NovoCure Limited (NVCR) Earnings Call Transcript & Summary

Good morning, everyone. My name is Jess Fye. I'm a senior biotech analyst at JPMorgan, and we're continuing the 42nd Annual Healthcare Conference today with Novocure. I'm joined by the company's Executive Chairman, Bill Doyle. He's going to give a presentation on the business, and then we're going to move into Q&A. If you're in the room and you want to ask a question, you can raise your hand, someone will bring you a microphone or you can always submit questions to me on the portal. So with that, let me turn it over to Bill.

Thanks, Jess. Thanks, JPMorgan, and welcome, everyone, to day 3, first thing in the morning. I'd like to introduce Ashley Cordova. Many of you know Ashley. But she's our CFO and she'll be joining me for the Q&A today. I hear a little bit of feedback. Are we okay? Okay. Great. So first off, I'll be making forward-looking statements. You can find our full disclosure on the investor portal. But let me start with our mission, which remains unchanged. At Novocure, we are working with our patients, and we'll talk about that -- let's see. The slides are not moving forward. Okay. I'm one behind here, but that's -- now it looks like we're where we want to be. Okay. I think we're synchronized now. Thank you very much. So at Novocure, we work together with our patients and our team to extend survival in some of the most difficult to treat cancer, some of the most difficult diagnoses. And we do this by developing and deploying our novel platform Tumor Treating Fields. And just for those of you who are less familiar with Novocure, Tumor Treating Fields is a completely unique cancer-fighting modality, was invented by Professor Yoram Palti at the Technion about 20 years ago. And what Professor Palti discovered was that, while it had been believed that electric fields go around cells and, therefore, have no effect on the organelles within the cells, if you tune them specifically, those electric fields can enter the cell and push and pull on the organelles and, in fact, cause cancer cell death. So we tune electric fields to specific cancer types. And I always like putting these little videos up because this sounds so incredible, but seeing is believing. So on the panel, on the left, this is normal cell division. You can see the chromosomes divide, the daughter cells form, and this is how 1 cell becomes 2, 2 become 4. But in the panel on the right, when that same cell is exposed to, again, an appropriately tuned electric field, so that electric field enters the cell, you now see that the mitosis cannot happen normally and the cell literally explodes. We deliver our therapy to patients via a wearable medical device. So this is another difference. We do clinical trials like a biotech company, but our therapy does not come in a pill or a bottle or a bag. It is delivered through this device. There are 2 components. The first is a reusable box. The current version weighs about 2 pounds that the patient carries. And then it is connected to disposable patches. And the patches are placed on the skin, in the region of the tumor. These patches are replaced about every 3 days by the patient. And this allows the patient to get continuous at-home therapy. I said that we work together with our patients. Our business model works in this way. We receive the script directly from the prescribing oncologists. Sometimes that's a medical oncologist, sometimes it's a radiation oncologist. And then our team delivers this system to the patient's home, trains the patient. And then, we bill the payer per month of therapy. So it's a unique mechanism of action, it's a unique delivery system, and it's a unique payment model that we've built. Our strategy at Novocure has remained unchanged for 10 years. It's based on 3 pillars. First and foremost is to drive commercial adoption in the indications where we have approval. Secondly, because this is a platform, we're focused on clinical trials to expand the number of indications and the number of patients that we can treat. And then finally, as I mentioned, because this is a device-based therapy, we have the opportunity to continue to improve the technology. This allows us to improve the efficacy, improve the comfort, improve the ease of use. And a corollary of this is that we continue to file patents as we make the improvement. So this whole strategy rests on a very substantial intellectual property platform that effectively creates an IP moat in the important geographies: Europe, Japan and the U.S. Notwithstanding tremendous macro headwinds in 2023, at Novocure, we made significant accomplishments in working toward our strategic objectives. So again, in terms of driving commercial adoption, we were very pleased at the end of this year to reach the milestone of having now treated over 30,000 patients commercially. That's principally GBM patients. But that's just a tremendous effect that we've been able to have on these patients and their families. We were also very pleased to continue to expand our geographic footprint. Our big markets going into the year were Japan, Germany and the U.S. We added France, and achieved reimbursement in France. Our launch was extremely successful, quite frankly, the best launch that we've had in any geography to date. And we're starting to earn meaningful revenue from France, and we expect that to continue to grow. Our France launch is really going to be a blueprint for us, and it represented sort of the culmination of all the things that we've learned to date. Importantly, and this goes