NovoCure Limited (NVCR) Earnings Call Transcript & Summary

Welcome to the Wells Fargo Healthcare Conference. Before we get started, if you are a member of the press or media, please disconnect at this time. This is a restricted line. Any unauthorized party in this meeting or any unauthorized use of the information communicated in this meeting is subject to prosecution to the fullest extent of the law. Any unauthorized person, including the media that is on the line at this time, please disconnect. Please note, today's call is being recorded.

Good morning. I'm Larry Biegelsen, the medical device analyst at Wells Fargo, and it's my pleasure to host this session with the management team from NovoCure. With us, we have Ashley Cordova, the CFO; and Tesh Shah, who is the Chief Commercial Officer. In terms of format, it's going to be a fireside chat. If anybody who has a question they want me to ask on their behalf, please email it to me, and I think we're going to try to do some polling questions here. So Ashley, and Tesh, thanks so much for being with us.

Thank you.

Thank you, Larry. Very nice to join you today.

Same. So I think before we jump into Q&A, Tesh, I believe you wanted to make some opening remarks. So I'll hand the floor over to you.

Yes. Thank you, Larry. And I will be brief. I do realize that many of you may be familiar with NovoCure and the work that we've been doing. But some of you may be new, so I'm just going to start with a quick foundation before we get into the Q&A. So first of all, thank you again for your time and interest in NovoCure. I'm just going to share some highlights of who we are and what we've been doing. So the company was founded about 20 years ago by Professor Yoram Palti in Haifa, Israel. And since then, we have secured 3 FDA indications in newly diagnosed glioblastoma, in recurrent glioblastoma and most recently -- in the malignant pleural mesothelioma. Some of you may know this form of lung cancer because it's closely tied to asbestos exposure. We also have a robust late-stage pipeline with 4 Phase III trials in development and a mid-stage pipeline as well where we are exploring to expand our current development efforts in solid tumors. Our core belief for Tumor Treating Fields remains that we're a backbone therapy. And in the Q&A, we'll get into a little bit more why this matters. We can safely combine together with evolving standards of care, which makes us relevant and really whatever that's happening in the space, we can continue to explore and add on to our development efforts. And in closing, I'll mention sort of the core priorities that we're focused on, which is growth and expansion. We want to make sure that the business that we built continues to grow, and we continue to expand in other geographies. We want to make sure that our late-stage development continues to bring us closer to the marketplace. And then finally, we want to make sure that we make choiceful and robust investments in product development because this clearly is an angle that can help us differentiate, but also increase patient comfort and get to better efficacy and other meaningful patient outcomes down the road. Finally, I'll just remind everybody, in Q2, we reported $134 million in net revenues, and we continue to invest aggressively in our R&D efforts with a record $50 million reported in Q2. So with that backdrop, I'll turn it back over to you, Larry, and entertain any Q&A.

Yes, thanks so much for that. So let's just get the COVID question out of the way, kind of a required question at this conference, I guess. But you guys have managed through COVID pretty well, much better than a lot of medical device companies. But you have seen some impact on the clinical side and a little bit on the commercial side. Obviously, we've seen the Delta variant surge here. Can you talk about how -- what you're seeing and how that's impacting both political and commercial and maybe compare and contrast it to prior waves. Ashley or Tesh, either one of you, I'm sure can address this.

Yes, Larry, I'm going to take this question. I'm going to couple what we see both on the commercial and clinical side because there are lots of parallels here. We are dealing with institutions, physicians and hospital traffic. We're reliant on patients going into clinic and getting a diagnosis to be able to be on a protocol or the treatment. So what I'll start off with is exactly what you mentioned. We're not immune to COVID. It's a global phenomenon. All health care companies and the whole world is dealing with similar challenges here. I will focus on 3 things that we're doing that allow us to continue to stay focus. One is we want to ensure that we're still executing against our agenda. So flawless execution here. And what this means for us is we want to ensure that no patient has turned away from our treatment. Every patient that's eligible for our protocol or for our commercial treatment has the opportunity to have a discussion around Optune and Tumor Treating Fields, and get a chance to think about that as a treatment path for them. The second aspect is be nimble and adaptable. A lot of things are happening. We did not anticipate the Delta variant, of course. We want to make sure that we continue to be adaptable to the needs of our customers, which include both the care community, the clinical community as well as patients. And on this front, in the very early days, we were tasked with adapting to what was happening in the marketplace. And for us, what that means is that we wanted to make sure that patients who are going on our treatment had an opportunity to get a virtual visit by our technical team. So we have a number of individuals who are in the field that support patients while they start treatment and all of those interactions are live or historically, they've been live. And we needed to pivot to ensure that when requested or when appropriate, we would have also a virtual offering. And we spent a great bit of time ensuring that we're not losing the touch point or the impact that we have on the education through this digitization of our resources. So that's where adaptability comes in. And then finally, I would just talk about ensuring safety because that's on top of all of our minds, especially when we're dealing with patients. So following safety protocols, oftentimes, these are regional. So one, even within United States, they become very specific to geographies. But as we deal with COVID across the world, they become very specific to different countries. Shipping product out, something that we didn't even have to think about becomes a challenge now depending on where the product is coming from and where the product is going. So these 3 things allow us to continue doing what we need to do, which is to make sure that no patient is left behind who is eligible for Optune or Tumor Treating Fields.

