NOVOCURE Earningcall Transcript Of Q2 of 2024
Ingrid Goldberg -- Vice President, Finance and Investor Relations Good morning, and thank you for joining us to review NovoCure's second-quarter 2024 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, and 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 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. William F. Doyle -- Executive Chairman Thank you, Ingrid, and good morning, everyone. Our mission at NovoCure is to extend survival in some of the most aggressive forms of cancer. Through the development and commercialization of our innovative therapy tumor-treating fields, we have built a strong foundation treating glioblastoma, and with an anticipated approval to treat second-line non-small cell lung cancer, we are on the threshold of helping many more patients in need. As we approach this year's milestone, the urgency of our mission is even greater for the entire NovoCure team. Entering 2024, we identified three key objectives which would best position us for success this year and beyond. One, to grow our commercial business in glioblastoma. Two, to launch TTFields therapy in non-small cell lung cancer. And three, to deliver on the promise of our clinical and product development pipelines. These objectives are ingrained in our business units and have been rallying points for our global teams. I am pleased to share that we are making significant progress on all three, and with the focus and dedication of the entire NovoCure team, we believe we can deliver on all three in 2024. This morning, we will review our progress on each objective, review our financial performance, and then open the line for questions. We ended the second quarter with 3,963 active patients on therapy, our highest number of active patients since commencing commercial operations. Our French GBM launch, now in its fifth quarter, continues to be a tailwind. France serves as a blueprint for a successful launch, employing our new synchronized commercial structure, a blueprint we will leverage in future expansion across the big five EU markets. Real world evidence of the benefits of TTFields therapy is a key resource for engaging with prescribers. In June at ASCO, Dr. Oliver Bahr of the General Hospital Aschaffenburg-Alzenau presented top-line data from the TIGER trial. TIGER examined TTFields therapy in the routine clinical care of newly diagnosed GBM patients in Germany. TIGER is the largest prospective non-interventional TTFields trial completed to date. Dr. Bahr reported a median overall survival of 19.6 months and median progression-free survival of 10.2 months, corroborating the leading survival outcomes observed in our phase 3 EF-14 trial. Last month, in the Journal of Neuro-Oncology, Dr. Mrugala of the Mayo Clinic, published updated findings from a post-marketing safety analysis of over 25,000 TTFields patients. Dr. Mrugala's analysis confirmed that TTFields therapy was well tolerated, and that no signs of additive systemic toxicity were detected in the patient population, corroborating the safety findings of the EF-14 trial. In April, in the journal BMC Cancer, Dr. Kumthekar of Northwestern, published a qualitative review of key factors driving patient adoption of Optune Gio for the treatment of GBM. Dr. Kumthekar's team found that the two most influential drivers for adoption are knowledge of Optune's proven survival benefit and the treating physician's opinion. Real world evidence from trials like TIGER &Dr. Mrugala and Kumthekar's analyses, are important additions to the ever-growing body of studies supporting Optune Gio for the treatment of GBM, and they underline our commitment to generate and share data with physicians to support and broaden the adoption of TTFields. We are also focused on product development to improve the patient experience. We have rolled out our next-generation arrays in our key European markers, and patient feedback continues to be positive. We submitted a PMA supplement to the FDA in December, and expect a decision from the FDA later this year. After approval, we will commence U.S. rollout. Our team is working on improvements to the digital experience for prescribers and patients, with the goal of providing dashboards to streamline patient starts and optimize usage and persistence. We believe our fully aligned commercial approach, supported by real world evidence and digital innovation, will help to drive strong commercial performance in the second half of the year. Our second key objective this year is the approval and launch of Optune Lua for the treatment of metastatic non-small cell lung cancer. Regulatory submissions have been filed, and we are engaged with authorities in all of our major markets. As a reminder, prior to our May earnings report, we had recently completed our 100-day meeting with the FDA, with no indication that the PMA will be referred to a panel. To date, a panel has not been requested, and our expectations remain unchanged. We eagerly await the FDA's decision later this year. In Europe, we are waiting for CE mark approval. The new MDR process in Europe has lengthened timelines, and we continue to engage with new reviewers at TÜV Rheinland, our EU-notified body. While the review process has taken longer than originally projected, our expected outcome has not changed, and we anticipate a final decision in the second half of 2024. Internally, our German and U.S. lung teams are hired and are preparing to launch immediately following regulatory approval. We plan to treat patients in the U.S. and Germany as soon as possible following approval using a named patient reimbursement process, with additional country launches expected next year. Non-small cell lung cancer represents the next major step forward in the NovoCure story, and we are eager to pursue this opportunity. Asaf will now review our clinical progress in the quarter. Asaf Danziger -- Chief Executive Officer and Director As Bill mentioned, our third key objective this year is to deliver on the promise of our pipeline. This quarter, we made significant progress toward achieving that goal across our clinical programs in GPM, non-small cell lung cancer, and pancreatic cancer. We have reached a key milestone in our non-small cell lung cancer program. Last month, Dr. Minesh Mehta of Baptist Health South Florida, presented data from the phase 3 METIS trial at the ASCO annual meeting in Chicago. METIS evaluated the use of TTfields therapy with best supportive care for the treatment of brain metastases from non-small cell lung cancer. METIS met its primary endpoint, demonstrating