NovoCure Limited

Thank you for standing by. Welcome to the Novacure Q2 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 your hand is raised. To withdraw your question, please press star 11 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.

Good morning, everyone. Thank you for joining us to review NovoCure's second quarter 2023 performance. I'm on the phone this morning with our executive chairman, Bill Doyle, our CEO, Asaf Donziger, 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.novacure.com, on our 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 attributable 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 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 will now turn the call over to our Executive Chairman, Bill Doyle.

Thank you, Ingrid, and good morning. At NovoCure, 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 polioblastoma. The second quarter marked the beginning of a transformational period for NovoCure as we moved beyond the brain with the presentation of data from our first randomized phase three trial in the torso. On today's call, we will begin with a discussion of the LUNAR trial and other upcoming clinical catalysts, followed by a review of our commercial and financial performance in the quarter. In June, we took a meaningful step toward bringing tumor-treating field therapy to patients with high unmet need in lung cancer. At the American Society of Clinical Oncology annual meeting, Dr. Tiziana Leal of Emory University presented the results of the Phase III LUNAR clinical trial. The LUNAR trial studied the use of TT field therapy together with standard of care therapies for the treatment of stage 4 metastatic non-small cell lung cancer following platinum failure. The LUNAR trial met its primary endpoint, exhibiting a statistically significant improvement in overall survival from 9.9 months to 13.2 months for patients treated with TT field and standard of care therapies. compared to treatment with standard of care therapies 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 18.5-month median overall survival for patients treated with tpFields and immune checkpoint inhibitors. This compares to a 10.8-month overall survival for patients treated with immune checkpoint inhibitors alone. I want 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 in lunar and was balanced across the four cohorts. and was consistent with expected wild-type expression. In the U.S., TPS expression was measured for 83% of lunar enrollees and was balanced across the 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 measured TPS scores. underlines the potency of the survival data, regardless of PD-L1 status. We've also fielded questions regarding the difference between the effect size in overall survival and progression-free survival. This observed difference is not uncommon in trials 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 the lunar results. One of the most exciting and rewarding aspects of dedicating one's career to extending the lives of cancer patients is witnessing the improvements and 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 immense unmet need for effective low toxicity treatment options 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 pembrolizumab 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 moved the needle further. LUNR is the first phase three clinical trial in over seven years to show a clinically meaningful extension in 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 TT Fields will provide a much needed new treatment option for patients and thoracic oncologists in need of therapies 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-MARC. 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, PT fields together with standard therapies for second-line treatment of stage 4 non-small-cell lung cancer. To supplement the lunar results presented at ASCO, we're conducting additional analyses, which will further elucidate many key aspects of the trial. These analyses 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 physicians with key data when evaluating the best opportunities to leverage RTT 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 trial studying TT fields in non-small cell lung cancer. As announced at ASCO, our next trials will explore the use of TT fields in earlier lines of therapy and in new therapeutic concomitant regimes. Specifically, I would like to highlight the Phase III LUNAR II trial, which will study the first-line use of TT fields concomitant with pembrolizumab and platinum-based chemotherapy for patients with metastatic non-small cell lung cancer. The FDA approved the IDE for LUNAR2, and we are currently preparing sites for initiation. LUNAR2 will be a randomized global trial designed to enroll 734 patients with a 21-month follow-up period after the last patient enrolled. Primary endpoints will be overall survival and progression-free survival. The LUNAR-2 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 field therapies to patients in need. With that, I will turn the call over to Asaf to discuss other clinical updates, as well as our commercial performance in the second quarter.

