Good morning, everyone. My name is Lei Huang with the Wells Fargo MedTech Research Team. Welcome. I am pleased to have with us NovoCure. From the company is CEO Frank Leonard. Thank you, Frank, for joining us.
Thanks, Lei.
Let's dive right in. You've had a very exciting launch with Optune Pax, and that's going very well, generating nearly 600 prescriptions so far, close to 300 active patients on therapy by the end of the quarter. Any update you can provide as far as that commercial launch, prescriber mix, where the product's being used, et cetera?
Happy to provide an update. Also just want to start by saying thank you to you and to Wells Fargo for covering us with Larry for so many years, and really being very detailed in your coverage of NovoCure. We are very excited about our launch with Optune Pax. As a reminder, we received approval for the treatment of locally advanced pancreatic cancer. This is Stage III pancreatic cancer. It is an indication that hasn't had a new therapy approved in over a decade, and we were really pleased with the clinical interest shown in our data from our Phase III trial. As Lei mentioned, we had a really strong launch. Q2 was our first full quarter in market. We finished with about 285 patients who are on therapy.
As we said on our Q2 earnings call, we're well ahead of our expectations in terms of the number of practices prescribing, the numbers of patients on therapy. As we enter into this third quarter, we do have a device. It is a device that's based on clinical data similar to a biotech product, but it is a device-based product. Our effort right now is to ensure that we consolidate the interest that we've seen, and that we take the prescribers who maybe wrote one prescription to wait and see, and we convert them into being multiple prescribers.
We're not giving specific top-line guidance of where we think run rates will fall. We are saying we see significant clinical interest in the product. We believe that our stage of disease, as well as being a first-line therapy, differentiates this against durvalumab, which we can talk about in a little bit. We do think, as a device-based launch, it's not the hockey stick of a pure biotech launch as we go through that process of making sure the initial prescribers have very strong confidence in the product going into the quarters to come.
That's helpful. Just on that, with the 600 prescriptions in roughly four months, that's about 150 per month run rate. Is that the type of run rate we should think about for Q3, Q4?
We're being really careful to not give out specific prescription guidance because I think, as we saw in the initial launch, particularly in the first quarter, the physicians are still being educated, so sometimes there's prescriptions that come in, it might not be the most appropriate patient. We're committed to growing active patients, as you've heard us say in other indications. We really look at active patients as that key metric, and we're continued to having growth in active patients over the year to come and even out into the future because we do think this is a very sizable market, but it's one where we are introducing the product to the physicians for the first time right now.
Got it. Any color on that conversion from number of prescriptions to active patients? It has been roughly 50% so far, but obviously a little early.
Yes, the interpretation of how you look at prescriptions turning into active patients typically takes a few quarters to develop, and in the publicly reported numbers, it is probably hard to interpret that metric right now. But when we look at it, looking at the patients that we are treating with pancreatic cancer, we compare them overall to patients with GBM from a health perspective, from an urgency perspective. We would say for right now a good benchmark would to be in that 70% range, that we are expecting about 70% of prescriptions to convert. Okay.
To be clear, is that what you are seeing right now, or that is what you expect on a kind of normalized rate?
That is what we are seeing right now.
Okay.
I am conscious to say we do need to see another two quarters
Okay
to really feel confident saying this is the benchmark. Based on what we are seeing right now, we think it is reasonable to use the benchmark from GBM, which is approximately 70%.
Okay, that is helpful. Let us touch on the approval of KRAZATI recently. How does that launch factor into your Pax momentum second half this year, going to next year? Obviously, there has been investor concerns about the sustainability of the momentum we have seen in Pax given the new competition. Any color from the field as far as how physicians are thinking about their KRAS inhibitor versus TTF?
Absolutely, yeah. I will start by saying, as most people in the room, we got into healthcare because we wanted to make a difference, and it is an incredible advance to see adagrasib coming to market in an area where physicians and patients have been desperate for new treatments. We welcome the addition of the therapy to pancreatic cancer. I will start by, again, going back to the differentiated stages and lines of therapy where adagrasib is now approved, Stage IV metastatic disease, second line. Our approval is locally advanced pancreatic cancer, so Stage III, first line. When I think about the impact of adagrasib in the market today, I separate it into two different areas.