back to expanding the commercial footprint, we also, and I'll talk about this a little more, but we were very pleased to submit our regulatory filings in Europe, U.S. and Japan for the non-small cell lung cancer indication. For any of you who have done this kind of work, you know how difficult it is to take data and actually turn it into a regulatory submission. And I'll show you a time line in a minute. But we expect approvals this year, and we will commence launch as soon as we receive those approvals. In terms of advancing the clinical pipeline, it was also a year full of accomplishment. We published the Phase III data in second-line non-small cell lung cancer. We're pleased to publish that in Lancet Oncology midyear. And we finished the enrollment in our METIS trial. METIS is the trial for brain metastases from non-small cell lung cancer. We also finished enrollment in PANOVA 3. PANOVA 3 is the trial in first-line locally-advanced pancreatic cancer. And this is new news that we announced yesterday, but we've also completed enrollment in our TRIDENT trial. TRIDENT trial is back to GBM, but this is a trial that is studying using Tumor Treating Fields earlier in the patient journey with radiation rather than waiting until after radiation. And there's significant reasons to believe that this will extend survival by starting the therapy earlier. And then finally, in terms of delivering product innovation, also a big year. So I've talked previously about our arrays. The arrays are the component that attach to the patient's body and actually deliver the energy. We've been working for many years on our next generation, I will say cleverly named our New Array. The new array is lighter, more flexible, easier to use, more comfortable. We received CE Mark early in 2023. We did a pilot launch in Austria and Sweden. The launch went as well as it could have gone. We're just starting to see year data in Austria. And all the things that we had hoped for are proving to be true in the field. And first and foremost, the patients are reporting a markedly improved experience receiving the therapy. And with the success of that pilot, we've now launched throughout Europe. And then finally, we have, back to FDA filings, we've completed, in this case, a PMA supplement filing in the U.S. And with a little FDA luck, we expect to be launching in the U.S. midyear. So now onto the future here. We went through a major exercise in the company to sharpen our focus going into 2024. And our focus is really geared to 3 key activities. We intend, and we expect and we believe, we can continue to grow GBM. I'll talk about this a little bit. But we have been flat in our established markets for the last couple of years. But we think there is significant opportunity to grow that base business. And we'll launch lung. As I said, we expect regulatory approval in Europe first half of the year; in the U.S., early second half of the year. We're preparing for that launch. And then finally, we continue to work to deliver our pipeline. So let me touch on each of these. So I want to remind everybody that one of the real differentiators at Novocure, compared to many clinical-stage biotech companies, is that we have an established profitable business in GBM. The business today is over $500 million. It's based on an NCCN Category 1 recommendation in the treatment of first-line glioblastoma. It really is built on the only progress that's been made in this field in decades. We're reimbursed in all of our key markets. And as I said, we ended the year with a record number of patients on therapy, close to 4,000. But only penetrated 30% to 40% in those markets, and that's where the -- where the opportunity comes. We built this business on this clinical trial. And again, for those of you who have been following us, you'll recognize the 14 clinical trial. In this clinical trial, we showed a meaningful increase in the median survival. But from a patient's perspective, what's really important, and when we talk to patients, medians, what does that really mean, they want to know how's my long-term survival? And in this case, we now have the data, the 5-year survival is almost triple in this trial from 5% to 13%, with nearly half of the patients alive at 2 years. But as impressive as this was, and again, this led to the regulatory approvals and the reimbursement, we now have real-world evidence. And the quality of the real-world evidence that's available to all companies, but to us as well, is really markedly different than was available, say, a decade ago. So what I'm showing here is data that we've purchased, which is every single patient that was placed on Optune in the U.S. in the second half of 2019 -- and I picked 2019 because I wanted to get out, show patients with 4-year data. These patients are not showing a 13% survival. In the real world, they're showing close to 25% of the patients. And this compares to, without Optune, survivals in the low single digits. So these are new data. This is the first time this has been shown. We're working to get this in publication form so that we can use it with our prescribers and I'll note the other number on this page. Many of our patients today start the therapy and they continue until they progress. But some patients, and this has been our recommendation, continue the therapy through progression. For those patients, it's not 24% 4-year survival. It's over 30%. So we're approaching 1/3 of the patients who are long-term survivors when they use Optune through their patient journey. And this is before some of the new