Thank you, Bill. I would like to underline Bill's enthusiasm and confidence in the lunar trial results. The lunar data are the culmination of nearly a decade of effort from patients, investigators, and the NovoQ team. The overall survivor data presented at ASCO 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, LUNR is the first of four Phase III trials that are fully enrolled and will read out over the next 18 months. Later this summer, we expect to release top-line results from the Phase III INNOVATE III trial exploring the use of TT fields with weakly-paclitaxel in platinum-resistant ovarian cancer. The INNOVATE III top-line will be followed by presentation of the full INNOVATE III data later this year. In the first quarter of 2024, we expect to release the top-line results from the Phase 3 METIS trial, treating brain metastases from non-small cell lung cancer. And as we announced last week, the Phase 3 Panova 3 trial, treating locally advanced pancreatic cancer, has successfully cleared its interim analysis with no safety or futility concerns and will continue to follow patients to completion. We anticipate top-line results from Panova 3 in the second half of 2024. Each of these trials is designed to evaluate the field's 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 launch 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 efforts. 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 1,556 globally. We also saw another strong quarter in the U.S. with 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 of the key drivers to this quarter's strength was our successful launch of OpTUNE in France. As a reminder, in March of this year, we received national reimbursement in France and began our commercial launch. We continue to ramp activities in France, and we are very encouraged by the strong physician interest in TT field therapy. We believe the launch in France can serve as a blueprint for other major EMEA markets. We also had a strong quarter in Germany with 499 active patients on therapy in Germany. It's 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. Consisted with last quarter, patients have experienced fewer alarms and the new arrays provide a more comfortable therapy experience. The positive data we have collected are informing next steps for the new arrays. We are on track to release the new arrays in Germany in coming months, the first of our large on-call 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-FILS 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 NovoQ colleagues. I know 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, Asaf. 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 and new indications. We generated $126 million in net revenues in the quarter, and ended the period with 3,571 active patients on therapy. Q2 continued the positive momentum we saw in the first quarter of the year with another quarter of year-over-year prescription growth. We did face two notable net revenue headwinds in the quarter in the U.S. compared to Q2 of 2022, as last year we benefited from $13 million in collections from previously denied or appealed 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, a high watermark since 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 investments made in pre-launch commercial infrastructure including market access and pre-commercial physician and patient engagement functions, provide a strong blueprint for future launches in new markets. Given the reimbursement process and collection cycle timing, we expect grants 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 rates. 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 in preparation of treating larger patient populations in new geographies and new indications in the near future. While we expect growth margins to be impacted by product enhancements in the near term, such as the ongoing launch of the new arrays, we remain focused on opportunities to increase efficiencies and scale within our supply chain and expect cost optimization over time. SG&A expenses for the second quarter were $99 million. As we look ahead to the potential opportunity to reach patients in multiple new indications, as well as new markets, we are focused on solidifying key functions to ensure we can meet the opportunity presented. This includes expanding our sales and marketing efforts, as well as increased spending in our IT and supply chain teams. While there will be growth in the aforementioned areas, you should not expect to see a material step function increase until we are closer to a commercial launch in non-small cell lung cancer. Research and development costs for the quarter were $55 million. As we have previously shared, as the current Phase III clinical trials conclude, we will backfill our clinical pipeline with new Phase II and Phase III trials in the coming quarter. The first of these new trials is the Lunar II trial. for which we recently received investigational device exemption approval from the US FDA. We expect moderate growth in R&D costs as more phase two and phase three trials launch, and as we continue to invest in product development. With multiple trials in various stages of design and regulatory approval, we look forward to updating you on new clinical developments later this year. Cash and short-term investments totaled $941 million as of June 30, 2023. Our net loss for the first quarter was $0.54 per share, or $57 million, and adjusted EBITDA was negative $27 million. We are in a period of transformation and preparation as we eye the opportunity to treat patients in indications that are multiple times the size of GBMs. We are investing strategically to ensure we are optimizing our launch potential to meet upcoming opportunities. All of these investments are supported by our sustainable and strengthening commercial business in GDM. I'd like to close today by highlighting one of our very first Optune users in Canada, Joelle Berenice. Joelle has been writing and performing with the acoustic guitar in Quebec for more than 40 years. Last year, Joelle began having trouble remembering songs and started to lose sensitivity in his fingers. Following an MRI, Joelle was diagnosed with glioblastoma. After a successful surgery, Joelle's radiation oncologist told him about Optu, which Health Canada had just recently approved weeks earlier. In November, He began using Optune. Within weeks of receiving treatment, Joel was back playing the guitar. People like Joel are a constant reminder of why we are here. To extend survival in some of the most aggressive forms of cancer. And to give patients like Joel the opportunity to continue doing what they love. With that, I will turn it back to the operator for questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from Jason Bednar of Piper Sandler. Please proceed.

