-gap financial measures are included in our press release, earnings slides, and our Form 8K filed with the SEC today. These materials can also be accessed in the Investor Relations page of our website. Following our prepared remarks today, we open the line for your questions. I will now turn the call over to our Executive Chairman, Bill Doyle.
spk06: Thank you, Ingrid, and good morning. At Novacure, Our mission is to extend the lives of patients diagnosed with aggressive forms of cancer. Over the last two decades, we have completed multiple successful clinical trials, expanded our international footprint to include 10 global markets, published over 500 manuscripts, built a strong and sustainable business model, and most importantly, treated over 27,000 commercial patients. and the people we have helped. Next month at the American Society of Clinical Oncology annual meeting in Chicago, we will present the results of our phase three pivotal lunar trial in non-small cell lung cancer. Our ASCO presentation will mark the beginning of Novacure's next chapter with the intention to help tens of thousands of additional patients diagnosed with deadly cancers in the coming years. I am grateful for the hard work of Novacure's employees, as well as for the dedication and courage of our patients and prescribing physicians. I cannot wait for all that lies ahead in 2023. On today's call, we will begin with a discussion of our clinical catalyst, followed by a review of our core business in GBM. We will close today's call with a discussion of our first quarter financial results before opening the line for questions. Earlier this year, we announced the top line results of the phase three pivotal LUNR clinical trial, evaluating TT fields together with standard of care therapies in stage four non-small cell lung cancer. LUNR met its primary endpoint, providing the first advance in stage four refractory non-small cell lung cancer in more than seven years. LUNR demonstrated a profound benefit when TT field therapy was combined with immunotherapy, meeting a powered secondary endpoint, evaluating overall survival of patients treated with TT fields and a checkpoint inhibitor versus a checkpoint inhibitor alone. Lunar also demonstrated a positive trend in overall survival for patients treated with TT fields and docetaxel versus docetaxel alone. We are pleased to share that the Lunar data will be presented next month at the ASCO Annual Meeting in Chicago. On Tuesday, June 6th, lead investigator Dr. Titiana Leal of Emory University will present the lunar trial findings during the metastatic non-small cell lung cancer session. Later on Tuesday, NovoCure will host a presentation and question and answer session with Dr. Leal, fellow lunar investigator Dr. Corey Langer of the University of Pennsylvania, and NovoCure leadership. I will remind you the improvements in overall survival demonstrated by LUNR follow a period with no clinical improvement in the treatment of non-small cell lung cancer following platinum failure since 2016. LUNR is the first of multiple phase three pivotal trials set to read out over the next year and a half, each focused on a population with high unmet needs. Later this year, we expect to announce top-line results from the Phase III Pivotal Innovate III trial in platinum-resistant ovarian cancer. In early 2024, we anticipate the top-line results from the Phase III Pivotal METIS trial, evaluating the use of TT fields for the treatment of brain metastases from non-small cell lung cancer. And following the completion of the 18-month follow-up of the last patient enrolled we expect top-line readout of the Phase III pivotal Panova III trial in locally advanced pancreatic cancer in 2024. These pivotal clinical trials will provide the foundation for the next stage of Novacure's growth. In the U.S. alone, the number of diagnoses of the cancers treated in these trials is nearly 14 times the annual diagnoses of glioblastoma. an indication in which we have built a strong and sustainable commercial business. The outcomes of these pivotal trials could enable tens of thousands of patients to benefit from TTC therapy. That promise to extend the lives of patients diagnosed with aggressive forms of cancer continues to drive us every day. With the potential to treat many thousands more patients soon, we believe we are one step closer to achieving our mission. I look forward to seeing many of you in Chicago next month and to updating you throughout this exciting time. With that, I will turn the call over to Assas to discuss our commercial business.