One is when you speak to a physician about the clinical data supporting Optune Pax and the patient profile who could benefit from Optune Pax, we see very clear interest. We see very clear differentiation between Optune Pax treating a focal disease, a local disease that still has the potential to be a singular target of our local regional therapy. Whereas durvalumab adagrasib is looked at this, essentially a second line, let's knock down as much metastatic drug as we can. And we see the clinical differentiation in how our product is perceived relative to durvalumab adagrasib. That being said, there's a second component to the reality of having the two products in market, which is they are in the middle of a launch where they announced they had more than 2,000 patients on therapy from their early access program.
If you can imagine being a nurse in a clinical practice that's never used durvalumab adagrasib before, and suddenly you have 10 or 20 patients on therapy with significant, essentially skin irritation, there's a lot of effort that that practice is now making to take care of those patients. And I think we do feel that from a practical standpoint of saying, "Can our sales rep get back in? Can we make that second call? Can we talk to you about how your patient with Optune is doing?"
There is a lot more activity in the market right now that those practices are also practically trying to figure out how to integrate durvalumab adagrasib, at the same time they're integrating Tumor Treating Fields. Again, going back to the big picture, we see that the clinical value of our PANOVA study is recognized. The differentiated patient population is recognized by the physicians. But as we go through this process of really ensuring we consolidate the interest in Optune Pax, we absolutely acknowledge that there's a pure mind, I should say, time share of the practice that you can get to, that we're feeling.
Okay. That's fair. You've given some color around what you expect lung and pancreatic revenue could be this year. I see you factored in this competitive dynamic into that outlook for the rest of this year.
We have, yes.
Okay.
As you know, we updated the guidance in Q2, and took into account everything we knew at the time, including the pending adagrasib approval.
Okay. It has been early, but kind of in line with what you have been thinking?
It has.
Okay.
I think, as we may touch on later, we've been very pleased in the pancreatic launch that we've already secured our first coverage policy from a major payer. We've had some of these tailwinds come in that have made us confident in our revenue guidance for the new indications.
That's perfect. You've talked about running a trial with TTF combination, I guess with KRAZATI. What are the next steps in the trial? Is that something you can share what you hope to learn and the timeline?
Yes, absolutely. What we've announced is that now that adagrasib is approved, we are able to use it in its commercial setting, so second line, stage 4. We can pursue a clinical trial with Optune Pax and adagrasib in that indication. The immediate next step is that we have to update our protocol to fully reflect the label for adagrasib. Now that we have that label in the last two weeks, we've updated the protocol, and we'll be approaching the FDA soon to file the IDE to run a device-led trial, with the concurrent therapy of adagrasib.
From there, what we're targeting is that we want to ensure we can give physicians a clear set of guidelines around how it could be safe and feasible to use the therapies together if they choose to do so. From there, we would build potentially into a new clinical program. At a minimum, because these two therapies are both new, because both therapies do have an element of skin irritation that can come up, we want to make sure that in a clinical setting, we address those concerns and document them and really make sure we understand how the therapies can be used together.
Got it. Is this something we could see launched next year, perhaps?
We haven't given specific guidance, but typically to get through an FDA process, it's a few months. I think reasonably at this time of year, we're looking at the early part of next year, yeah.
Got it. Okay, that's helpful. You mentioned initial coverage for Optune Pax. Perhaps you can expand on that. You said year or two full coverage. What can you say on the commercial and the Medicare side at this point?
Thank you. Yeah. For everyone in the audience, our product is provided to patients in their home. We are providing the device directly to them, so we qualify as durable medical equipment. We fall into this very niche area of reimbursement. Because of that, because we have to work through coverage both with Medicare and payers, we typically expect about a year to two years between initial launch and when we've established at least the beginning of broad-based reimbursement coverage. Typically, a year for private payers, more on the two-year side for the Medicare process. We still think that's in line with what we're expecting. I think on the private side, we're ahead, having one of the big payers already come on board. We're ahead on the private side. The next major milestone here will be to secure inclusion in the NCCN guidelines.