Hey, good morning. Thanks for taking the questions here. I wanted to start with maybe a multi-parter on Lunar to a really large study, longer patient follow-up than we've seen from Novacure in the past with your other phase three trials. Can you talk about how you're thinking about maybe the pace of enrollment, number of recruiting sites here? And I don't mean to be insensitive at all, but one of the challenges that we ran into with LUNR was just that it was a competitive market for lung cancer trials, never reached the original enrollment targeted even after several years. So why is LUNR too different? And then, you know, the follow up there, can you address whether there's an interim analysis at any point in the study during or after enrollment? And then again, sorry for the multi-parter, but is this using your new high intensity arrays in the study?

Great, Jason. Thank you for that question. This is Pritesh. I'd like to remind everybody about the LUNAR-2 study. So this is our next randomized global study that will explore tumor treating fields concomitantly with pembrolizumab in the first-line setting, first-line metastatic non-small cell lung cancer setting. And this is an important study because we have now shown that tumor treating fields work along with an immune checkpoint inhibitor in the second-line setting. So as typical development would go. We would look to bring the therapy earlier in the treatment algorithm to be able to have a broader impact on patients. And as you heard in the prepared remarks, this study is designed to enroll 734 patients over a 21-month follow-up period. And one of the things that we learn in the lung cancer setting today is that the most commonly used immune checkpoint inhibitor is premolizumab. That is the standard of care today. and we're looking to add on to that standard of care to extend survival and help these patients. So we will help you understand as the trial opens up. We're looking at sites right now in the hopes to get our first site up and running, enrolling the first patient, and we will keep you updated on how the study progresses there on forward.

Okay, sorry, just maybe on some of those, can you say whether there is an interim analysis at any point in the study and also whether it's using your new high-intensity arrays?

Yes, thank you for reminding me about that. So on the interim analysis front, there's not an interim analysis plan. And on the new arrays, I'll remind you that the new arrays today are for patients with GBM, and we're working on other array innovation for the torso and abdomen patients.

Okay. All right. Understood. And then maybe, Ashley, I'm trying to reconcile, if I could, the gross margin of the quarter. It was below our model. And I guess I think you mentioned maybe the new arrays that you have might be lower margin than the older generation. I guess, did I hear that right? And then are there other factors that may be influencing gross margin, like you're treating patients in France or Canada or other markets, but you're not yet getting paid yet for those patients?

Yeah, Jason, thank you for the question. The short answer is yes to everything that you ran down, but if we look at this a little bit more in detail, our gross margin is now steady. I would say, and at a stable rate, if you look at the actual cost per, you know, COGS per active patient, If you look at what most impacted the margin year over year, you have to look at the net revenue. So as we took the benefit of the aged claims out of the top line, you saw that flow through to the margin number. And then additionally, you saw the impact of some increased investments in 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 investment has now stabilized. We're at where we need to be, but it did 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 we introduce the new arrays. As with any new product enhancement, there's a period of kind of Manufacturing efficiency is 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 while we optimize the supply chain. But I would say that is just slight pressure, and we will certainly be working to optimize that over time.

Okay. And those patient support investments you mentioned, those hit gross margin. They don't fall into SG&A?

They do. Much of our patient support flows into our COGS plan.

Okay. Great. I'll go back and queue. Thank you.

Thank you.

One moment for our next question.

And our next question comes from Emily Bodner of HC Wainwright. Please proceed.

Hi. Good morning. Thanks for taking the question. I'm curious on the new lunar study that you're planning to evaluate in the second-line setting with TTP fields with checkpoint inhibitors post-chemo IO. Do you see any risk with the FDA 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 and design plans for those. Thank you.

Yeah, so this is Bill.

Good morning, Emily. Thanks for the question. I'll start with the regulatory question, then I'll turn it back to Pritesh 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 FDA. Again, LUNR hit its primary endpoint. It was a large, randomized trial. We stated that the cohorts were all well-balanced, and we hit the ITT, and we will be seeking a label that is consistent with that primary endpoint. And so we don't expect any requirement for waiting for additional trials, as you described.

Yeah, thank you, Bill. And what I would close with with regards to the next set of trials is 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 in non-small cell lung cancer setting. So with that, we already talked about Lunar 2, which is, again, a first-line metastatic non-small cell lung cancer trial exploring tumor-treating fields with pembrolizumab. The second study we're looking to initiate is a tumor-treating field with immune checkpoint inhibitor following chemoradiation in the first line locally advanced metastatic non-small cell lung cancer setting. Again, our strategy here is to ensure that the data that we see with tumor-treating fields and IO in 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 I'll just add, this is consistent with the way progress is typically made in these cancers. You know, I would remind everyone that this is where Pembroke started, you know, in the distant lines, and then over time conducted additional studies and moved to the earlier lines. So we're following the same strategic pathway that is typical in the industry.