spk00: Thank you, Bill. Before turning to GBM, I would also like to share my excitement and commitment to what is coming in the next two years. With multiple pivotal studies set to read out, it is an amazing time to be at NovoQ. We have a lot of rewarding work ahead of us to bring our therapy to many new patients. One of our key areas of focus this year is to return to active patient growth in GBM. Novacure's commercial business continues to provide the financial strength to invest for the future. Our commercial foundation has never been more important, with the possibility of multiple commercial launches on the horizon. We are proud of the resilient business we have built, but we know there are many more GBM patients that could benefit from TT Fields therapy. We are determined to increase penetration in our current markets, reach patients in new markets, and help patients remain on therapy longer through education and product innovation. Increasing market penetration in our current markets Where we have captured approximately 40% market share is essential to the growth of our GBM business. In recent months, we restructured our commercial organization to better leverage resources and improved our digital footprint to engage more healthcare providers and patients. In the U.S., we received 1,051 prescriptions in Q1, the most we have ever received in a single quarter. While we recognize and appreciate that in healthcare, systemic change does not occur overnight, we are encouraged by the U.S. results. Further, we are seeing steady recovery in Germany in both new patient starts and reimbursement approvals. While these are early indicators, we believe they show progress that will contribute to greater penetration in the future. We are also dedicated to entering new markets. enabling many more GBM patients to access our therapy. Earlier this year, we received reimbursement for Opitune in France. France is the second largest country in the EU, and entering France represents a key execution milestone in our effort to reach patients in new markets. We have received our first prescriptions in France and have begun treating patients. France is our second new market opening in less than four months. following the approval of Optune in Canada in November. Our market access teams are engaged with healthcare authorities in a number of additional potential markets, with the goal of reaching more GBM patients in need. Finally, we continue to focus on improving our technology to better serve patients. Clinical research shows that more time on TT fields therapy leads to better outcomes. and we want to enable patients to wear Optune for as many hours per day as possible. To this end, one of our most important initiatives is the launch of a new generation of arrays. Our new arrays are thinner, lighter, and more flexible than those in current use. Following a successful pilot launch in Austria last year, we are now rolling out in Sweden, and we are very pleased with the results to date. Patients have reported a materially improved treatment experience, both during daily activity and during sleep. The new arrays are proving to be much more comfortable, and we are seeing high patient usage rates. Our next steps are to launch in Germany and submit a PMA supplement to the FDA for approval to market in the U.S. We expect to submit a PMA supplement in the second half of the year. We remain committed to improving the TT-Freeze experience for patients and expect to learn further product enhancements in the years ahead. Before I hand the call to Ashley, I would like to thank our colleagues for the hard work over the first three months of the year. This is an exciting time to be a part of NovoQ. And I know you're all ready to continue driving to help as many patients as possible. I will now hand the call to Ashley to discuss our financial results.
spk03: Thank you, Asaf. We began the year with a corridor of solid execution and a focus on investing our time and resources strategically to spur growth in GVM, to progress and expand clinical and product development programs, and to lay a solid foundation for potential future launches across multiple indications. In the first quarter, we generated $122 million in net revenues and ended the quarter with 3,467 active patients on therapy. As expected, the impact of slowing collections from previously denied and aged U.S. claims caused a $5 million headwind in the quarter. While active patients were down year over year, we are seeing promising green shoots from our restructured US CNS franchise. In Q1, we established a high watermark in quarterly prescriptions, and we remain focused on a return to growth in our GBM business. In Germany, as expected, we saw a $2 million decrease in year-over-year net revenues following 2022 payer negotiations. We continue to see signs of recovery in Germany as active patients grow and as patient mix shifts towards approved coverage. Growth margin for the first quarter was 76%. Margin was impacted by a planned increase in patient support capacity and preparation for potential future launches, as well as the ongoing launch of our new array. SG&A expenses for the quarter were $93 million. We have increased sales and marketing activities intended to increase awareness of tumor-treating fields as we enter new geographies. We have also expanded our supply chain and increased spend on information technology enhancements to enable future growth. Research and development expenses for the first quarter totaled $60 million. In the past three months, we completed enrollment of both our PNOVA III and MEDIS Phase III pivotal trials. As these and our other Phase III trials near completion, We expect to replenish our clinical pipeline with new trials across a variety of solid tumor cancer. In addition, we will continue to fund product development initiatives designed to enhance patient ease of use and optimize our therapy. Cash and short-term investments totaled $958 million as of March 31st, 2023. Our net loss for the first quarter was 50 cents per share, or $53 million, and adjusted EBITDA was a negative $18 million. We are investing strategically in growth initiatives to expand our capacity to treat larger patient populations, enhance our commercial capabilities, and to increase awareness of tumor treating fields in anticipation of future approval. All of these investments are supported by the strong foundation provided by our stable commercial business in GVM. The future is bright for NovoCure, and we look forward to updating you on our progress throughout the year. I'd like to close today by highlighting one of our Optune users, Mike Hugo of Wellington, Florida. Mike is 38 years old and happens to be a medical device sales manager in the CNS industry. He was diagnosed with GBM about a year ago. Mike and his wife, Vanessa, a clinical researcher, dove into the literature to explore his treatment options. Together, they determined that tumor-treating field therapy could extend Mike's life and needed to be an essential part of his treatment. Last summer, Mike started using Optune. After Mike's diagnosis, he posted a video on Facebook asking country singer Tim McGraw to record a duet of the song My Little Girl With Him. Mike's goal was to have the song played at the teacher weddings of his two daughters, Bridget and Brooke. It turned out McGraw had also been impacted by GBM. His father, legendary baseball player Tug McGraw, had died of GBM in 2004. When Tim heard Mike's message, he arranged for the entire Hugo family to fly to Nashville and meet him at the Grand Ole Opry. There, with the cameras rolling, Mike danced with his daughters and sang a duet with the country icon. We are honored to be a part of Mike's journey. and those of thousands of patients like him. We will continue to work tirelessly to drive our innovative therapy forward with the goal of making a meaningful impact in the lives of many more patients and their families.
