NovoCure Limited (NASDAQ:NVCR) Q4 2023 Earnings Call Transcript
NovoCure Limited (NASDAQ:NVCR) Q4 2023 Earnings Call Transcript February 22, 2024
NovoCure Limited isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and thank you for standing by. Welcome to the NovoCure Q4 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] 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 and thank you for joining us to review NovoCure’s fourth quarter 2023 performance. I am joined this morning by our Executive Chairman, Bill Doyle; our CEO, Asaf Danziger; and our CFO, Ashley Cordova. Other members of our executive leadership team will be available for Q&A. For your reference, slides accompanying this earnings release can be found on our website, www.novocure.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 thus reflects the financial value generated by our business. Reconciliations of non-GAAP to GAAP financial measures are included in our press release, earnings slides and in our Form 8-K filed with the SEC today. These materials can also be accessed in 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.
Bill Doyle: Thank you, Ingrid. At NovoCure, our mission is to extend survival in some of the most aggressive forms of cancer through the development and commercialization of our novel therapy, Tumor Treating Fields. In 2023 we made notable strides and reached many important milestones in our commercial, clinical research and product development programs. Our commercial business treating patients with GBM finished the year with 9% year-over-year growth in active patients on therapy. Our LUNAR Phase 3 trial in non-small cell lung cancer met its primary endpoint. We completed enrollment of two additional Phase 3 trials; METIS and PANOVA-3, and we completed enrollment of the TRIDENT trial in January. We launched LUNAR-2 and PANOVA-4, which are now initiating sites and enrolling patients and the protocols of two new clinical trials, KEYNOTE D58 and LUNAR-4 are under regulatory review.
We successfully introduced our next generation arrays in several European countries and filed a PMA supplement for approval to bring the new arrays to patients in the U.S. Importantly, we have now treated over 30,000 patients since we first started commercial operations and we ended the year with a record number of active patients on therapy. I am incredibly proud of our colleagues' achievements and look forward to a data and catalyst driven 2024. 2024 is an important year for NovoCure with more milestones on the horizon. We are laser focused on achieving three core objectives; growing our GBM business, launching TTFields in non-small cell lung cancer, and delivering our clinical and product development pipelines. Achieving these objectives will position our company for success for years to come.
I'll begin this morning with a review of our commercial GBM business and non-small cell lung cancer program. Asaf will then provide clinical trial and product development updates followed by Ashley's review of our financial performance. Our commercial GBM business is key to our long-term success. Driving growth in our core country markets is a central objective in 2024. We ended 2023 with a record 3755 active patients on Tumor Treating Fields therapy and generated $509 million in net revenue for the year. To achieve our growth goals, we are focused on building greater awareness and engagement with patients and prescribers and enhancing the quality of these engagements. We are focused on seamless cross functional alignment and a synchronized approach to driving the key levers of growth, prescriptions, patient starts, compliance and therapy duration.
Each of these inputs is critical for the best outcomes for patients and to achieving sustainable growth. We have always been a data-driven organization. As healthcare providers move to further integrate TTFields therapy into their practices, we are determined to provide the clinical data to best inform TTFields therapy use. A critical part of this effort is the generation of real-world evidence.
Optune Gio: These new real-world data will be added to, peer reviewed and published later this year, but the bottom line is large real-world data sets confirm that Tumor Treating Fields therapy can provide a significant survival benefit for patients struggling with this devastating disease. As we continue to generate more real-world data, we will be working to increase physician awareness of outcomes and importantly, build patient awareness of the data. As our therapy is a unique modality, we know that physicians or patients can drive the choice of TTFields as a therapy option. To this end, we have adjusted our organization to integrate patient support and physician support earlier in the patient journey. Direct engagement with physicians will enable our teams to provide more hands-on assistance at the time a prescription is considered and written.
We believe early engagement with patients will drive higher conversion of scripts to patient starts and deliver a more seamless therapy experience. Our second key objective in 2024 is the regulatory approval and successful launch of Tumor Treating Fields in non-small cell lung cancer. As a reminder, last year we published the results of the Phase 3 LUNAR trial. LUNAR showed a statistically significant and clinically meaningful survival benefit for second line non-small cell lung cancer patients who progressed on platinum-based chemotherapy and who used TTFields and standard therapies compared to patients who only used standard therapies. Since announcing positive top line LUNAR data, we have made steady progress towards our goal of commercial launch in 2024.