I assume you maybe want to talk about the NCCN guidelines as well. The NCCN guidelines for pancreatic cancer have historically been updated once a year. We unfortunately didn't have our FDA approval at the time that last year's guideline review was done. We've resubmitted now with our approved labeling, and we're just waiting for that guideline to come out. Hopefully with that guideline being published soon, we can then trigger the next leg in the process, which is pursuing Medicare coverage.
Got it. Did you file for category one with the guidelines?
You don't file for a specific request in terms of coverage. You simply just file your data, and it's up to them.
Okay.
As many people may have noticed, the NCCN while there's one overarching organization, every single disease committee has its own rules, its own cadence, its own willingness to make updates, and so, it's all quite different as to how the guidelines get updated.
Got it. For GBM, as far as category one guideline, was four or five years after the newly diagnosed approval. Would you hope to be sooner than that for Optune Pax?
Yes, the answer is yes, and let me give the context about NCCN guidelines. The NCCN has different rating systems. Essentially, favorable ratings start with 2B, which is a lower level of evidence and some disagreement. 2A is a higher level of evidence, but still some disagreement, and one is uniform consensus that the treatment should be used. Typically, you are able to start to receive reimbursement, especially with private payers, around the 2B recommendation.
2A is actually a pretty solid recommendation that also leads to Medicare approval often, and then one is obviously the gold standard, and it's outstanding. In terms of our launch in GBM, it did take five years to get to the category one recommendation, but from memory, I want to say it was 18 months after the trial data was available, we had achieved the 2A recommendation. Oftentimes, there might be a stepwise function where it's an initial rating, and then it can go up over time as you add more evidence. I don't expect it to be five years, is the short answer.
Fair enough. That's helpful. Then just wrapping up on Pax, I know you guys haven't given a long-term revenue outlook, but if we look at GBM, about 10 years after the newly diagnosed launch in the U.S., global revenues was $650 million or so. How do we think about pancreatic in that context? It's a larger TAM. We've seen pretty good uptake initially. Any color around that?
Yeah, I think that we do. I wouldn't look to the 10 years as a specific window because it's a different context. We were a smaller company. We had to launch more sequentially overseas. I do think thematically, though, that the launch will pursue a device-like launch curve. We do have to go through the reimbursement process in every single country. We need to establish these relationships with practices. While we're not giving a specific years or a peak, I would just say that we think this is a big market. It's as big or bigger than the current GBM market, in the U.S. specifically. We do think it'll be a multi-year process to really ramp it up to the point where we've kind of left the launch phase and we're more into the incremental growth phase.
The only other thing that I would point out that we haven't talked about is that in Japan, the incidence of pancreatic cancer is actually significantly higher than it is in the United States. In Japan, we're expecting regulatory approval for Optune Pax at the end of this year with a reimbursement approval coming next year. I would just encourage everybody to look at that dynamic of our growth story over the next two years, that we really will have not just the U.S. being able to drive growth, but Japan driving growth in Optune Pax.
That's helpful. Let's move on to a few of your other products. Optune Gio for GBM, your flagship product. Active patient growth was pretty strong in Q2, up 11%, including 8% growth in the U.S. What drove the strength in the quarter? Perhaps you can talk about what's sustainable going forward. Your guidance implies slightly slower growth in the second half for GBM versus first half. Anything you can say beyond 2026, kind of what's a good growth algorithm for that business?
Yeah. I would just start by saying first, we've been incredibly pleased over the last three quarters, so Q2, Q1, and Q4 of last year, with our GBM franchise for Optune Gio. The truth is that there's not one exciting issue or change I can point to and say, "This is really what drove growth." To be honest, it falls into two categories. One is simply we've made investments over the last three years to upgrade our software, our patient targeting algorithms, which are very complicated. This is a little-known fact, but GBM doesn't have its own ICD-10 code. Even though there's more than 12,000 patients a year who have the disease in the United States, it's very hard to target down from the full number of brain tumors into GBM.