spk04: With that, I will turn it back to the operator for questions. Hi, everyone. I think we're having a technological problem.
spk10: DeeDee, operator, are you there, please?
spk02: Yes. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. And our first question is from Greg Frazier of Truist Securities.
spk07: Good morning, folks. Thanks for taking the questions. On the U.S. markets, For GBM, you had double-digit growth in prescriptions while active patients declined. Can you talk a bit more about that strong prescription growth? Is the base of Optune prescribers in the U.S. growing, and should investors expect the prescription growth in the first quarter to drive active patient growth in the near term?
spk08: Hi, Greg. Thank you for the question. This is Frank Leonard speaking. Yes, you know, we are – you know, first I will say that we're very encouraged by seeing the Q1 prescription results in the U.S. where we hit this record high. As Ashley noted in her remarks, prescriptions are the leading indicator. They're a component of the overall metrics that we have to drive in order to ultimately pull through on revenue growth. But just looking at prescriptions and demand indicators, we are encouraged by the first quarter results. We think it reflects, in part, activities in Q4 and Q1 First, the investments and the upgrades that we've made to the U.S. commercial organization, where we focused on putting the right people in the right place in front of our customers with the right incentives and tools to pull through to prescription. Second, we've seen the dynamic where the overall macro environment in oncology has come back to in-person events. So we had an incredibly strong presence at Snow in the fourth quarter, which is our main conference with neuro-oncologists. Same with ASTRO, our main engagement point with radiation oncologists, and then again in the first quarter at AACR where our scientific team had an incredible presence. So overall, I think the message that we're sending is that we're encouraged by the first quarter results. We think they reflect actual changes. I wouldn't go to the point of noting any specific mixes or dynamics other than to say that we think we've got the right team now that we can keep, you know, we can continue to make progress.
spk07: Great. That's very helpful. And then the question on the lunar presentation, some of the questions and unknowns are related to PD-L1 status, clearly, whether you have data on PD-L1 status for a large percentage of the patients, whether there was an imbalance. Do you expect that the presentation will address these questions such that there won't be ambiguity about the results for the IO groups following ASCO?
spk06: Yeah, so good morning. This is Bill. So we were very pleased to announce that we will have an oral presentation during the metastatic lung cancer session at ASCO. So first and foremost, we're looking forward to seeing everybody in June. Following the presentation, we will also have an investor meeting that will include KOLs, investigators, as well as Novocure personnel. And we would expect to address all the issues with respect to balance and PD-L1 status at that time.
spk07: Great, just one more quick one, I'll jump back in the queue. Average time on therapy is a very important determinant of efficacy with TT fields. Should investors expect to see data on time on therapy at the ASCO presentation? Thanks so much.
spk03: For LUNR? Yes, I would expect that the data set this is actually will include average time on therapy, and I'll remind everybody that until you get that data, we ask you to anchor to the PFS in the phase two trial.
spk07: Thank you.
spk02: Thank you.
spk04: One moment for our next question.
spk02: And our next question comes from Emily Bodner of HC Wainwright. Your line is open.
spk09: Hi there. Thanks for taking the questions. Maybe to follow up on the first question, do you kind of view first quarter sales in the U.S. as kind of a base, and should we expect increases in sales from here on out for the rest of the year? And maybe can you expand a bit on what kind of clinical trials you plan to initiate this year, whether that'll be early stage or late stage? And are there any other indications where you think combining with immunotherapy can make sense besides lung cancer and GBM? Thanks.
spk03: Emily, this is Ashley. I'll start because Frank was able to give color on the prescriptions and the leading indicators. When we look at revenue, which is ultimately what we need to deliver on the GVM business, I would say that consistent with expectations, we need everybody to anchor to the core map of activations times net price per month times the number of months in the period when you're modeling up revenue. So that would be three months for the quarter or 12 months for the year. And so Q1 performance reflects that as we no longer had the tailwinds from age claims and it is not our expectation that those would continue at the pace that we've seen in prior years in 2023. So I do think Q1 reflects that core map and we would like you to anchor to that core map. That's an important base. Now we do have puts and takes against this. We've talked about the green shoots with prescriptions in the U.S. I will also note that the recovery in Germany is is progressing as expected, and so we expect to continue to see some benefit in the net price at a global level over time on that, but it is important to anchor to that core map, and that's what we would like you to do in your model.
