Good afternoon, everyone. I am very happy to be here on the first day of the Morgan Stanley Healthcare Conference, joined by the management team of Novocure. I am sitting here with CEO Frank Leonard and CFO Christoph Brackmann. Thank you both for joining us here today. Hope you had a great day of meetings. Just a quick research disclaimer, you can see our research disclosures at morganstanley.com/researchdisclosures.
Frank, let us start with just a high-level overview of Novocure and where you guys sit today. For anyone following along that is not familiar with the story, maybe you can just give a brief overview of the company and what you are trying to achieve.
Yeah, absolutely. Kelly, thanks for having us here today. We have had a great day at the Morgan Stanley conference. Novocure as a company was founded a little bit over 25 years ago in Israel, and it was a classic story of innovation where a founder had a unique insight into how to disrupt cancer cell division using electric fields. The technology, over the course of 25 years, was advanced through multiple phase III programs, roughly $1 billion worth of research and development, and has really been shown, especially in glioblastoma, to have definitively changed long-term survival for cancer patients.
The way that I like to think about Novocure at this stage is that we have spent the first 25 years taking a really novel approach to killing cancer cells, and again, it is electric fields, which we can talk more about, applied in a way that they have not been used before, such that it is very low toxicity, no systemic toxicity effectively, but the ability to target multiple different types of cancer. We have kind of crossed from the startup phase of the company to now where we have built out a global, sustainable business. The question now is where can we best apply Tumor Treating Fields to help extend survival?
Great. Frank, you took over as CEO in late 2025. What are some of just the strategic changes that you have implemented since sitting in the seat?
Yeah, thank you. I have been joined through this process by Christoph, who we have really been side by side in that we came in to a really promising technology, and an engaged and wonderful team at Novocure. What we lacked coming into the start of this year was really the focus and the discipline on where are we going to invest, where are we not going to invest, and moreover, for our existing business treating glioblastoma, how are we going to return that franchise to growth? I think, coming into this year, our major priorities were, one, find a way to grow the number of patients using the device to treat glioblastoma. Two is finding the best way to launch in our new indications treating pancreatic cancer and non-small cell lung cancer, specifically non-small cell lung cancer in Japan.
Then three, we also needed to take a hard look at some of our operating expenses and make sure, particularly on the R&D line, that we were investing in a way that would lead to an appropriate return on capital. I am pleased to say that we have accomplished all three of those initiatives through the first half of the year. Moreover, I think one of the other major changes we have made is that we have begun issuing guidance for the first time in company history so that we can really have a much more streamlined conversation with our investors.
I want to go a little bit further into one of the points you made, which is this return to growth in GBM. Optune Gio , this is your most advanced commercial franchise, in GBM. Optune Gio has now been on the market for over 10 years. You did have a little bit of a moderation in growth in recent years, but now you have had several strong quarters in a row. So how did you guys reignite that growth in the business? I do not want to gloss over that point that you made.
Thank you. Well, I am happy to talk about it. Optune, as Kelly noted, Optune Gio was approved for newly diagnosed glioblastoma in the United States in 2015 and reached, at the time of peak market penetration, around early 2021. We more recently, starting end of last year and through the first two quarters of this year, have returned the business to growth, where it was this 8% year-over-year volume growth. We have done that through a couple of key initiatives. Number one, first and foremost, we have invested heavily into how we develop patient identification, segmentation, and targeting tools. Glioblastoma is thankfully a very rare disease. We are the only branded product in that disease, and so we do not have the luxury of having off-the-shelf tools. We really had to pioneer how do you find GBM patients.
Then the second area that we benefit from is that as we've launched our other products in non-small cell lung cancer and pancreatic cancer, we've effectively doubled our sales team. We're able now to cover the practices that are high volume for GBM that we've covered for years and expand into the community practices that may only see one or two GBM patients each year.
Okay. And you expect that growth to continue going forward and into 2027?