As the only branded product pursuing GBM, we've actually had to build those algorithms, work with our vendors, and our team has gotten better at, quite frankly, chasing down where the patient is at the moment when they'd be eligible to use Optune Gio. We've coupled that with the fact that now with our larger sales force that's also detailing to non-small cell lung cancer and pancreatic cancer, we have a much bigger breadth of reach than we've had historically. We've just been really pleased that when the team had all the right elements in place, they've started to drive that growth in the U.S. I'm speaking to the U.S. specifically. To the question of the trend going into the end of the year, there's not really a change in what we view as the momentum.
It's just more the comps get tougher because all of our growth last year came in Q4, so it sort of skews the way you think about year-over-year trends. I'd also highlight in Germany and Japan, we've seen similar dynamics that we've continued to drive growth. We've also opened up Spain as a new market. We've opened up some of the smaller markets like part of Canada, Czechia. Our global markets franchise, which kind of covers all of the smaller markets, has really been successful at knocking down one small win after another. We do see the GBM franchise continuing to grow. We talk about the mid-single digits going forward being feasible, and we're very pleased at the progress we've made this year in GBM. Because we have the reimbursement in place, it drives straight to the bottom line.
That's helpful. On Optune Lua®® for lung cancer l aunch in Japan recently. Strong launch, 64 patients on therapy at the end of Q2. Help us size that opportunity, perhaps. Again, we know the TAM there is larger for lung than it is for GBM, and the standard care is different there versus in the U.S.
Yes. To set the stage, in Japan, we have launched Optune Lua®. It is consistent with our U.S. label. It is second-line treatment of stage four non-small cell lung cancer. As Lei mentioned, the guidelines in Japan over clinical treatment are more nuanced than in the United States, where immune checkpoint inhibitors are often continued into the second line if they have shown success in first-line therapy. Moreover, whenever possible, delaying or using less chemotherapy is a preferred treatment. We have seen physicians in Japan are more willing to use Tumor Treating Fields in the second line, continuing an immune checkpoint inhibitor from line one to line two or line three. That has really driven the clinical interest, and it is coupled also with the fact that in Japan, the primary treating physician is a thoracic surgeon who is typically more comfortable with devices than a medical oncologist.
We have seen a really nice setup. The last thing I will note is that when we launch in Japan, it is always on the basis of having national reimbursement. It is important to note that we have actually been able to reset our pricing in Japan, where the yen has obviously depreciated significantly over the last decade. Our pricing in Lua and our expected pricing in Pax is actually significantly higher than in GBM. We see a lot of really positive momentum. You asked about setting the stage for where we think the TAM could be. We have not commented yet on where we think we can get to in terms of a full TAM and peak penetration. I do think, if you look at these first couple of quarters, you can get a sense that this is a stable, growing business that is going to expand.
Got it. That is helpful. Let us talk about the product that is in the pipeline, Optune Maia.
Optune Maia.
Right. For brain mets. You expect approval possibly later this year. Talk about your confidence level in that, and can you comment whether you've had FDA labeling discussions so far?
Yeah. Optune Maia is our product to treat brain metastases from non-small cell lung cancer. The clinical trial, the METIS trial, showed that we essentially doubled the time to intracranial progression when applied after stereotactic radiosurgery. So patients received SRS plus Tumor Treating Fields or SRS alone and watchful waiting. And we were able to show that doubling in time to intracranial progression. We have had multiple interactions with the FDA at this point. We are entering into the final stages of that FDA discussion. We have set the expectation of approval by year-end. We do not comment at any more detailed level of where we are with the FDA other than to say that we reiterate that we believe approval is coming by year-end.
I think, what we see in this market, especially, I will just focus on the United States for a moment, we see tremendous clinical interest from the radiation oncology community to the point that the product has already been added to the NCCN guidelines with a 2A recommendation even before FDA approval. So we feel this really strong clinical pull. I think the challenge that we will have to address is with the payer community. It's always more challenging when you are treating not the primary tumor, but a secondary tumor.