In December, we filed the necessary regulatory submissions in our three major markets; the U.S., Europe and Japan. In January, the FDA formally accepted our PMA submission for filing and the PMA is now under substantive review. At the 100-day mark, which will occur in mid-March, we anticipate meeting with the FDA to discuss their next steps. Our team is fully prepared to address any questions and we look forward to engaging with the FDA in the coming months. Outside the U.S., we are awaiting a CE Mark decision in Europe and regulatory next steps in Japan. Pending regulatory approvals, our goal is to launch in Germany in the first half of 2024 and in the U.S in the second half. Once we receive marketing approvals, we will engage payers in Germany and the U.S. to establish reimbursement.
We plan to start patients on therapy in Germany and the U.S immediately following approval, using a named patient reimbursement process similar to that we used when we launched GBM. We are eager to open this new chapter at NovoCure and look forward to potentially treating many more patients in the coming months. In 2024, our teams will also deliver top line results of the METIS and PANOVA-3 clinical trials. Both trials are fully enrolled and now in patient follow-up. Asaf will discuss these trials momentarily, but timing indicates NovoCure could announce material data or new indication approvals in every quarter of 2024. It is going to be a very exciting year.
Chief Human: I'll now turn the call over to Asaf to discuss our clinical objectives.
Asaf Danziger: Thank you. As Bill mentioned, we are focused on three objectives in 2024; grow our GBM business, launch lung cancer and deliver our pipeline. We have consolidated our clinical trial initiatives into three indications where we have proven efficacy and can address significant unmet needs. These are GBM, non-small cell lung cancer and pancreatic cancer.
temozolomide,: TRIDENT is studying the survival benefit of starting Optune Gio with chemo radiation rather than after chemo radiation, two to three months earlier than today's standard protocol. Clinical studies and preclinical research have shown that the mechanisms of action of radiation and TTFields can work together to create a more pronounced cytotoxic environment for cancer cells and can potentially extend patient survivals.
temozolomide: At the SNO annual meeting in November, Dr. Tran presented updated data from to the top. The median overall survival of patients in the trial was 24.8 months compared to 14.6 months for a match control cohort from our EF-14 data set. The to-the-top Phase 2 results are very promising and we are eager to launch KEYNOTE D58 and begin enrolling patients this year. TRIDENT, KEYNOTE D 58 and technological improvements like our new arrays provide possibilities to further improve survival for GBM patients and demonstrate our continued commitment to the neuro-oncology field. We look forward to sharing more information on these programs in the future. We are also focused on the treatment of non-small cell lung cancer. The success of the LUNAR trial provides the foundation for a number of additional lung cancer trials.
Last year, the ID was approved for LUNAR-2 and we began site initiations. LUNAR-2 will evaluate the use of TTFields together with the immunotherapy pembrolizumab and platinum-based chemotherapy in first line metastatic non-small cell lung cancer. The protocol for the Phase 2 LUNAR-4 trial is under review by regulatory authorities and we hope to launch later this year. LUNAR-4 will study use of TTFields and immunotherapy in the second line following first line immunotherapy. We also continue to enroll patients in the Phase 2 KEYNOTE B36 trial evaluating TTFields therapy and pembrolizumab in first line treatment of locally advanced or metastatic non-small cell lung cancer. Given the success of LUNAR, we believe we are just scratching the surface of the potential of TTFields in non-small cell lung cancer.
We are also exploring the use of TTFields for treatment of secondary tumors. Our Phase 3 METIS trial is studying TTFields following stereotactic radiosurgery for brain metastasis for non-small cell lung cancer. We finished enrolling METIS in March 2023 and will complete the minimum twelve months follow up from last patient in the coming weeks. Once followup is complete, we expect to announce top line results at the end of Q1. METIS addresses a significant unmet need in a large heterogeneous patient population. We are eager to understand if TTFields can provide benefit to these patients. In aggregate, our non-small cell lung cancer program will include five trials, LUNAR, LUNAR-2, LUNAR-4, KEYNOTE B36, and METIS. These trials allow us to study the use of TTFields across multiple stages of non-small cell lung cancer and have the potential to unlock availability of TTFields therapy for tens of thousands of patients.
Nab: PANOVA-4 is evaluating the addition of the immunotherapy atezolizumab to the regimen used in PANOVA-3 to treat first line metastatic pancreatic cancer. Unfortunately, pancreatic cancer is an indication that is growing and for which there is a great unmet need. We look forward to reviewing the data from these trials as soon as possible. As previously mentioned, we are also exploring opportunities to improve our therapy through product development. In 2023, we launched our next generation arrays in Europe for GBM. Feedback has been positive. Patients have mentioned increased comfort and ease of use. In December, we filed a PMA supplement for approval to market the new arrays in the U.S. If approved, we look forward to launching in the U.S. patients in the second half of 2024.