Okay. I just want to confirm, are these all planned to initiate this year?

Yeah, so I would say as soon as possible, because we're looking forward to get these trials up and running and enrolling patients and getting to the data readouts.

Yeah, there's always a regulatory step here, and we're always hesitant to predict when the FDA will provide the IDE. We were very pleased in this quarter to announce the IDE for Lunar 2. So that's a very important step for us that may not have been emphasized.

Okay, thank you.

Thank you. One moment for our next question.

And our next question comes from Vijay Kumar of Evercore ISI. Please proceed.

Hi, this is Kevin on for Vijay. Just one on prescriptions and active patients on treatment in other markets. Can you talk to the performance this quarter? Was France a key driver? Or did the reclassification of Canada into other markets have anything to do with the performance this quarter? Any factors you can call it would be helpful. Thanks.

Kevin, this is Ashley, and I can take that question. So as noted, we were pleased with kind of the continued positive momentum that we saw in GBN. It was a solid quarter, I would say, around the globe with maintained momentum in the US, a steady recovery in Germany, and then, as you noted, a very strong launch in France. So France was a key driver of the growth in our international markets. You can see in our 10Q, which we did publish this morning, the breakout of those prescriptions by region, but we did see a significant early strong physician interest in tumor treating fields 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, given the timeline to reimbursement and collection cycle. I think that answered your question because you asked about the other markets, but I would like to highlight, again, the maintained 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 back of our transition to a franchise model last year there.

And have you sized Canada at all from an active patients or prescriptions perspective?

Yes, of course, as we make those investments, we're doing all the associate analysis on the market, but I will say that is not a material driver of what you've seen 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.

Thank you, everyone on the phone, for your continued interest and support in NovoCure. 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 III trials, making a total of six Phase III trials for which we will have data readouts, all in 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. Hello. Thank you. Thank you. Thank you. Thank you. Music Music Good day and thank you for standing by. Welcome to the NovoCure Q2 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 your hand is raised. To withdraw your question, please press star 11 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.

Ingrid Goldberg Good morning, everyone. Thank you for joining us to review NovoCure's second quarter 2023 performance. I'm on the phone this morning with our Executive Chairman, Bill Doyle, our CEO, Asaf Donziger, 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.novacure.com, on our 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 attributable 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 in our Form 8K 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 will now turn the call over to our Executive Chairman, Bill Doyle.

Thank you, Ingrid, and good morning. At NovoCure, 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 NovoCure as we moved beyond the brain with the presentation of data from our first randomized phase three trial in the torso. On today's call, we will begin with a discussion of the LUNAR trial and other upcoming clinical catalysts, followed by a review of our commercial and financial performance in the quarter. In June, we took a meaningful step toward bringing tumor-treating field therapy to patients with high unmet need in lung cancer. At the American Society of Clinical Oncology annual meeting, Dr. Titiana Leal of Emory University presented the results of the Phase III LUNAR clinical trial. The LUNAR trial studied the use of TT field therapy together with standard of care therapies for the treatment of stage 4 metastatic non-small cell lung cancer following platinum failure. The LUNAR trial met its primary endpoint, exhibiting a statistically significant improvement in overall survival from 9.9 months to 13.2 months for patients treated with TT field and standard of care therapies. compared to treatment with standard-of-care therapies 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 18.5-month median overall survival for patients treated with tiki fields and immune checkpoint inhibitors. This compares to a 10.8-month overall survival for patients treated with immune checkpoint inhibitors alone. I want 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 in lunar and was balanced across the four cohorts. and was consistent with expected wild-type expression. In the U.S., TPS expression was measured for 83 percent of lunar enrollees and was balanced across the 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 measured TPS scores. underlines the potency of the survival data, regardless of PD-L1 status. We've also fielded questions regarding the difference between the effect size in overall survival and progression-free survival. This observed difference is not uncommon in trials 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 the lunar results. One of the most exciting and rewarding aspects of dedicating one's career to extending the lives of cancer patients is witnessing the improvements and 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 immense unmet need for effective low toxicity treatment options 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 pembrolizumab 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 moved the needle further. LUNR is the first phase three clinical trial in over seven years to show a clinically meaningful extension in 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 TT Fields will provide a much needed new treatment option for patients and thoracic oncologists in need of therapies 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. TT fields, together with standard therapies, for second line treatment of stage four non-small cell lung cancer. To supplement the lunar results presented at ASCO, we're conducting additional analyses which will further elucidate many key aspects of the trial. These analyses 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 physicians 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 ASCO, Our next trials will explore the use of TT fields in earlier lines of therapy and in new therapeutic concomitant regimes. Specifically, I would like to highlight the Phase III LUNR-II trial, which will study the first-line use of TT fields concomitant with pembrolizumab and platinum-based chemotherapy for patients with metastatic non-small cell lung cancer. The FDA approved the IDE for LUNR-II and we are currently preparing sites for initiation. LUNAR2 will be a randomized global trial designed to enroll 734 patients with a 21-month follow-up period after the last patient enrolled. Primary endpoints will be overall survival and progression-free survival. The LUNAR2 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 field therapies to patients in need. With that, I will turn the call over to Asaf to discuss other clinical updates, as well as our commercial performance in the second quarter.