things that we're doing. Again, I mentioned TRIDENT, bringing the therapy earlier. We've talked previously about -- and I'll mention trials that are ongoing, combining with immunotherapy, all which promise to move that 31% even higher in this terrible disease. So now onto lung. We presented these data at ASCO, back to another extremely difficult-to-treat condition. These are in patients that have failed platinum-based chemo plus standard of care in the first line. So they're now on to the second line. This is really the first progress since the original Keytruda KEYNOTE-010 trial. And again, you see the data. Significant improvement in the median and a very important improvement in the tail with this data. And these data are now submitted in Europe, to the FDA, and in Japan. Now one of the things, and I want to address this head-on, that has been raised about these data has been, okay, this is really important, but we -- but does it matter given that you've shown really important advanced, particularly when you're combining with immunotherapy, but that immunotherapy has now moved to the first line, will it be used? Will our therapy be used? And our answer is, we believe, and we believe, based on the conversations that we've initiated with prescribers, that we have an opportunity that's at least twice as large as our GBM opportunity in non-small cell lung cancer. There are approximately 114,000 patients in this category, Stage 4 metastatic disease. 60% of those will receive platinum-based chemotherapy. And of those, the vast majority will progress and about half will seek therapy in the second line. This gives us this 30,000 patient target for whom doctors have nothing essentially. They have old chemotherapies, and that's it. And so when we have the discussion, our therapy with no toxicity is something that, again, we believe many of these patients will seek as a means to extend their survivals. So where are we in the path? There's a lot of check boxes here. This again is a slide that we've used many times. I've talked about the clinical data. It's published. We presented not only at ASCO, but subsets of data at all the big lung conferences during the year. Big accomplishment from the regulatory perspective, everything is in, and we're now in the discussions leading to approval and labeling. And unlike GBM, when we were a small company, and we basically started our launch activities after approval because we had to, here, we have a full team that's focused on launch. We have education campaigns about Tumor Treating Fields in this new prescriber base that are up and running. DTC campaigns will follow, to get to the patients. And the KOL engagement, the ad boards, are important and ongoing. And then finally, going to expanding the pipeline, we expect 2024 to be a very big year. I mentioned we completed the enrollments of METIS and PANOVA-3. So we're now on the clock counting down till the time from last patient in. We expect the METIS data in brain mets from non-small cell lung cancer at the very end of this quarter, and the pancreatic cancer data toward the very end of the year. So 2 new Phase III data sets. And then I mentioned TRIDENT. TRIDENT will be a 2026 readout. That's a 2-year follow-up. So we continue. And of course, that's not the end. We have taken a very close look at our pipeline. And one of the opportunities and challenges when you have a platform technology that can be deployed against many, many difficult-to-treat tumors, we do have to pick and choose and focus. And our focus is on the indications where we have proof. So in GBM, I mentioned Trident, followed by KEYNOTE D58, which is the registrational trial combining Tumor Treating Fields and pembro, immunotherapy. In thoracic, I mentioned the METIS trial. We have also started recruiting LUNAR-2 in first line, again, with immunotherapy. And PANOVA 3 is followed in Phase II already by PANOVA 4. This is our partnership with Roche, combining immunotherapy with Tumor Treating Fields in pancreatic cancer. So it's robust, but it's focused, on these key indications. And so just to end the prepared remarks here. You may have seen an announcement that we undertook a reorganization at the end of the year. We believe this is what responsible management teams must do. We took a very close look at our organization. We, quite frankly eliminated some fat that had grown in the middle that was not directed at the key objectives that I've outlined. And we've reorganized the operations so that, again, to grow GBM. We now have a franchise with full span of control of all activities, generating prescriptions, getting patients on therapy, and then working with them to get the maximum benefit from that therapy. And this has allowed focused investment. So the GBM business is profitable, but we continue to invest for growth, but we're investing for growth in our non-small cell lung cancer launch and in the clinical trials that I described in GBM, in lung cancer and in pancreatic cancer. All of this leading to a path to profitability here in the foreseeable future. So I'm going to end on one last slide here. It's going to be a big year. We have METIS data coming, lung approvals that we expect and launch in all of the key markets. And then at the end of the year, the pancreatic cancer data. All of this built on this foundation that we will continue to report out this profitable business that we're focused on growing in GBM. So with that, I will end the prepared remarks. Jess, and we'll join Ashley. And I'm delighted to answer any questions that you may have.