I am extremely encouraged by our achievements in 2023 and excited for the catalysts on the horizon this year. Our team is focused on our key objectives and energized to reach more patients in need. I look forward to updating you all on our progress throughout the year. Ashley will now run through our fourth quarter and full year performance.
Ashley Cordova: Thank you, Asaf. The fourth quarter was another quarter of progress and execution at NovoCure, setting the stage for a strong 2024. We generated $134 million in net revenue in the quarter and $509 million for the year. We ended the year with a record 3755 active patients on therapy, an increase of 9% from year end 2022. One of our key objectives this year is to drive growth in our GBM business. As we transition into '24 several of the complex situations that have affected our business in recent years have been largely resolved. This includes depletion of the most accessible flow of backlogged Medicare payments, achievement of a revenue baseline in our newly launched French market, and successful negotiations with German payers.
The resolution of these variables serves to strengthen the foundation for net revenue growth this year, directly tied to active patients on therapy, duration of therapy and price. NovoCure's team in every function is aligned to support and enhance these drivers in 2024 and beyond. One of our victories in the fourth quarter was the continued success of our Optune Gio launch in France. Our business in France was a tailwind to our EMEA active patient count throughout the year and contributed $8 million in the fourth quarter. This sets a strong baseline as we move into 2024. In the fourth quarter, we also saw strength in Germany with year-over-year increases of 21% in prescriptions and 12% in active patients on therapy. As a reminder, in mid-2022 we engaged with German payers to negotiate updated contract terms that effectively paused our German business.
As expected, it took approximately six quarters to recover. Moving forward, we expect the fourth quarter to serve as the baseline for our German market. Gross margin for the fourth quarter was 76%. For color, gross margin was affected by two near-term factors, investment in increased patient support capacity and the rollout of our next generation arrays. In time, we expect these factors to be offset by increased active patient counts and improved efficiencies with scale as we optimize manufacturing of our new arrays. Last year, we implemented portfolio prioritization and strategically restructuring initiatives to realign our business to support near-term growth and long-term value creation. As a result of these initiatives, we streamlined our operating expenses, removing $60 million in residual OpEx. This streamlining will enable us to invest in future growth initiatives like our non-small cell lung cancer launch, without increasing our cash burn.
We believe in the immense potential of the Tumor Treating Fields platform and are investing accordingly, but we also recognize the need to accelerate our path to profitability. We are confident that recent adjustments will position NovoCure to create shareholder value while achieving our mission of extending survival in some of the most aggressive forms of cancer. SG&A expenses for the fourth quarter were $99 million. Looking ahead, SG&A expenditures would be distributed to support areas with the highest growth potential and in alignment with our 2024 goals. This includes global commercial infrastructure and launch preparation ahead of our anticipated non-small cell lung cancer launch. Research, development and clinical trial costs in the quarter were $54 million.
Our R&D spending is largely tied to the number of ongoing clinical trials at a given moment. As the current slate of Phase 3 trials nears conclusion, we are in the process of launching our next set of trials, including LUNAR-2 and KEYNOTE B58. Following our portfolio prioritization efforts last year, future R&D investments will be focused in areas of highest return; GBM, non-small cell lung cancer, and pancreatic cancer. Cash and short-term investments totaled $911 million as of December 31, 2023. Our net loss for the fourth quarter was $47 million or $0.45 per share, and adjusted EBITDA was negative $32 million. As we prepare for the potential to treat thousands of additional patients in the years to come, we are committed to ensuring incremental investments are allocated to areas that align with long-term strategic vision.
Our goal is to focus on growth investments in areas of highest potential return while maintaining balance sheet strength and accelerating our path to profitability. I'd like to close today by highlighting one of our Optune Gio patients, Janice Arms [ph] of Los Angeles. In 2019, Janice moved to New York City where she met Jeff, the love of her life. Avid nature enthusiasts, Janice and Jeff were soon scaling mountains across the country together. In 2021, Janice was diagnosed with GBM and began treatment with Optune Gio. Amid the fear and uncertainty of a GBM diagnosis, Janice and Jeff decided to pursue their passion. They married and moved to California to better enjoy an outdoor lifestyle. With Optune Gio on Janice's shoulder, Janice and Jeff continued to scale mountains and have plans to hike and rock climb across the globe.
People like Janice are a constant reminder of the impact we can make in patient's lives, helping them reach more birthdays or anniversaries or the summits of new mountains. With that, I'll hand the call back to the operator for questions.
Operator: Thank you. [Operator Instructions] Our first question comes from Jason Bednar of Piper Sandler.
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