Thank you, Bill. I would like to underline Bill's enthusiasm and confidence in the lunar trial results. The lunar data are the culmination of nearly a decade of effort from patients, investigators, and the NovoQ team. The overall survivor data presented at ASCO 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, LUNAR is the first of four phase three trials that are fully enrolled and will read out over the next 18 months. Later this summer, we expect to release top-line results from the Phase III INNOVATE III trial exploring the use of TT fields with weakly-paclitaxel in platinum-resistant ovarian cancer. The INNOVATE III top-line will be followed by presentation of the full INNOVATE III data later this year. In the first quarter of 2024, we expect to release the top-line results from the Phase III METIS trial treating brain metastases from non-small cell lung cancer. And as we announced last week, the Phase III Panova III trial treating locally advanced pancreatic cancer has successfully cleared its interim analysis with no safety or futility concerns and will continue to follow patients to completion. We anticipate top-line results from Panova III in the second half of 2024. Each of these trials is designed to evaluate ET 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 launch 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 efforts. 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 1,556 globally. We also saw another strong quarter in the U.S. with 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 of the key drivers to this quarter's strength was our successful launch of OpTune in France. As a reminder, in March of this year, we received national reimbursement in France and began our commercial launch. We continue to ramp activities in France, and we are very encouraged by the strong physician interest in TT field therapy. We believe the launch in France can serve as a blueprint for other major EMEA markets. We also had a strong quarter in Germany with 499 active patients on therapy in Germany. It's 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 alarms and the new arrays provide a more comfortable therapy experience. The positive data we have collected are informing next steps for the new arrays. We are on track to release the new arrays in 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-FILS 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 NovoQ colleagues. I know 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, Asaf. 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 and new indications. We generated $126 million in net revenues in the quarter, and ended the period with 3,571 active patients on therapy. Q2 continued the positive momentum we saw in the first quarter of the year with another quarter of year-over-year prescription growth. We did face two notable net revenue headwinds in the quarter in the U.S. compared to Q2 of 2022, as last year we benefited from $13 million in collections from previously denied or appealed 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, a high watermark since 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 investments made in pre-launch commercial infrastructure including market access and pre-commercial physician and patient engagement functions, provide a strong blueprint for future launches in new markets. Given the reimbursement process and collection cycle timing, we expect France 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 rates. 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 in preparation of treating larger patient populations in new geographies and new indications in the near future. While we expect growth margins to be impacted by product enhancements in the near term, such as the ongoing launch of the new arrays, we remain focused on opportunities to increase efficiencies and scale within our supply chain and expect cost optimization over time. SG&A expenses for the second quarter were $99 million. As we look ahead to the potential opportunity to reach patients in multiple new indications, as well as new markets, we are focused on solidifying key functions to ensure we can meet the opportunity presented. This includes expanding our sales and marketing efforts, as well as increased spending in our IT and supply chain teams. While there will be growth in the aforementioned areas, you should not expect to see a material step function increase until we are closer to a commercial launch in non-small cell lung cancer. Research and development costs for the quarter were $55 million. As we have previously shared, as the current Phase III clinical trials conclude, we will backfill our clinical pipeline with new Phase II and Phase III trials in the coming quarter. The first of these new trials is the Lunar II trial. for which we recently received investigational device exemption approval from the US FDA. We expect moderate growth in R&D costs as more Phase II and Phase III trials launch and as we continue to invest in product development. With multiple trials in various stages of design and regulatory approval, we look forward to updating you on new clinical developments later this year. Cash and short-term investments totaled $941 million as of June 30, 2023. Our net loss for the first quarter was $0.54 per share, or $57 million, and adjusted EBITDA was negative $27 million. We are in a period of transformation and preparation as we eye the opportunity to treat patients in indications that are multiple times the size of GBMs. We are investing strategically to ensure we are optimizing our launch potential to meet upcoming opportunities. All of these investments are supported by our sustainable and strengthening commercial business in GBM. I'd like to close today by highlighting one of our very first Optune users in Canada, Joelle Berenice. Joelle has been writing and performing with the acoustic guitar in Quebec for more than 40 years. Last year, Joelle began having trouble remembering songs and started to lose sensitivity in his fingers. Following an MRI, Joelle was diagnosed with glioblastoma. After a successful surgery, Joelle's radiation oncologist told him about Optu, which Health Canada had just recently approved weeks earlier. In November, He began using Optune. Within weeks of receiving treatment, Joel was back playing the guitar. People like Joel are a constant reminder of why we are here. To extend survival in some of the most aggressive forms of cancer. And to give patients like Joel the opportunity to continue doing what they love. With that, I will turn it back to the operator for questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from Jason Bednar of Piper Sandler. Please proceed.

