NovoCure Limited (NVCR) Earnings Call Transcript & Summary

All right. Good morning. Why don't we get started here? I'm Jason Bednar. I cover med tech here at Piper. Next fireside chat is with NovoCure. Very happy to have with us the Executive Chairman, Bill Doyle; and CFO, Ashley Cordova. Thanks a lot both of you for being here today.

Our pleasure.

So why don't we start with maybe some of the recent updates, I do want to get into -- it feels like topic du jour for the past 18 months, LUNAR. But why don't we first talk about, you had some recent updates on Canada. You recently had approval for Optune in Canada. And congratulations on that. Nice geographic expansion, really to go along with some of your other efforts in Europe. Is the plan to wait to commercialize in Canada until you have reimbursement in place similar to how you're approaching other new markets right now?

Yes. So I always -- when I get these questions, take a step back, right, for everyone. And the first point I'd like to make is, it's clear to us that we have plateaued in our GBM growth over the last several quarters. However, we are not happy about that plateau and we're determined to continue to grow that base business. And we see growth coming from a number of different avenues. And I'll go in the order to get to geographic expansion. But first and foremost, we need to continue to penetrate in the centers where we are currently approved and reimbursed, principally the U.S., but also Germany and Japan. And you will have noted in terms of recent announcements that we have reorganized our U.S. efforts in order to allow better focus under a more senior leader in order to drive that. There's a lot going on behind the scenes, where -- we had great conferences at ASTRO with the radiation oncologists, and just a couple of weeks ago at SNO with the neuro-oncologists. And we feel good about our opportunity to further penetrate. Secondly, for every patient that we have who lives longer because of our business model, essentially a subscription model, where we are paid for every month of therapy, the better the patients do, the better we do. And we've talked for some time about new arrays, providing higher doses. And those arrays are now on patients. One of the things that we talked about in terms of recent announcements as we received the CE mark for those arrays, we were delighted with that, because for those of you who follow the med tech world, you know that the whole CE system in Europe is almost hopelessly backed up. So we really did a lot of hands-on work to get that through. And those arrays are now on patients, the first patients in Europe. And then that leads to the third lever, which is geographic expansion. Our business today is principally a business in the U.S., Germany, Japan, plus some other smaller countries, Sweden, Austria, Israel. And our intention is to continue to bring this therapy to patients who can benefit in other parts of the world. We've talked about France, and we expect France -- very soon to be treating patients in France. And among the next large countries is Canada. Now Canada, interestingly -- and we may have some Canadians in the room, but has its own completely separate regulatory process. So it's not CE, it's not FDA. So you have to go through a Health Canada process. That's different. I view this as yet one more validation of tumor treating fields that the Canadian health authorities have approved us for both newly diagnosed and recurrent GBM. And we've established an office in Montreal that will be our home base in Canada. Importantly, in Canada, we expect to have a commercial -- a thriving commercial business, but we also do a tremendous amount of clinical work, meaning clinical trial sites in Canada that we can leverage. So that was a very long way to your question, which is we will launch when we have reimbursement.

I will say there is the opportunity similar in the U.S., so province-by-province to go case-by-case. So there is commercial activities ongoing now. And we'll expect that to kind of expand as we get the more commercial-oriented provinces on board and grow through national public reimbursement over time.

Sure. So national reimbursement is what you're seeking. And any time line on what -- on how long that might take?

It will be -- again, I think 1 to 2 years is what we say in most markets to get full national, but we're going -- we're launched.

We will go case-by-case.

Right. So we're going to go case-by-case in the more business-friendly provinces.

Okay. You are going to launch. But -- okay, got it. And then France, Bill, you mentioned launching or treating the first patient here very soon. I think the original time line was by the end of this year. Does that still hold? I mean that -do you - or is it maybe bleeding into 2023?

It's still holding. I would say we're definitely there by near, but I mean we're in the final mile, I would say.

All right.

And that does underline the importance of our strategy, which is to establish a commercial presence, begin to work with the key opinion leaders who ultimately drive the decisions in these countries, engage the relevant payers and, at the same time, set up in infrastructure. So it's a lot of work to bring a new therapy to patients, train the doctors and get paid, right? And we've proven our ability to do this. We know how to do it. It's a different formula in every country. But as I said, we're on a roll now to go beyond our -- the footprint of today to a larger footprint of tomorrow.

