Yahoo Finance NovoCure Limited (NASDAQ:NVCR) Q1 2024 Earnings Call Transcript
NovoCure Limited (NASDAQ:NVCR) Q1 2024 Earnings Call Transcript May 2, 2024
NovoCure Limited beats earnings expectations. Reported EPS is $-0.36134, expectations were $-0.43. NVCR 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 Q1 2024 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.
Ingrid Goldberg: Good morning, and thank you for joining us to review NovoCure's first 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.
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 by developing and commercializing our innovative therapy, Tumor Treating Fields. Over the last two decades, we’ve established TTFields mechanism of action, developed and improved the TTFields delivery technology, completed multiple successful Phase 3 clinical trials, treated over 30,000 commercial patients and built an innovative business model. We entered 2024 ready to build on this foundation, and I’m pleased to report our progress today. In March, we announced that our METIS Phase 3 clinical trial studying the benefits of treating brain metastases from non-small cell lung cancer with TTFields therapy met its primary endpoint, providing a statistically significant extension in time to intracranial progression.
Later this year, we expect FDA PMA and EU CE mark approvals for TTFields therapy and metastatic non-small cell lung cancer post- platinum progression. And an FDA PMA supplement approval for our next generation arrays for GBM. Towards the end of 2024, we will announce top line data from our Phase 3 trial in locally advanced pancreatic cancer. 2024 is an exciting year for NovoCure with many milestones. I’m incredibly grateful for the hard work of our colleagues and for the dedication of our patients and prescribing physicians. On today's call, we will begin with a review of our commercial business in GBM. We will then discuss clinical trial updates from the quarter. And we will close with the discussion of our Q1 financial results, before opening the line for questions.
In the first quarter at NovoCure, we continued our steady pace of execution. We finished Q1 with 1,643 new prescriptions and 3,845 active patients on therapy, both are global records for our organization. Our global commercial team is focused on all levers of active patient growth, including prescriptions, patient starts and long-term compliance and persistence. We believe each input is critical to achieving the best outcomes for patients, which in turn we believe will drive sustainable growth. We also believe product development enhancements can drive improved patient outcomes. As a reminder, last year we successfully introduced our next-generation arrays in several European countries and our PMA supplement for the new arrays was filed with the FDA in December.
The new arrays are lighter, thinner and more flexible and leverage new materials to improve the patient experience. New patents have been filed in our key markets to protect the improved designs. In the U.S., our teams are focused on increasing awareness of the benefits of TTFields therapy among potential patients and prescribing physicians. Last month, we launched a direct-to-consumer campaign, I Power My Life, our new print and digital assets and our first ever direct-to-consumer television advertising campaign are key to our efforts to grow our GBM business. Through connected television, which reaches most U.S households, we are educating potential patients and caregivers about Optune Gio. We believe direct-to-patient messaging will raise awareness of TTFields therapy and strengthen the demand from patients following diagnosis.
As we look ahead, one of our key objectives in 2024 is to successfully gain approval and launch Optune Lua for patients with non-small cell lung cancer. We have filed regulatory submissions in our major markets. In January, the FDA formally accepted our PMA for filing. We recently completed our 100 day meeting with the FDA, a critical milestone for any PMA submission. The 100 day meeting was productive, and there was no indication that the LUNAR PMA will be referred to a panel. Outside the U.S., we are awaiting a CE mark decision in Europe and are in substantive discussions with Japanese regulators. Pending regulatory approvals, our teams are focused on launch preparation. In both the U.S and Germany, we have hired and trained our thoracic sales teams, including territory managers, clinical educators and patient experience teams.
Within the organization, we are preparing for the opportunities ahead. Our teams are developing marketing materials and field team training assets, preparing HCP certification resources, assembling materials for future thoracic speakers bureaus, planning for thoracic congresses, and training internal support teams. We are prepared to hit the ground running. We plan to treat patients in Germany and the U.S immediately following approval using a named patient reimbursement process, similar to the way we launched treatment for GBM in these countries. Our teams are eager to support another large indication and hope to treat many more patients in the coming months. I will now pass the phone to Asaf, to share more regarding our clinical pipeline updates.
Asaf Danziger: Thank you, Bill. In Q1, we made strong progress, advancing our clinical pipeline in three main indications. I will start with METIS. In March, we announced our Phase 3 METIS trial, METIS primary endpoint, marking our latest positive Phase 3 clinical trial. As a reminder, METIS started TTFields therapy with supportive care for the treatment of brain metastases from non-small cell lung cancer, following stereotactic radiosurgery. Patients in the TTFields therapy arm achieved a 21.9 months median time to intercranial progression compared to 11.3 months in the control arm. The results were statistically significant with a P value of .016. The other ratio was .67. Patients treated with TTFields therapy experienced sustained neurocognitive function and quality of life without an increase in systemic toxicity.
The METIS results are very meaningful to physicians, patients and caregivers. Many thousands of non-small cell lung cancer patients suffer from brain mets each year. Their prognosis is poor and typically involves rapid neurocognitive decline, with devastating effects on quality of life factors such as motor skills, speech, mood and cognitive ability. Today, there is limited innovation or studies in brain metastasis. The only treatment options are stereotactic radiosurgery, which has risk of continuous relapse and whole brain radiotherapy, which risks major neurocognitive toxicity. For this patient population, TTFields ability to significantly extend the time to intracranial progression, delay the need for repeat SRS and sustain neurocognitive function without increasing systemic adverse events offers a major benefit.