Hey, good morning. Thanks for taking the questions here. I wanted to start with maybe a multi-parter on Lunar to a really large study, longer patient follow-up than we've seen from NovoCure in the past with your other phase three trials. Can you talk about how you're thinking about maybe the pace of enrollment, number of recruiting sites here? And I don't mean to be insensitive at all, but one of the challenges that we ran into with LUNR was just that it was a competitive market for lung cancer trials, never reached the original enrollment targeted even after several years. So why is LUNR too different? And then, you know, as a follow up there, can you address whether there's an interim analysis at any point in the study during or after enrollment? And then again, sorry for the multi-parter, but is this using your new high intensity arrays in the study?

Great, Jason. Thank you for that question. This is Pritesh. I'd like to remind everybody about the LUNAR-2 study. So this is our next randomized global study that will explore tumor-treating fields concomitantly with pembrolizumab in the first-line setting, first-line metastatic non-small-cell lung cancer setting. And this is an important study because we have now shown that tumor-treating fields work along with an immune checkpoint inhibitor in the second-line setting. So as typical development would go. We would look to bring the therapy earlier in the treatment algorithm to be able to have a broader impact on patients. And as you heard in the prepared remarks, this study is designed to enroll 734 patients over a 21-month follow-up period. And one of the things that we learn in the lung cancer setting today is that the most commonly used immune checkpoint inhibitor is premolizumab. That is the standard of care today. and we're looking to add on to that standard of care to extend survival and help these patients. So we will help you understand as the trial opens up. We're looking at sites right now in the hopes to get our first site up and running, enrolling the first patient, and we will keep you updated on how the study progresses there on forward.

Okay, sorry, just maybe on some of those, can you say whether there is an interim analysis at any point in the study and also whether it's using your new high-intensity arrays?

Yes, thank you for reminding me about that. So on the interim analysis front, there's not an interim analysis plan. And on the new arrays, I'll remind you that the new arrays today are for patients with GBM, and we're working on other array innovation for the torso and abdomen patients.

Okay. All right. Understood. And then maybe, Ashley, I'm trying to reconcile, if I could, the gross margin of the quarter. It was below our model. And I guess I think you mentioned maybe the new arrays that you have might be lower margin than the older generation. I guess, did I hear that right? And then are there other factors that may be influencing gross margin, like you're treating patients in France or Canada or other markets, but you're not yet getting paid yet for those patients?

Yeah, Jason, thank you for the question.