spk06: So, and I'll take the, this is Bill again, I'll take the second part of your question with respect to clinical trials. So, you know, we are all here because we're pioneering a new modality that targets the electrical properties of cancer cells rather than their chemical properties. And there are just so many exciting aspects to the platform therapy here. We can use our therapy with all other therapies. So we see either synergy or additivity with radiation, chemotherapies. And one of the most exciting advancements has been what we're seeing now when we combine tumor-treating fields with IOs. We see that in, for instance, the two that top trial in GBM, where we've combined tumor-treating fields with pembrolizumab in a cold, you know, quote-unquote cold tumor, and we see great results. And, of course, what we've alluded to and what we'll present at ASCO when we've combined tumor-treating fields with IOs in non-small cell lung cancer, a cancer where IOs are used routinely, and we see a profound improvement. We know we can deliver tumor-treating fields to the head, neck, torso, and abdomen, and all of these difficult cancers in those regions are targets. And so the answer is yes. You should expect to see additional trials in the indications in which we're already working. So, for instance, non-small cell lung cancer, I would say we've just begun. And you'll expect to see additional trials there, as well as trials in areas like gastric and hepatocellular carcinoma, where we've disclosed very promising Phase II data.
spk02: Great. Thank you.
spk04: Thank you, one moment for our next question.
spk02: Our next question comes from Jessica Fai of JP Morgan. Your line is open.
spk11: Good morning, guys. This is Nasan for Jessica Fai. A couple from me. So when Panelist 3 was completed enrollment, there was a mention of an interim look. Can you say if that interim has happened yet and what, if anything, the outcome was? And then in terms of Innovate 3, are we still on track to anticipate a top line data announcement in mid 2023 and then a full data presentation later in the back half of the year? And then lastly, It was interesting that Novocare was breaking out Germany revenue for this quarter and the other active markets contributing nearly $8 million. Is this to say that the overall EMEA markets did $23 million in the quarter? And was there any incremental revenue from France in the quarter? Thank you.
spk01: So, hi, it's Asaf. I will start with Panova. So, we are on track. We're still planning to do the interim soon. And I think the rest of the question is Ashley, correct?
spk03: No, I mean, I'll just reiterate that we are also on track with the Innovate enrollment, and we're in that patient follow-up period, and that should end, you know, In the back half of this year, mid-this year, I would expect data to come out. No change in those expectations, to be very clear. Things are progressing as expected. When we talk about revenue, that has also no change. This was simply an internal adjustment to our international market franchise structure. Germany has always been broken out in its own line item under EMEA. It's now broken out in its own line item under There are no non-AMIA markets in other. Japan is our only active market currently outside of AMIA in the U.S. So that, you know, you can tie others to other AMIA in prior queues. So I appreciate that question. I will note that we do not yet have revenue in France. We are treating patients, so we have active patients in that market, but it will take us a couple of quarters. before you see the material revenue come through as we just go through this administrative ramp up and look to see a successful conclusion of a collection cycle.
spk04: Thank you.
spk02: As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.
spk04: One moment.
spk02: And our next question comes from Vijay Kumar of Evercore ISI. Your line is open. Hi.
spk05: This is Nebinan for Vijay. Just back on the topic of ASCO, can you remind us again, will we get to learn PD-1 expression status of patients then? And second, on OpEx in the quarter, specifically on SG&A, there seemed to be a large increase. How much of this increase were, say, new hires focused on new markets and new indications versus current existing markets like GBM? Thanks.
spk06: So good morning, and thanks for your question. And I'm just going to underline for everybody that the lunar data presentation will be Tuesday, June 6th at 1109 in the metastatic non-small cell lung cancer. And yes, I'll repeat, we will provide the PD-L1 data from the trial during that presentation and take Q&A with respect to all of the parameters in our session to be held later that afternoon. And then Ashley.
spk03: Yeah, and on the SG&A, I will say as we look at growth in SG&A, it is almost exclusively related to growth in our markets, whether that's geographic expansion for our existing GBM business or it's preparation for commercial launches in lung, ovarian, and hopefully pancreatic in the future. So I would say we do appropriately resource our existing GBM business in our active markets of today, but we feel like they are adequately resourced, and so increments there are focused on opening up France and opening up early commercial opportunities in Long and beyond.
spk04: Thanks.
spk02: Thank you. I would now like to turn the conference back to Bill Doyle for closing remarks.
spk06: So I want to thank everyone for joining us this morning and your continued support of Novocure. It's hard to convey over the phone what an exciting time it is to be at Novocure. We are really thrilled with the way our efforts in the market are beginning to bear fruit, both in terms of geographic expansion, increases in scripts, We didn't talk about it much on this call, but we are thrilled with what we're seeing with our launch of our next generation arrays. We think this is very important and the early read from Austria and Sweden is that this is a great product and we're focused on rolling this out now across Europe and getting the PMA supplement in the US so we can roll out here following regulatory approval. And then of course, the new indications. We're pioneering this new modality. We have been talking about the broad application based on our 23 years of R&D, and we're really now on the threshold of bringing it to patients. So thank you all.
spk02: Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.
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