So it sounds like you've navigated it well as well as anybody. But I'm just curious, maybe, Ashley, you -- I can't remember it's first or second quarter where you first started talking about an impact. Last year, it was pretty muted, but you did see an impact earlier this year. How would you compare? How should we think about the second half of this year relative to some of the other waves you've seen just -- we all know that Delta has been worse than anyone probably expected 3 months ago. So help us understand the second half here.

Yes. I actually think I'll tip this back over to Tesh and ask him to speak specifically about the impact of just education and awareness building in a virtual setting. Because I think from our perspective, there's going to be ebbs and flows in patient volume, but that's not unique to us. And it's also so regional that it tends to be muted in the aggregate, right? You have puts and pulls in various regions at different times. But I do think what we are feeling is just the enduring impact of now 6-plus quarters of a virtual education experience, and that's relevant on the clinical side as well, but it's certainly relevant on the commercial side. So maybe Tesh, you can just provide an anecdotal color there.

Yes. I'll focus on 2 things here. So number one, Larry, I think through the GBM business, we are able to now, over the course of the many years, ensure that we have a sustainable flow of business coming in, both from a prescription and active patient trends. Where we start to see the slowdown there, it's a matter of multiple factors, COVID being one of them. And I'll focus on the second part of -- my answer here, I'll focus on what we're specifically doing to increase the engagement and making sure that our -- the education and our awareness building, we remain top of mind for providers and for patients. In the very early days, where access was shutting down, our teams had to become creative. And one way to engage is to bring people out of their clinical setting to make sure that they can allocate the time to speak with us. And on this front, I'll use a very specific anecdote, which was successful in the early days, which was the use of food trucks, that bring the clinicians out on their break. We've had some individuals in the field use parking lot for coffee breaks and things like that. Again, it was to make sure that we're taking advantage of -- any time that we get with the customer, by and large, face-to-face is the best, and we can still enable some face-to-face interactions. But when we cannot be face-to-face, we want to make sure that Optune and TTFields remain top of mind. So we look for new opportunities now to engage and make sure that we are continuing to elevate sort of our sheer voice in the minds of customers.

That's helpful. Tesh, we haven't -- I don't think we've ever done one of these before, you and I, and maybe some investors on the line aren't familiar kind of with your portfolio, your responsibilities at NovoCure. You've been with the company actually since 2012, so a long history, I believe. Hopefully, I got that right.

You got it right.

Maybe just tell your responsibilities there. And yes, I'm curious actually where you're based because NovoCure is such a global company. I'd just love to hear a little bit more about your role.

Yes, thank you for that question. So I have been with NovoCure for almost a decade now. And it's been an amazing journey because we're constantly doing something new to remain on the focus of bringing TTFields to more and more patients, and I really enjoyed being part of that. My responsibility is primarily focused on, I would say, bringing the treatment, the commercial treatment to our patients, ensuring that there is adequate access. So market access is part of my responsibilities. But also once the physician puts the prescription into our filter, our fulfillment of that through our technical support, we call them device support specialists and the general patient experience around that I'm responsible for that. And the general sort of responsibilities that are commercial or sales and marketing, so generating demand and also ensuring that we're thinking strategically about new opportunities. So outside of GBM and MPM how do we ensure that we set the marketplace up for great success such that adoption can be a bit more turnkey than our early days where we were teaching individuals about the basic aspects of our mechanism of action, the delivery system, device being a therapeutic, the patient angle and then how the patient would be involved. Those are the types of things that we hope to alleviate or at least make better as we get to lung cancer and some of the other opportunities. My background over the last 20-plus years I've been in the field of oncology, I worked in GI cancers, lung cancers. And obviously, over the last many years in the neuro space, I'm very excited to get back to lung cancer and pancreas and GI and leverage some of my experiences there. Yes. So that kind of summarizes me in a nutshell.