Key opinion leaders have validated our enthusiasm for the METIS results. Last week, we were pleased to announce that the METIS trial has been accepted as a late breaking session at the 2024 ASCO annual meeting and will be presented in Chicago on Monday, the 3rd of June. The METIS presentation was submitted and accepted by ASCO long after the standard congress deadlines, validating our belief in the clinical relevance and interest in the study. I would like to express my thanks to the investigators and patients involved in METIS, as well as our NovoCure team who supported the planning and execution of the trial. This quarter, we also announced that our INNOVATE-3 Phase 3 clinical trial results were selected as the best oral presentation at ASCO 2024.
INNOVATE-3 studied TTFields therapy together with paclitaxel in platinum resistant ovarian cancer. Results from an exploratory subgroup analysis that showed pegylated liposomal doxorubicin or PLD, naïve patients treated with TTFields therapy and paclitaxel saw a significant improvement in overall survival compared to PLD naive patients treated with paclitaxel alone. Of the 558 total patients enrolled in the INNOVATE-3 clinical trial, 201 patients were PLD naïve. Overall survival in PLD naive patients randomized to receive TTFields therapy and paclitaxel was 16 months compared to 11.7 months in PLD naive patients randomized to receive paclitaxel alone. In the PLD naïve subgroup, baseline demographics were similar across both cohorts. This analysis may help to explain the potential survival benefit previously reported in INNOVATE-3 patients who received only one prior line of therapy.
NovoCure is exploring the effects of doxorubicin on tumor tissues and the potential consequences on TTFields dose. We believe these findings will contribute to a deeper understanding of our mechanism of action and inform future trial design. Finally, within our GBM program, we completed enrollment of the TRIDENT trial studying overall survival when Optune Gio is started with chemo radiation compared to starting after chemo radiation. And the FDA approved our IND for KEYNOTE D58, a Phase 3 clinical trial, studying overall survival of newly diagnosed GBM patients treated with TTFields temozolomide and pembrolizumab. The KEYNOTE D58 trial builds upon promising clinical data from the 2-THE-TOP Phase 2 trial and extensive preclinical research published in JCI.
We accomplished a lot this quarter. I would like to reiterate my gratitude to the team. I look forward to our future report on our milestone field 2024. Ashley will now share details of our first quarter financial performance.
Ashley Cordova: Thank you, Asaf. The first quarter was a period of consistent execution with commercial and regulatory progress, launch preparation and important clinical readout. We generated $139 million in net revenues in the first quarter, up 13% year-over-year and ended the quarter with 3,845 active patients on therapy, up 11% year-over-year. Revenue growth was primarily driven by our successful launch in France, and improved approval rates in the U.S for both current and 2023 periods. Gross margin for the first quarter was 76%. SG&A expenses were $95 million this quarter, up 2% year-over-year. The modest increase in sales and marketing expenses was driven by sales force expansion and increased marketing activities in anticipation of a potential launch in non-small cell lung cancer.
These investments were partially offset by lower personnel expenses within G&A. R&D expenses for the quarter were $52 million, down 14% year-over-year. The decrease was driven primarily by lower personnel expenses, and the timing of activities within our ongoing clinical trial portfolio. Our net loss for the first quarter was $39 million or $0.36 per share, and adjusted EBITDA was a negative $5 million, an increase of $14 million compared to the first quarter of last year. The increase in adjusted EBITDA was primarily driven by revenue growth, and an associated increase in gross margin. Actions taken during the November 2023 restructuring and a heightened focus on driving operational efficiencies, reduced total operating expenses, excluding share-based compensation by $2 million year-over-year.
We intend to take actions that prioritize growth and maintain financial health and flexibility as we position NovoCure for future profitability. Cash and short-term investments totaled $870 million as of March 31, 2024. This morning, we announced that we have entered into a new 5-year senior secured credit facility with affiliates of Pharmakon Advisors for up to $400 million. The first $100 million tranche was issued at closing, and the second $100 million tranche will be issued by June 30, 2025. An additional $200 million is available to be drawn across two tranches at NovoCure's discretion and subject to certain milestones through March 2026. The proceeds will be used to settle upon maturity NovoCure's convertible notes and to fund working capital needs stemming for NovoCure's anticipated launch in non-small lung cancer.
The full terms of the deal are outlined in today's 10-Q. Importantly, with this transaction, we have strengthened our cash position and further solidified our balance sheet with non-dilutive capital. With a number of exciting milestones on the horizon, this multi tranche delayed draw debt facility provides us with valuable balance sheet flexibility. At NovoCure, we appreciate the importance of balancing both growth and profitability, and we have a watchful eye on achieving both objectives. I'd like to close today by highlighting one of our Optune Gio users. Kelvin “Doc” Sinclair, at Sacramento California. Doc is a man of many passions. He composes music, collects minerals, raises [indiscernible] and operates a bodybuilding gym from his home.
Most of all, he enjoys spending time with his wife Terra and his three children and seven grandchildren. In February 2022, Doc was diagnosed with glioblastoma. And after discussions with physicians and considerable research, Doc decided Optune Gio was right for him. Optune Gio has helped Doc's continue an active lifestyle without having to sacrifice his numerous hobbies. It's people like Doc who remind us why we do what we do, and what it means to extend patient survival and aggressive cancers like glioblastoma. We have an exciting slate of potential catalysts approaching. The metastatic presentation at ASCO, upcoming regulatory decisions for the LUNAR CE mark in Europe and the PMA submission in the U.S., the PMA supplement for new arrays, and finally, top line data from our Phase 3 PANOVA-3 trial in pancreatic cancer.
Our teams are heads down and focused on execution. And we look forward to updating you throughout the year. With that, I'll hand it back to the operator for questions.
Operator: [Operator Instructions] And our first question comes from Jason Bednar of Piper Sandler. Your line is open.
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