The short answer is yes to everything that you ran down, but if we look at this a little bit more in detail, our gross margin is now steady. I would say, and at a stable rate, if you look at the actual cost per, you know, COGS per active patient, If you look at what most impacted the margin year over year, you have to look at the net revenue. So as we took the benefit of the aged claims out of the top line, you saw that flow through to the margin number. And then additionally, you saw the impact of some increased investments in 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 investment has now stabilized. We're at where we need to be, but it did 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 we introduce the new arrays. As with any new product enhancement, there's a period of kind of You know, manufacturing efficiency is 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 while we optimize the supply chain. But I would say that is just slight pressure, and we will certainly be working to optimize that over time.

Okay. And those patient support investments you mentioned, those hit gross margin. They don't fall into SG&A?

They do. Much of our patient support flows into our COGS. Okay.

Okay. Great. I'll go back and queue. Thank you.

Thank you. One moment for our next question. And our next question comes from Emily Bodner of HC Wainwright. Please proceed.

Hi. Good morning. Thanks for taking the question. I'm curious on the new lunar study that you're planning to evaluate in the second-line setting with TTP fields with checkpoint inhibitors post-chemo IO. Do you see any risk with the FDA 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 and design plans for those? Thank you.

Yeah, so this is Bill.

Good morning, Emily. Thanks for the question. I'll start with the regulatory question, then I'll turn it back to Pritesh 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 FDA. Again, LUNR hit its primary endpoint. It was a large, randomized trial. We stated that the cohorts were all well-balanced, and we hit the ITT, and we will be seeking a label that is consistent with that primary endpoint. And so we don't expect any requirement for waiting for additional trials, as you described.

Yeah, thank you, Bill. And what I would close with, with regards to the next set of trials, is that this is a really important opportunity for us to expand on the label that we expect to get with LUNR and continuing to build the evidence in non-small cell lung cancer settings. So with that, we already talked about LUNAR-2, which is, again, a first-line metastatic non-small cell lung cancer trial exploring tumor-treating fields with pembrolizumab. The second study we're looking to initiate is a tumor-treating field with immune checkpoint inhibitor following chemoradiation in the first-line locally advanced metastatic non-small cell lung cancer setting. Again, our strategy here is to ensure that the data that we see with tumor treating fields and IO in 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 I'll just add, this is consistent with the way progress is typically made in these cancers. You know, I would remind everyone that this is where PEMBRO started, you know, in the in the distant lines, and then over time conducted additional studies and moved to the earlier lines. So, we're following the same strategic pathway that is typical in the industry.

Okay. I just want to confirm, are these all planned to initiate this year?

Yeah, so I would say as soon as possible, because we're looking forward to get these trials up and running and enrolling patients and getting to the data readouts.

Yeah, there's always a regulatory step here, and we're always hesitant to predict when the FDA will provide the IDE. We were very pleased in this quarter to announce the IDE for Lunar 2. So that's a very important step for us that may not have been emphasized.

Okay, thank you.

Thank you. One moment for our next question.

And our next question comes from Vijay Kumar of Evercore ISI. Please proceed.

Hi, this is Kevin on for Vijay. Just one on prescriptions and active patients on treatment in other markets. Can you talk to the performance this quarter? Was France a key driver or did the reclassification of Canada into other markets have anything to do with the performance this quarter? Any factors you can call out would be helpful. Thanks.

Kevin, this is Ashley, and I can take that question. So as noted, we were pleased with kind of the continued positive momentum that we saw in GBN. It was a solid quarter, I would say, around the globe with maintained momentum in the U.S., a steady recovery in Germany, and then, as you noted, a very strong launch in France. So France was a key driver of the growth in our international markets. You can see in our 10Q, which we did publish this morning, the breakout of those prescriptions by region, but we did see a significant early strong physician interest in tumor treating fields 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, given the timeline to reimbursement and collection cycle. I think that answered your question because you asked about the other markets, but I would like to highlight, again, the maintained 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 back of our transition to a franchise model last year there.

And have you sized Canada at all from an active patients or prescriptions perspective?

Yes, of course, as we make those investments, we're doing all the associate analysis on the market, but I will say that is not a material driver of what you've seen 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.

So thank you, everyone on the phone, for your continued interest and support in NovoCure. We have entered a period of transformation and expansion that kicked off earlier this year with the presentation of the successful lunar phase three trial data. Over the next 18 months, we will have data readouts from three more phase three trials, making a total of six phase three trials for which we will have data readouts, all in 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.