Perfect. Let's move on to the late-stage pipeline. That's obviously where a lot of the focus is among investors. You've got the next near-term pipeline event, I think, is the interim analysis for INNOVATE-3, which is the ovarian cancer Phase III trial. And that's expected in the third quarter. Actually, can I -- can we confirm that that's still a third quarter event? And I guess, what are -- the third quarter is almost over?

Yes. Happy to take it. So again, just as a reminder, INNOVATE-3 is our registration trial randomized studying tumor treating fields in combination with weekly paclitaxel for the treatment of platinum-resistant ovarian cancer. The next disclosure event for this trial will be the last patient enrolled to an LPI press release. And we are really in the kind of final mile. So third quarter is our current estimation, but it is -- we're still enrolling and we're kind of in that final round. That's the next bit of news you'll get is an LPI press release. And then there is the statistical plan and the interim analysis tied to the last patient enrollment. So then a short period after the last patient enrollment, we will conduct the interim analysis, the independent DMC actually conducts that. So I always then get asked what's the time difference between the LPI and the interim, and that's a widow bid up to kind of the schedules and the time that it takes the DMC to convene. But it is, in short order, let's say, that the interim analysis then gets conducted. And then I would expect a press release on the results of that interim analysis. And I think we've been clear, and we want to continue to reiterate that our base case assumption is that the trial continues as planned. This is how we design our Phase III trials. And again, particularly given this trial, which has been fairly rapid to enrolling, our expectation is that this trial will continue as planned. But there is -- it is a protocol-specified interim analysis, which means that it will have a futility hurdle. Again, we don't believe that will be an issue for us, but it will go all the way from a futility analysis through an analysis for statistical success. There's a very high hurdle for that, but it is powered. There is a small offer reserve there. So those are the 3 options. Our base case assumption would be a press release as that trial continues as planned. At that point then, we would have data 18 months after the LPI. So a long-winded answer. The short answer is the next disclosure event will be last patient enrollment, which is upcoming, forthcoming, and that will trigger the other downstream disclosures.

All right. Well while we see David sneak in one, the first polling question. We'll try to do 2 on this call, David from OpenExchange. So the first one, so you want me to read it? Okay. The interim analysis from INNOVATE-3 is expected this quarter. What do you think the most likely outcome is? A, the study stopped early on efficacy, i.e., it's positive; b, the study stopped early for safety or futility negative; c, the study will continue to file completion in 18 months, I believe, Ashley said; and d, not sure after what happened with the LUNAR interim analysis could throw us for another loop. So let people answer that and we'll -- because I know there's a bit of a lag, so we'll ask the next question here while people are responding to that. Ashley, following INNOVATE 3, the next interim analysis, I think, is PANOVA-3, which is for pancreatic cancer. And I think you've basically said that's a first half 2022 event, the interim analysis. Is that still on track?

It is. And again, it's a similar -- it's a similar time line of INNOVATE that we'll have LPI be the triggering event and then the statistical analysis plan supports an interim analysis that last patient enrollment. So if we step back and look at where our kind of late-stage pipeline is progressing, we would expect to have our LPI in lung cancer before the end of the year, which we all know starts at 12-month clock to final data. We would then have the LPI in our pancreatic cancer trial at the beginning of next year, which starts at first half of next year, which starts at 18-month clock to final data. And then we also have our METIS trial, which we would expect in the front half of next year, LPI which starts another 12-month clock of data. On top of that, we do expect to have the first patient enrolled in our KEYNOTE-B36 trial, and we continue to enroll patients in our TRIDENT trial. So all of those are large kind of randomized late-stage data points that have series of events coming up in the near to medium term. And we're not done there. What I would expect is that you can also hear a continued news pool about our activities and product development and then just an expanding pipeline generally. This is definitively an area of capital allocation for us, right? Whatever we can do to leverage the organic growth opportunity we have in Tumor Treating Fields we're committed to doing, and I would expect to hear ongoing news about our expanding pipeline.

David, do we have the results? Okay. Thank you. And Ashley...

We've been heard, right? So good. This is good. You're a successful messenger.

Inter sting. 86%. That's pretty high. Okay. All right. So moving on, actually to LUNAR. I think you've said that you are going to enroll -- complete enrollment by the end of 2021. Is that still on track? And remind us of what the follow-up is. I think it's 12 months.

It is. Yes. So that is still our current estimate. And you are correct that the follow-up is 12 months.