All right. Last question before we get into LUNAR. What's the regulatory pathway look like for those high-intensity arrays as we think about maybe a U.S. or Japanese introduction?

So it's different in both regions. In the U.S., it's a PMA supplement without, we believe, clinical information. So it will be a paper filing. We've mentioned a number of times that we want to launch in Europe, get it on patients, get any information about human factors, that sort of thing and then put together our package for the U.S. So again, that's well underway. As I said, the arrays are on commercial patients in Europe as we speak, and we would expect that filing next year in the U.S.

Okay. Perfect. All right. So turning over to LUNAR, I guess, as I said, everyone's favorite topic right now. I'm sure you're exhausted having to answer these questions.

You don't say, right?

What's that?

You don't say.

Yes. So maybe -- in just maybe 30 or 60 seconds, I mean, I would love to hear your perspective on like why is LUNAR so important? It's caught the attention ever since it started as a Phase III trial. You have other Phase III trials, but this one carries more importance than others. And why do you think that is -- in my opinion, why do you think that?

Well, I'm not -- you've given me a time limit on this one. I'm not sure...

I got to keep you reigned in here.

In all of our work over the last 22 years, we have seen that Tumor Treating Fields properly tuned and delivered at appropriate intensities can kill any cancer cell that, if you will, gets in its way. Before we initiate a Phase III trial, we do a tremendous amount of work. And by the way, this work is required by the FDA to give us the clearance to start the trial. So there's preclinical work, there's work in animal models and then there's Phase II trials. I've said this before, every single one of these ever in our history has resulted in a positive result. And we wouldn't go into a Phase III program if we didn't have this -- if you will, the stairsteps of success. And we have as much confidence as one can have, I think, in our -- in the totality of our Phase III program. I'm not sure I agree that one trial is more important than another. However, lung is next, right? So for no other reason than lung is next, it's important. I think if pancreas were next, you might say the same thing about pancreas. Lung is also large. So I think that's probably the other reason. And then the third reason is we have 2 arms in this trial: one with chemotherapy and one with immunotherapy. And we've learned, I would say more recently -- I talked about the 22 years of development and research. It's been really over the last few years that we've really begun to understand and explore the powerful synergy between tumor treating fields and immunotherapy. So we'll have a data set within -- a Phase III randomized data set with that combo. So I think all of those things just kind of add up to it being really quite pivotal for our company.

All right. So then maybe building off of those 2 arms -- I mean, one of the questions I wanted to ask was, there's always been a lot of talk from buy side and sell side out there around whether or not the study is even going to matter in the current standard of care. So maybe taking a global view, because you do have 2 arms in the study, how do you see the label playing out and how will it be applicable in the U.S. and then in other markets where maybe the standard of care might be different currently?

Yes. So I'll start, and I'll let Ashley join me on this one because there are many facets to this question. Let me start with just the unequivocal statement that we believe this trial is important and relevant commercially, period. Okay? So this is a trial in patients who have failed platinum therapy. They can have failed platinum with chemo. They can have failed platinum with immunotherapy. When we designed the trial, we understood quite well that the standard of care was moving. And in fact, when we started it, immunotherapies were, I would say, mostly in the second line and have moved mostly to the first line. The number of patients diagnosed with non-small cell lung cancer, again, it's still the largest indication, is over 200,000. The number of platinum failure patients who seek therapy is in the 40,000 to 50,000 range. So we don't think the label on day 1 is relevant for the first-line 200. But at 40 to 50, it's still 4x the eligible patients of our GBM business. Those patients, if they have failed a first-line immunotherapy, can receive a second line different immunotherapy with TTFields, highly relevant. And again, depending on the patient and the first-line therapy, if they're going to receive chemo in the second line, this is tremendously relevant. So the folks who, I think, are trying to pick this apart, I think, are wrong. Also again, in my habit of taking a step back, our therapy is positioned as a backbone therapy to be used with whatever the best pharmacology is at the moment. And by proving that it works well with and synergistically with chemo -- I'll remind you, the chemo here is a taxane, which is our most effective, at least to date, chemo combination and proving that it works and enhances the effective chemotherapy. I find it hard to really make a credible argument that that's not relevant. The last point I'll make is we don't anticipate, and I don't think anyone who plays in the lung cancer arena would anticipate, that this is a one-and-done trial situation. So we've already announced our second trial with Merck. In first line -- Stage III first line in combination with pembro. There'll be other trials too. This is a big franchise. Our METIS trial in brain metastases from non-small cell lung cancer, even though it's in the brain, we group that in our lung cancer activities. So I think this is just -- it's the beginning. It's relevant. And there's going to be a lot more to come.