a median time to intracranial progression of 21.9 months in the TTFields arm compared to 11.3 months in the control arm. A positive trend in the majority of assessed quality of life scales was also measured, and there was no evidence of worsening cognitive function in the TTFields arm. Consistent with prior clinical trials, TTFields therapy was well tolerated, with no additive systemic toxicity. Final analysis of the METIS trial data is ongoing. We intend to publish the data in a peer-reviewed journal later this year. We have expanded our non-small cell lung cancer clinical program to include another registrational phase 3 trial, LUNAR-2. LUNAR-2 will explore TTFields views with pembrolizumab, and platinum-based chemotherapy in first-line metastatic disease. This trial is open and enrolling at initial sites, and we are focused on expanding the clinical footprint. We are also in the process of opening a phase 2 pilot trial, LUNAR-4. This trial will evaluate immunotherapy retreatment in metastatic non-small cell lung cancer. Turning to KEYNOTE-B36, we are evaluating appropriate next steps for this trial, given its pace of enrollment and our focus on LUNAR-2. Our GBM program includes two additional registrational phase 3 trials, TRIDENT and KEYNOTE D58. TRIDENT is exploring the use of Optune Gio, concurrent with chemoradiation. If TRIDENT is successful, we will work to expand our label and enable physicians to prescribe TTFields therapy several months earlier with chemoradiation rather than after chemoradiation, as is indicated today. TRIDENT is fully enrolled and will read out in 2026 once follow-up is complete. We are also preparing to open KEYNOTE D58. KEYNOTE D58 will explore the addition of pembrolizumab to TTFields and temozolomide in GBM, and builds upon the promising results of the -- to the top phase 2 trial conducted by Dr. David Tran. Finally, we are nearing an important readout in our pancreatic cancer program. In the fourth quarter, we expect to announce the top-line data from the phase 3 PANOVA-3 trial, which is studying TTFields together with gemcitabine and nab-paclitaxel for the treatment of first-line locally advanced pancreatic cancer. We are also currently enrolling patients in our phase 2 PANOVA-4 trial. This trial is exploring the use of atezolizumab with TTFields, gemcitabine, and nab-paclitaxel in metastatic pancreatic cancer. Pancreatic cancer is a devastating diagnosis with five-year survival rates of 10%. We are eager to learn more about the potential benefits of using TTFields in the treatment of this aggressive disease. So far this year, we have reached one successful phase 3 readout in METIS, and are hopeful for a second in PANOVA-3. We are awaiting potential regulatory approvals in lung cancer, and our solid commercial GBM business continues to fuel additional R&D initiatives. We are launching several new clinical trials this year that have the potential to expand TTFields use dramatically. We are pleased with our progress this year, and are eager to continue pursuing our goal to deliver the promise of the clinical pipeline. I look forward to providing further updates later this year. Ashley will now review our financial performance for the second quarter. Ashley Cordova -- Chief Financial Officer Thank you, Asaf. The second quarter was a period of consistent execution as we drive toward our three key objectives for 2024. our GBM business turned in the best quarter to date. We are laying the groundwork to launch in non-small cell lung cancer, and we continue to purposely invest in clinical research and product innovation. Walking down the P&L, we generated $150 million in Q2 net revenue, an increase of 19% year over year, and ended the quarter with 3,963 active patients on therapy, an increase of 11% year over year. The French market continues to be a tailwind to growth, and contributed $14 million in net revenue this quarter, with 369 active patients. We also continue to see a benefit in average selling price from improved approval rates in the United States. I want to call everyone's attention to two important points on the revenue model. Beyond the benefit in period, improved approval rates in the U.S. generated a $5 million benefit and Q2 net revenues from prior period claims. In addition, we received $3 million in Q2 net revenues from a private payer in the United Kingdom where payments are not yet routine. We do not expect these two benefits, totaling $8 million, to recur, and would remove them from baseline expectations when projecting future revenues. Gross margin for the second quarter was 77%. SG&A expenses totaled $94 million in the quarter, a decrease of 5% year over year. This decrease was primarily driven by lower personnel expenses in support functions, which more than offset our continued investment in sales force expansion ahead of a non-small cell lung cancer launch. Research, development, and clinical trial expenses totaled $55 million in the quarter, in line with the same period in 2023. Our net loss for the second quarter was $33 million or $0.31 per share. We ended the quarter with cash and short-term investments of $951 million. This quarter, we saw positive adjusted EBITDA of $1 million, an increase of $28 million from the same period in 2023. While this was in part due to the one-time revenue contributors, we also saw material benefits from reduced operating expenses resulting from the strategic restructuring we undertook at the end of 2023. As we actively invest for growth, profitability remains a critical goal for us at NovoCure and something we are actively driving toward. I would like to close this morning by highlighting one of our Optune Gio users, Marino DiRienzo. Marino began using Optune Gio in January 2022 following debulking surgery. A father of twin adult sons, and a grandfather of three Marino, prides himself on living an active life and was eager to get back on his feet as soon as possible after his GBM diagnosis. Marino was able to integrate tumor training fields therapy into his daily activities quickly and was soon back on the baseball field with his sons and playing golf with friends. Marino is the embodiment of living each day to the fullest and a great reminder of what's at stake in extending survival for our patients. It is so fulfilling for our colleagues to be able to help Marino and his family, and I'd like to personally thank Marino for allowing us to be a part of his journey. With that, we will open the call for your questions. Operator Questions & Answers: |
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