Okay. And so -- and you're on track to complete enrollment this year?

Before midyear. Correct.

Okay. I'm sorry, before midyear?

Yes. No, no. So our current estimate is before midyear.

Okay. And the METIS trial, which is brain metastasis. You pushed out final completion of that from 2022 to 2023. Why has the study taken a little bit longer to enroll in your view?

Yes. So let's just step back and again talk about the design of METIS. It is an important additional trial in our thoracic program. I think a lot of people think about METIS treating the brain, which it clearly does. But we very much see this as another opportunity to impact and offer a survival advantage for lung cancer patients, right? We are treating in the METIS trial brain mets from non-small cell lung cancer. It's studying specifically Tumor Treating Fields following stereotactic radiosurgery versus [ left for waiting ] alone in brain mets from non-small cell lung cancer. I mean I think broadly, we've seen this trial enroll -- it's taken a bit more geographies than we had initially intended. I think that has probably more to do with the fact that we're treating the secondary tumor than anything else. This is, I think, a different treatment paradigm. But fundamentally, we're on track. We're approaching again the end of this trial. We don't provide detailed enrollment statistics. But we do now estimate that we will have LPI in the front half of next year. And again, as we mentioned, final data in 2023. It is a 12-month follow-up period. There is no interim analysis for this trial, so we'll get -- your next disclosure event will be LPI and then we'll have a 12-month follow-up. And I would actually maybe tip it over to Tesh to talk about how this fits into the kind of broader lung cancer landscape because I think this is what's most interesting for us to think about how we might have lung cancer and METIS data, and be able to impact patients at multiple points in the lung cancer journey.

Ashley, thank you for that. I'll add a few comments to the importance of METIS in our lung portfolio. So first, I'll remind everyone that we do have an indication of mesothelioma in the U.S, and we have CE Mark in Europe and some other parts of the world that allows us now to educate the lung cancer community, specifically around mesothelioma, but bring tumor treating fields as a treatment modality to them earlier in our journey than we had the opportunity to do with GBM. So that's -- already we're starting to pass the footprint of what lung cancer will look like for tumor treating fields. With METIS specifically, the interesting thing about lung cancer is one of the core areas of lung cancer, primary lung cancer metastasizes to is the brain. And one of the challenges that we've seen in this area is the ability to get therapeutics into the brain, right? The blood brain barrier works like a filter and kicks things out that generally don't belong in there. And that's one of the challenges of developing therapies that need to enter the brain. With our therapy being a regional therapy and being an external therapy, the body is not doing anything to the therapy. We can actually give the tumor or the area of the tumor a hug like we do in the GBM space. And we can capture that area and treat the mets that are primarily driven by lung cancer. So the complement of METIS become really important now as we think about broader lung cancer opportunity with Tumor Treating Fields. So one aspect of lung cancer that we're excited about is that the work in lung cancer is just starting for us. LUNAR being one of the core aspects of our ability to treat primary lung cancer. But the opportunities then to make sure that we continue to expand beyond the eligible population of LUNAR is endless given all the development in the lung cancer space. And here also, what's exciting to us is taking advantage of the signals that we've seen both preclinically and clinically with IOs because IOs have a clearer foothold in the lung cancer space and building on that evidence, layering on tumor treating fields to whatever IO combination may become the standard of care down the road. So holistically, when we think about lung cancer, it becomes a really exciting long-term opportunity for us, starting with mesothelioma transitioning to LUNAR and then folding in medicine whatever else we may do on this front.

That's very helpful. Let's go to the second polling question, and I'm going to ask a question while people are answering that about the press release you put out yesterday for Breakthrough designation. But let let's go to the second question, David, only question. Okay. So as NovoCure's 4 ongoing Phase III studies, which do you think has the highest probability of clinical success in its Phase III trial? METIS from brain metastasis? LUNAR for non-small cell lung cancer? PANOVA-3, pancreatic cancer? INNOVATE-3, ovarian cancer? Or e, not sure? So while people are filling that out, actually, we saw obviously the press release yesterday on the Breakthrough designation I think that's for liver cancer. So could you -- what are the implications of that? How could it -- how does it benefit you?