Okay. Let me ask one question because -- and I've gotten this question multiple times. How are doctors going -- or clinicians going to look at the trial results when you're evaluating after platinum failure, not necessarily platinum plus IO failure, which is going to be more of the current standard of care or current treatment regimen. Is that going to matter in the eyes of doctors?

So we -- this is the other thing that's true. So we have the endpoints that are specified in the trial. We will also slice and dice these data in every way imaginable. So I don't know the data. I don't know the patient cohorts. But I would anticipate that there are going to be patients in the trial who failed IO and then received this in the second line. And we'll look at all those data and we'll share the relevant data with the experts.

Okay. I know a lot of it has been focused on kind of the U.S. market and I'm guilty of this as well, just like the process that will then take place, assuming everything looks good with the data and you move forward with regulatory approvals and whatnot. But what about the European market, Japanese market? I mean, you have existing commercial infrastructure there. Or do you have a -- I guess, how are you prioritizing other, I guess, regulatory submissions or preparations for international markets for lung?

So again, first and foremost, we have to get the data, clean the data. And I think as you implicit in your question, the U.S. will be the principal focus because it's the biggest market where we sit. But in parallel, we will work to submit in the EU to focus on our German application and Japan. It will all happen in parallel.

Okay. All right. Any difference in, I guess, timelines that should be calibrated for? I mean we all -- and I know very well the U.S. timelines because we've talked about those directly. I don't know that we've had, I guess, a direct commentary on others.

Yes. I mean, again, I think all of this is a little bit speculation given what's going on at all these regulatory agencies. But I would think about those in parallel paths, particularly in Europe, with EMEA and with the CE Mark and the U.S. The one important caveat that I would just point out is that we don't anticipate going into markets with one first. So when you're looking at our footprint, we would anticipate applying in markets where we have GBM reimbursement established. And then in Europe, the timeline is largely going to be driven by the reimbursement discussions, not as much the regulatory discussion.

Sure. Okay. Taking the perspective from the physician community, this is -- you are going to be -- again, let's assume this all looks good and you're going to be commercializing this down the road. What's going to be different with the physician group that you're going to be selling into with lung versus, say, like a neuro-oncologist or radiation oncologist with GBM?

So it's interesting. We're learning a little about this as we go along. When we launched in GBM, the fact of the matter is, we were sort of building the plane on the runway. We were a small private company, funded as small private companies are funded. We have much more infrastructure and much more resources, quite frankly. And so our launch activities have commenced. We have, for instance, a new website that is an educational website on Tumor Treating Fields. We've attended ESMO not as a neuro-oncology company, but as a cancer therapy company introducing Tumor Treating Fields. What we're learning and what we have learned is these clinician groups are in many ways completely different from one another. So I think we will benefit from the fact that we've established this strong presence in neuro-oncology, so it's not going to be the first indication. But the behavior of the clinician groups is almost completely -- first of all, they're completely different groups. They're trained in very different ways. And we see almost no overlap in terms of behaviors. And the same thing is true with -- so we're -- recall, we're also looking forward to an ovarian readout in the middle of the year. So we've already started our ovarian activities as well. And that group is completely different from the thoracic and from the neuro group. So they really are separate distinct groups of clinicians.

And we've talked at length in the past on maybe some of the hesitation from some of the neuro-oncologists at academic centers with GBM. I mean, is there -- how would you, I guess, think about that in the context of lungs? Is there -- do you think -- do you see the same maybe reticence amongst the thoracic surgeons? Or do they look at data and think about treatment protocols differently?

So the dynamics are different, I'll just say that. And I'll say one fact about lung. Lung is a more competitive space. There's a lot going on, a lot of new things in lung. In one sense that's good, because these are doctors who are trying lots of new things. On the other hand, we're going to have to capture our share of voice in this more crowded space. Now again, we're not trying to say use our drug and not this drug, right? We're trying to say use whatever drugs you want to use and then add Tumor Treating Fields to the backbone. I'd say in ovarian, in the ovarian space, there are things going on but less in general. And we've seen almost a "when can we have it, when can we have it" in ovarian, which, again, is a little different than the other 2.