Great. Thanks for the presentation. Heading into this launch in lung cancer, can you just elaborate on kind of how you're gearing up to launch in lung? And maybe elaborate a little more on your commercial expectations for Tumor Treating Fields in that setting?

Sure. So let's -- let me have Ashley answer the question.

Great. Thank you. I appreciate it. So we'll start in Europe. We've already submitted, we noted the CE Mark last year in June. So we would expect Europe to launch in the front half of this year. We'll launch first in Germany, and that's because we have a path to a named patient reimbursement in Germany. Our focus will be on the right patient, meaning they are on label, they have metastatic non-small cell lung cancer, they have progressed post platinum. Those are the patients for whom we think we will eventually get paid. And we're going to be really focused on a positive first patient experience. So demand is always important. We will be generating demand across [indiscernible] force that is ramped up and ready to go. But it's not kind of scatter shot demand. We really want to make sure that the medical oncology community understands the right patient at the right time, and it's generating a positive first experience which will turn into a virtuous cycle as we move through further adoption. We'll then repeat that process in the U.S. Again, the expectation is now, with the FDA submission in December, that we would have approval in the back half of next year. We will be hiring up a few...

This year.

That's right. We're in 24, and it's in the back half of '24. We will be hiring a field team over the course of the next couple of months. We have the key leaders already in place. And we'll be launching soon this year.

When we're looking towards that approval in lung, one of the questions we've gotten from investors around the trial design and then kind of evolution of the treatment paradigm over the past several years, do you anticipate any, like better pushback from regulators related to the trial design and that kind of shifting paradigm?

Yes. So we've definitely received that question. And I think it comes from maybe a misunderstanding about how the regulatory process works compared to the physician prescription process. So the FDA is going to look at the data, and we will develop a label with them based on the data. We expect that label to be consistent with the trial design and our achievement of the primary endpoint. So the prime -- and just to remind everyone, the primary endpoint is Tumor Treating Fields plus standard of care, either chemotherapy or immunotherapy, after platinum failure. That's the FDA process. The second question, and this is -- so we don't expect pushback from the FDA with respect to the trial results of the data. The second question is, given that KEYTRUDA has moved from the second line to the first line, will doctors prescribe it? That's not a regulatory question. That's a commercial question. And as I said, our belief is that there -- first of all, there's nothing for these patients other than old chemotherapies. We have the successful trial outcome. We have no added toxicity to the standard therapies. And we're being told by doctors, they have patients for whom this is appropriate and they will prescribe. Back to Ashley, we have to ensure that it's a good first experience and that they learn that this doesn't create a burden for them as prescribers. But those are really 2 separate questions, not the same question. And from the regulatory perspective, we don't believe it will be an issue.

Okay. So maybe kind of on that point, what has the kind of physician or KOL feedback been on the LUNAR data?

I was -- I'm trying to decide whether I should start or Ashley should start. So let me describe the process. So first of all, the thoracic oncologists really don't know much about Tumor Treating Fields at all, right, as a baseline. So we have been active in neuro-oncology for the last -- since really 2016, in the front line. And so this is a new prescriber group, where we really have to start with educating them about Tumor Treating Fields and the mechanism of action. We do that initially in ad boards, where we gather KOLs, 8, 10 and 15 together. And we start with a question, will you prescribe Tumor Treating Fields to your patients? And almost to the beginning, it's a small number. Then we educate them. We talk to them about the data. And by the end of the hour, we get a completely different answer. We get the answer, we have these patients in our office who are -- who have failed first line, but are still relatively healthy. They want to make it to the next milestone. They do not want to give up. That's the 50% of the patients. There is another 50% who are extremely ill and metastatic who don't seek therapy in the second line. But that 50% who do seek, they say this is a real therapeutic opportunity for those patients, both, by the way, with chemo and with immunotherapy. And many are talking about -- this is one term we hear a lot, which is smoldering progression. So it's progressed, but it has yet to explode throughout the body. These are patients that they keep on, either they keep on pembro or they'll switch to immunotherapy. And this has been a patient group that they've said, number one, is growing. And number two, is the perfect patient group for us to add Tumor Treating Fields. So then, the bottom line of all that is the clinicians, once with a little education. Again, we're not talking about a CME course, we're talking about an hour or half hour introduction, identify the patients in their practice for whom this would be appropriate.

And maybe, I think you flashed it up on the slide, but maybe we could spend a little more time on LUNAR-2 and just take us through how it differs from the original LUNAR trial and maybe touch on kind of enrollment?

So we -- so it's first line. That's the takeaway. So it takes the LUNAR protocol in combination with IO and moves it frontline, right? So it's metastatic non-small cell lung cancer, first-line treatment in combination with pembro. That's the LUNAR-2 trial design. We are fully through site opening processes right now, so that enrollment is up enrolling, but we're at the beginning of that phase, and we'll give clear line of sight to final data once we have kind of enrollment at a tick that we can predict.

And we believe this is the natural progression, right? We have these great data in second, third line. And that's where one needs to start in cancer therapy development. But this therapy with no toxicity that shows this tremendous synergy with I-O belongs in the first line. I mean one thing that has been pointed out to me, our data in the second line is as good as the pembro data alone in the first line. So that gives you some perspective on the additive benefit of combining these 2 therapies.

And I guess, just sticking with that for a minute, I'm sure you want to kind of get to that data as quickly as possible. Is there anything you can do to kind of speed enrollment for that trial?

I mean everything we can do, we are doing, is the short answer, right? One, it is a competitive enrollment space, so it will have to play out. But we do have another trial, which is the KEYNOTE-B36 trial, which is a Phase II trial, also looking at first line, combination with pembro and mono -- just the doublet Tumor Treating Fields and pembro. That's a smaller 100 patient trial, that will read out in the interim. So we'll have an early look on the first-line combo as we're waiting for the LUNAR 2 data with the KEYNOTE-B36.

Got it.

And of course, that's precisely designed to provide these data faster than we can do a full randomized trial.