We do think that as we get to the end of the year, the year-over-year comps will begin to get more challenging. But on an absolute basis, we are committed to continuing to grow GBM as a single-digit growth franchise. To put it in perspective, in the U.S., we think our penetration rate is about 35%-40% of the eligible patients. And for a product that has shown durable median overall survival, two-year survival, and really good patient tolerance, we don't see any reason why we can't continue to push that for several years.
Okay. I know you've got an ongoing phase III trial in GBM, that's your KEYNOTE D58 trial. Can you give a quick overview of it and, if successful, what impact you think that could have on the future of this business?
Absolutely. Our current approval in glioblastoma is with what's known as the Stupp protocol. A patient will be diagnosed with glioblastoma, would receive surgery, roughly 90% of the patients receive surgery, followed by chemoradiation with temozolomide, and then maintenance temozolomide. Tumor Treating Fields from our clinical data set in EF-14 was added at the time of the maintenance chemotherapy and showed an improvement in survival. What we're now studying is, in addition to building off the Stupp protocol, is adding pembrolizumab on top of Tumor Treating Fields to see if we can extend survival even farther. We view this as meaningful in two ways. One, any improvement in survival is still needed. Median overall survival is still now hovering around 21 months when patients are treated with Tumor Treating Fields, which is a great improvement, but there's more to be done.
The second part of this is that immune checkpoint inhibitors have consistently failed when applied in all brain neoplasms, and specifically glioblastoma. We think there's a secondary scientific clinical validation that Tumor Treating Fields does lead to a modulation of the tumor microenvironment, which leads to a better response to immune checkpoint inhibitors. That's a signal that we've seen in pilot studies, animal studies. We've seen it in our non-small cell lung cancer data. If we can replicate that in GBM, it's, I think, a tremendous win for us.
That's great. We look forward to it. Sorry, what's the timing of that potential readout?
We intend to complete enrollment of the trial by the end of this year with an expected readout. It's an event-driven readout, but it would be around two years from now.
Okay. You mentioned pancreatic as an important area, an important launch for you. There have been some important developments in the treatment paradigm and the competitive set in pancreatic cancer, specifically RevMed's recent RASONQUE approval in previously treated metastatic pancreatic cancer. Can you give just an overview of the Optune Pax program and how you are thinking about[audio distortion].
stage III disease, non-resectable as a first-line treatment? RASONQUE is now approved for second-line treatment of metastatic disease, so stage IV. These are two distinct patient populations. Typically, metastatic patients will present, particularly at second line, with overwhelming physical disabilities, a need for emergent or urgent treatment. The locally advanced patients are typically presenting with general discomfort, but still really good health, and whether they score as resectable or non-resectable, they often start treatment with the goal of getting to a surgery.
Our device in that locally advanced population has the strong data set that indicates we were able to enhance local disease control, delay disease progression to the liver, and extend pain-free survival. So in that locally advanced patient population, we think we have a distinct population. That being said, first of all, for patients, this is a huge win now to have RASONQUE on the market. It is clearly an incredibly valuable tool for physicians treating patients with metastatic disease. We can talk more about some of the things that we are thinking about in terms of how do we integrate with daraxonrasib as it moves into other indications. Potentially, some of the other new cutting-edge therapies that are coming to market as well.
Okay. You have also just mentioned your plans to explore the use of Pax with KRAS inhibitors in the past. Can you tell us the rationale between combining that product with other potential programs that are out there?
Yeah. Absolutely. It starts with, first and foremost, Tumor Treating Fields across now multiple phase III trials as well as a huge number of pre-clinical trials, has always shown the ability to be additive, if not synergistic, when applied with systemic therapies. The great advantage of Tumor Treating Fields is that we do not have adverse events on a systemic level. It is really skin irritation has been the primary adverse event. You have low to no toxicity Tumor Treating Fields not inhibiting the systemic therapy of choice, and so the question becomes how do you best optimize both therapies? We have now completed our pre-clinical research that was then validated by the Mayo Clinic, looking at KRAS inhibition on top of Tumor Treating Fields, and we see really promising pre-clinical signals to say there is a rationale for bringing these two therapies together.