And we fully acknowledge that we think we are going to be in the United States, we have really strong clinical interest to launch into. But we are being careful about setting expectations because we do not want to build up a massive clinical presence until we are really confident we can get over the hurdle with the payers of having them believe that time to intracranial progression was significant to the patient.
That's helpful. In that context, with the guideline and what you said about payer, how should we think about that commercial ramp, let's say in 2027? Would it look more maybe not like Optune Pax, more like GBM or Optune Lua®? Anything you can kind of point us to?
I think what we want to do is get to the approval with the full labeling before we start to talk about how we're going to think about the launch. I think the main message is that this is going to be a longer launch curve for us than what we saw in Optune Pax, where we had not only a lot of interest from physicians, but a lot of interest from patients. It was the first new product approved in a long time. I think this is one that we'll have to build over time.
That's fair. Just a couple financial ones. Last week, you issued an 8-K about unauthorized access to the company's information system. Obviously, we've seen that with the other companies across the MedTech sector. Can you give any update, and what have you said in terms of financial implications?
Yes. Lei, thanks for the question, because actually, I am glad I get to clarify this here. Number one, we have stated clearly there is no material financial impact from the cybersecurity incident. We were fortunate. I think like all companies in this space, especially companies that have access to patient information, we were targeted. We were targeted by a very sophisticated scheme. Fortunately, our internal capabilities kicked in, and we were able to prevent.
There was no access or control lost over our systems. Our devices were not implicated. As we have announced, it was fewer than 50 patients where PHI with identifiable information was tracked down. Overall, I would say we fell into the category of being lucky with ending up with no material impact, none that we are aware of today. We continue to evaluate the situation. The long and short of it is that we think we were fortunate, and it is a good wake-up call to everybody in the industry that this is something you have to deal with and take it seriously.
That is helpful update. I have to ask about 2027.
Yes.
You have not given guidance, but there is obviously a lot of interest across companies. The Street is modeling 12% top-line growth next year, roughly 5% EBITDA margin. Again, I know you have not given guidance. Can you just maybe give some color on the puts and takes for next year, both in terms of the top line and the profitability level, and any reaction you may have to the consensus numbers?
Yeah. To set the stage, when I took over as CEO in December of last year, one of the things that we recommitted to as a management team and through the board is that we wanted to put the company on a path to double-digit top-line growth in the coming years, plus a clear path to profitability. We took a very important first step this year in terms of issuing guidance for the year for 2026.
Yeah.
As you've seen in the guidance, we've also really committed that we need to get to adjusted EBITDA positive as quickly as possible. I would say that the founding or the foundational elements of how we think about next year is within that context, that we want to continue delivering double-digit top-line growth, then we want to achieve double-digit top-line growth, then we want to make sure we do that in the context of driving towards profitability. What I would say is that I won't comment on the specific numbers regarding consensus for next year right now, but what I will say is that, going back to Japan as a market, as I mentioned before, the incidence of pancreatic cancer in Japan is relatively higher than the United States. It's around three times higher.
When you look at that against a population of 120 million people, that's a pretty big market to pursue for pancreatic cancer. We also have the tailwind of the successful lung launch in Japan. We do think that between the U.S. market with Pax, continued growth in GBM around the world, then now this tailwind kicking on of Japan becoming a more integrated part of the overall portfolio, we're in a really good place for next year from a financial standpoint.
That's helpful. Anything more specific on margin improvement?
I would say on margin improvement, I guess two things I would always point out. Number one is that from an SG&A standpoint, and really from a sales and marketing standpoint, we have made the investments that we need to make to launch our products in Pax and Lua® by and large, there is some small incremental investments that may be needed in Japan. But we basically have already made those investments. We are repositioning our investments in lung into panc.
So we do not see a stepwise growth in sales and marketing coming. We continue to be very vigilant about G&A spending. We are looking at anything we can do there to hold it flat or at least keep it in line with inflation. The biggest area where we have to focus is on R&D. The company invested a little bit more than $200 million in R&D last year. As I think you heard on, or I know you heard on our Q2 earnings call, we have significantly resized one clinical trial to result in $90 million of savings.