Yes. Is that -- I mean, do you think that's -- that was evident just in the -- and how quickly that trial enrolled?

I think that's part of the evidence supporting what I just described.

Yes. Yes. And as you said, we're -- I think this is the -- we just had just recently -- coming out of the third quarter call, I think it's the first time we had a firm time line on when we're going to see the -- at least the headline data. So second half of next year. Is there -- I would think it's probably third quarter if we're using...

I mean, 18 months after LPI in October of last year. So that puts us to kind of early Q3. But then you need the time for data cleanup.

Okay. And then -- and similar to how we thought about the timelines around LUNAR. Then you've got full data. That probably comes...

At a medical conference.

At the next appropriate medical conference.

Okay. Yes. Great. I do want to leave some time for maybe the current commercial GBM business that you have because it's sizable and it's been very relevant. So Bill, you talked about the kind of reorganization, putting Frank Leonard and heading up that business. I like Frank a lot. I guess any sense of what's going to change under Frank? What is he going to bring to the table to really kickstart the growth back in that business?

Well, I'm trying to go through -- so there are a lot of things. So first of all, Frank is coming in at a higher level in the organization. And he will have every part of the organization relevant to driving that business, reporting to -- including medical, okay? So the medical education used to report into the CMO. The sales reps would report into the VP of Sales. And even in a -- I guess, we're no longer quite a small company. We now managed to get ourselves to being a medium-sized company. But making sure that everybody is on the same page and driving without bureaucracy, having that focus at -- with a leader who has a tremendous track record of success in the company, knows the customers already and is dedicated to restarting growth in the business.

Okay. All right. Maybe over in Germany, Ashley, has the situation there stabilized? Are you starting to see new scripts flow in the door in a more normal fashion with patients qualifying under the new coverage requirements?

Yes. I think -- I mean, you've heard our message there in the second quarter and the third, and I would just reiterate those if you go back and look at transcripts. Nothing has changed there. Stable is, I think, the point we've arrived at now. Now, we're looking forward to: How do we return to growth into the market that we had there? And that will happen, but it will happen over time. And I think that's what we're seeing. That physician behavior -- our reps are out in the field educating on the checklist for exactly who and how they get covered. But these are physicians that were used to putting in kind of any patients that they wanted to on therapy. And so there is some change management at the prescriber level there. But I would say stable, yes. And now we are very much focused on enabling that growth. But it's going to play out over the course of quarters.

The growth is going to play out or like...

Yes, I would say. I'm looking ahead through like 2023, 2024 to get back to where we were in Germany.

Okay. Does it go -- I don't want to say does it go parabolic. But I guess I just read -- it sounds nonlinear, I guess, is the way to think about it.

It's not linear and it -- I think in some ways that's due to the success of our subscription model, right? We have a large volume of patients that are on for extended durations of time that were started under the prior coverage criteria. They continue to do very well. So it's a factor of patient mix and getting enough new patients on and having patients unfortunately terminate treatment. And we have a very sticky group of patients that are doing well that have been on since prior to the updated coverage criteria. So we just have to have the patience for that patient mix to play out over time.

All right. I'm going to sneak in one last question for you, and I know you love this one. So in lieu of guidance, you had active patient growth commentary out there to start this year. Does that come back next year?

Yes. I mean I think what we've always done is looked at consensus of making sure that everybody has the tools that they need to adequately model this business. I think on an active patient and a patient growth perspective, people have heard our messages very well. Now we're focused on making sure that the way that they model the revenue associated with those patients is consistent. So you hear us talking about modeling the core patient volume times our global ASC, times 12 months of therapy to get to a number. There is still a fair amount of aged Medicare claims and the numbers we want to be very clear on, on the fact that our business moving forward is not dependent on those aged claims. That's really in the core business. And that's what we would ask people to look at.

That's a maybe?

Yes.

All right. Well, thanks, we are out of time. Thanks so much, Bill and Ashley, for joining us. And thank you, everyone, for tuning in.

Thanks for your interest in NovoCure.