We've moved ahead and announced that we will open a trial as soon as feasible, where we will pursue a clinical trial with daraxonrasib on its label in metastatic second line with Tumor Treating Fields being added as the investigational device. We're going to make sure that we capture the safety and feasibility data to start showing doctors how we use these two therapies together.
Okay. Is it more about combining your technology with on-market programs, or can you think a little bit earlier about combining your investigational therapy with another investigational therapy, and how do you think about that combination strategy?
I'll turn this over to Christoph in just a second, who actually leads our activities in those areas. But for us, we are happy to work with any companies that are willing to work with us and that there's a good clinical rationale.
Yeah, as Frank alluded to, on the one hand, we are looking at an IDE trial with daraxonrasib and TTFields, and that will be though in their approved indication second-line metastatic. Now, we are also looking at a trial in our approved indication, locally advanced first-line, and that would be in combination with a not yet approved KRAS agent.
Okay. Makes sense. Can you just give an update, either of you, on the process of launching additional pancreatic cancer trials and kind of where you stand in terms of expanding that opportunity?
Yeah. We're actively looking at where do we go next within pancreatic cancer, and I think it's such an evolving landscape right now in terms of the entry of daraxonrasib, RASONQUE into actual commercial use, different RAS inhibitors, targeted RAS inhibitors. I think we'll have more to say as we go into next year. At a high level, one of the things that we've challenged our teams to recognize and address is that in these markets where there's emerging therapies coming to trial constantly throughout the year and really having the potential to disrupt the landscape over and over again, we need to be more flexible, nimble, and faster getting to data readouts that can lead to registration versus, I think historically, when we were a less proven therapy, we had the burden of doing these large drug-like trials, trying to get to overall survival.
But going forward, I hope that we can find a way to do that in a faster way.
Okay. I think, the idea of global expansion of your product is going to be a very important part of the growth story going forward. I know you've secured CE mark for Pax and have also submitted for approval in Japan. Can you talk a little bit about any upcoming European launches, Japanese approval expectations, and kind of how you think about the global opportunity here?
Absolutely. We are really excited and proud of the fact that Novocure, literally starting from being a startup in Israel, has now grown into having operating businesses in 16 countries around the world. That means we have this very diversified business now between GBM, PANC, lung, and we are excited to launch the Optune Pax device for pancreatic cancer in Europe already, in Germany, where we are able to go case by case in our launch. Looking ahead, we have said we hope to have approval in Japan by the end of this year with a reimbursement approval sometime in the first half of next year. Europe, Germany will go first, then we have to begin working on markets like France, where it is more regimented national reimbursement.
We think, to put it in context, I would think of the pancreatic business in Europe will probably take a year plus to mature, and we will really know where it is going. In Japan, we have national reimbursement, so if we are successful and we believe we will be successful, we would go into the first half of next year launching with national reimbursement, in an indication that it has a higher prevalence in Japan than in the United States.
Okay. It sounds like in Europe it is a little bit more on a country-by-country basis, working through the reimbursement, kind of, not challenges, but just working through that operationally.
Absolutely. There are challenges because it is a market where we will have challenges over payment levels, and so we are confident that we can work through those, but it can be a long process, as we have seen with GBM, to really get the European businesses up to stable levels.
Okay. Anything you want to mention just on the lung cancer launch and how you see that going forward?
Yeah. As you know, we launched our non-small cell lung cancer device, Optune Lua, in the end of 2024. It is targeted into second-line stage IV non-small cell lung cancer. This is a very sick patient population. In the United States, unfortunately, the data from our clinical trial was, I would say, scientifically and clinically compelling, but unfortunately, the standard of care shifted. We've seen real challenges in our U.S. business, trying to commercialize and launch, and we are kind of where we are now in terms of the U.S. business. The flip side, though, is that in Japan, the clinical treatment guidelines are more flexible in terms of continuing an immune checkpoint inhibitor from first line to second line, and so it aligns more closely with the data that we have from our pivotal trial.