With that change, we can now commit to saying we can hold the $200 million level of spend. I mentioned I have just gotten back from a trip to Israel where I saw our R&D facility, and we are really taking a look at everything right now and asking, within this, what is the right level of R&D spend given our size, given our goals and aspirations? We will continue looking there, but as a baseline, what we have committed to is sales and marketing, we think we have right-sized it. G&A, we want to hold the line. R&D, we are committed to the $200 million level. That alone, we think, puts us on the path to adjusted EBITDA positive and cash flow positive. From there, we will continue looking at the $200 million to see what is feasible.
That is super helpful. Just going back to a couple of the products. On Optune Lua® in Japan, you talked about the standard care being different versus U.S., and it is more consistent with the label. Is the standard care changing? Is that dynamic changing in Japan? Does it look more like the U.S. going forward, or is it fairly stable, just in terms of implications for continued uptake of the product?
No, we think in Japan, the market has been pretty stable, especially in the second line. There hasn't been an introduction of new products. I think if anything is slightly different in Japan than the U.S., there's the guidelines generally discourage the use of docetaxel.
Okay.
Which is another reason why we've seen Optune be a really viable product with an immune checkpoint inhibitor. So no, in Japan, we don't see anything coming up in the market that would be disruptive to the lung business.
Okay, great. Going back to Optune Pax. You also recently received approval in Europe, but that label's a little bit different versus the U.S. label.
Yes.
Can you just talk about that difference briefly and any implications for the adoption over there?
Yeah. In most of Europe, nab-paclitaxel gemcitabine, that combination is approved for use in metastatic pancreatic cancer. It is not technically approved by the European Medicines Agency for locally advanced stage III. That being said, most countries, including France and Germany, in the local clinical guidelines and the local reimbursement practices, they do include nab-paclitaxel gemcitabine in their treatment regimens. When we approached our CE marking body about our label, we had to make some modifications versus the U.S. In the U.S., we say very clearly that it is with nab-paclitaxel gemcitabine because those are generally accepted by FDA as approved. In Europe, we need to be more explicit so that the payers understood that we did not seek an approval for those drugs in that indication.
Okay.
But if it is consistent with your local practices, then it is okay to use them together. It is a very technical answer. The main point is that it is a technical nuance in how the labeling had to be done. We do not really expect it to be different in terms of the patient selection process. We have launched in Germany, and we are looking forward to ESMO in the coming weeks in October, where we are really going to have our official launch at that point at ESMO. More to come on the earnings call.
That is great. Lastly, on Japan, you said that approval is coming soon, and you will launch with national coverage.
Yep.
Talk about the timeline for that.
We've said that we expect approval for Optune Pax in Japan before the end of the year. Then historically what we've seen is that anywhere from one quarter to two quarters later, if you're successful, you receive your national reimbursement. So we're saying in the first half of next year, we'd be able to launch with national reimbursement.
That's great. Thank you. We covered a lot. About a minute and a half left or so. I will leave you, Frank, with the closing remarks, and thank you again for joining us.
Thank you. Again, thank you, Lei. Thank you to Larry as well. Truly appreciate being here at the conference and to everything that Wells Fargo has done in terms of covering us for over a decade now. I would say that NovoCure's at an inflection point. We've gone through a period of time where we've grown into a global company. We, over the last six to nine months, have done the hard work to ensure that we control our destiny, where we've invested where we can see clear paths to growth. We've right-sized our P&L so that in Q2 we actually generated cash for the first time in several years.
I think over the coming quarters, what you'll hear from us is that as we've right-sized the financial house, we'll start talking more about what comes next from an R&D perspective and how we continue that growth beyond 2027 and into the future years. It's a fantastic technology that has no systemic toxicity, very low adverse event profile. It is an ideal product when you need to treat cancers that are tough to pursue with systemic therapies. That's why we think it's been so broadly adopted in GBM and including in pancreatic cancer, where the systemic therapies often struggle to get to the tumor. We're excited for the future.
Great. Thank you so much. Thank you.