Yes. No, I think it's a great question. And we're benefiting in the same way that any of these kind of device innovators are in the field. So this is an area I would say where your research honestly has been helpful as we're helping to actualize this for people just on the back of the [ MTIT ] update. But this provides 2 clear benefits, right? One is expedited review with the FDA and a dedicated team that's going to follow your package through. And the second would be the reimbursement implications post-approval, right? So I think clearly, what we're seeing industry-wide is that the regulators and the payers in Washington are understanding we need pathways to value innovation in life-saving devices. And we are as Class 3 life extending medical device. And I think that -- all of those advancements and just in the regulatory framework squarely help us as well. So 2 clear benefits, expedited review, that dedicated FDA team and reimbursement on the other side of approval.

Ashley, just curious, do you have Breakthrough or have you applied for Breakthrough designation for the other indications? I would think that you have an opportunity for some other indications, too.

Yes. So I mean, this is a new designation. So I would say we're certainly always looking at opportunities to optimize the framework. At the moment we have it for this liver cancer device only, but I would expect it to be a part of our strategy moving forward.

It's not too late on the other ones like where you've already started Phase III trials?

Yes. We don't currently have an application underway. I think the nitty gritty of how this plays out, we're going to see out over time. But again, what I will say is we're head and soul making sure we're able to take advantage whichever area, any area we can.

Okay. Okay. So stay tuned, basically?

Yes, exactly.

If you can you will. Okay...

[ I did better ] myself.

Okay. Okay. But you don't think that like the window is closed? I don't remember exactly when you need to apply. You don't think -- given that you're in a Phase III trial...

I think you should think about this more as we're looking forward for future indications, just given the regulatory framework.

Future, meaning ones that are not in Phase III trial today?

Correct. Correct.

Got it. Okay. David, do we have the -- all right drumroll. Well, interesting. 50-50. That's interesting. I mean LUNAR actually, you obviously got some positive news flow there. So it's interesting to see that it's even with brain metastasis disease, I might have expected LUNAR to be a little higher...

Well, it's just the same because remember, it's one cancer in both cases, right? So these are treating the same cell line. It's lung cancer in 2 regions of the body. So I think fundamentally, we can see a lot of support here for our lung cancer program.

Okay. Interesting Cool. Well, let's move on. We only have 3 minutes left. So then we have the CFO. So maybe we should ask some financial questions. Ashley, I'll ask the guidance question. It's like a badge of honor that you don't guide. It sounds -- I assume no plan to change that, and I'll just kind of tie in another question. You do, however, when you see kind of consensus, things that people are not -- or things that people are mismodeling, if you will, you will highlight them from time to time. So anything on this year or next year. I mean, I'm asking everybody about 2022, puts and takes, things like that. But consensus is [ 636 ] for you guys, EPS of $0.06. Anything you want to highlight?

Yes. So first of all, I think you are hitting the nail on the head that we do provide a fair amount of qualitative context, and I would look to that, right? We are certainly intentional about that. And so as we look forward, what we see as a story here where -- we still have a significant growth opportunity in hand, I think everybody at this company thinks that 40% is -- there's many more patients that could benefit from Tumor Treating Fields than are currently on therapy. That said, we do acknowledge we're 5-plus years post launch in our maturing markets, so in the U.S., Germany and Japan. And so the pace of that growth is moderating. And we're looking both -- we're still head down working to capture the full market potential, but we are also looking for geographic expansion. And those things take -- they take time, but we're actively working on them, right? So I would say our future growth potential, certainly, there's still opportunity in GBM, but the pace of that growth will moderate. And you'll hear us announce new markets, and you'll see academic-center penetration kind of trend over time. We are then also very, very much focused on investing in our future, right? So when we think about capital allocation, we have an engine of financial strength in the GBM business, the sustainable revenue top line, which is generating cash that we're able to put back into organic growth opportunities, investing aggressively in our clinical pipeline, but also our development pipeline, a significant amount of investments in the engineering and the technology improvements, which we've been making over the last year and will continue to make. And then also in growing new markets. So you will see us invest in new geographies and also in the work that we need to do to prepare for future launches. So we are heads down I would say in execution mode. And feel like we have the financial strength to continue to invest to drive growth in GBM, but also in future indications. But we would kind of moderate that statement with an acknowledgment that we're 5-plus years in our mature markets, and we -- there is a strength in a sustainable revenue line that comes from that.

All right. Anything -- actually we're out of time. Anything you want to close with before we end?

No, I would just, again, thank everyone for their interest. In 3 short words, we have an established commercial business, we have a really rich pipeline both on the clinical and product, and we have the financial strength that we think we need to deliver on both of those fronts. So I appreciate your interest, and we're here if you guys have questions on our ongoing business.

Great. Well, thanks so much for being here, and I hope the rest of the day goes well for you. Tesh, nice to meet you.

Thank you.

Bye.