At Q2, we were pleased to talk about our success in Japan, with the initial launch for non-small cell lung cancer, and we see that continuing, and we feel that's going to be a good tailwind for the business in Japan for years to come.
That's great. Just turning to Christoph for a moment. You've been very vocal about your pursuit of profitability as a company, and you're kind of turning the corner on that. Can you give us a little bit of an update and what are the next benchmarks in your path to profitability and when you expect to reach them?
Yeah. In terms of profitability, we said for us it's a three-step process. Step one is to become break even on adjusted EBITDA as a proxy for profitability. Step two is to become cash flow break even, and then step three is to become truly break even on a net income U.S. GAAP basis. We are quite happy, in terms of where we are this year or the progress that we have been able to make this year, in terms of a true enterprise-wide focus on not only growth but also profitable growth. As we said in the past, we believe we made largely the investments that we need to go through the launch periods and now extract the leverage out of the P&L, meaning revenue growth being higher than expense growth.
We see the fruits of this this year with the guidance that we gave at Q2. We said that at a minimum, we believe we will be breakeven on an adjusted EBITDA level by the end of this year, potentially up to $50 million positive adjusted EBITDA. Again, the next step once clearing adjusted EBITDA breakeven would be to become cash flow breakeven, and that's approximately $30 million- $40 million more in terms of profitability that we need for that. We haven't given explicit guidance, but we believe that it's in reach in the foreseeable future.
You guys have clearly done a great job of managing costs. How do you think about managing that OpEx when you think about global expansion going on, multiple programs reaching later-stage trials or enrolling or reading out? Clearly, there's a lot you're trying to manage through. How do you think about controlling that OpEx spend?
Yeah. We are very committed to keeping our expenses and expense growth, be very disciplined about it. Even more specific, what we said is that on R&D, or to be exact, on the specific P&L lines, on R&D, we don't expect growth. On G&A, we don't expect growth. There will be inflation-adjusted growth at most. Sales and marketing, there will be some moderate growth for the launches that we expect. Again, largely speaking, we have invested in our capabilities in the last couple of years, and we believe that now we have essentially the infrastructure in the 16 countries that we are in to go through this period of launches and internationalization with really only moderate additional investments needed.
Okay. With $440 million on the balance sheet at the end of the quarter, do you think that your current capital position is adequate to achieve some of these goals without having to go access the capital markets again in the near term?
Yeah. We have, last time we reported $440 million, roughly speaking, on the balance sheet in terms of cash. That includes $200 million of debt. At the beginning of the year, we made a decision. We had a credit facility that allowed us to go up to $400 million of debt, and we made a decision to basically stay at the $200 million level because we thought it's more important to now really double down on profitability. Yeah, we feel comfortable with the balance sheet that we currently have. We also think that debt has a place on a P&L from a pure cost of capital perspective, and we believe we don't need to go to capital markets.
Okay. Frank, another question for you. I know you've served in multiple different roles within the organization over the course of your career, and I'm just thinking about as you assess the team today globally, how do you think about do you have the right players on the field to kind of execute against your goals, and how you think about just the culture of the firm today?
Yeah, I'm privileged to answer that question. Being in this role is really truly humbling because this is a company where you have people who have been here for 25 years, and you have people who have been here for 25 minutes, and you're trying to meld those two together into a world-class healthcare company. I think high level, that's the advantage we have is we have people who have been really dedicated, deep science research, deep knowledge of how the technology actually works, and we're now pairing that with bringing in people from outside who have had expertise running global businesses. As I think about it, that's our biggest team dynamic challenge that we'll have in the coming year.
But I think where this really comes down to, and it dovetails off the question about the balance sheet and about capital allocation strategies, we are now at a place where we've earned the right and the privilege to control our own destiny. We, this year, got cost under control. We restarted growth in the businesses. You asked, where do we have really outstanding leadership? I would highlight that our business leadership and our medical leadership, broadly defined, really came together and took a franchise that for 10 years had been in market and got it growing again in every key market.
I think we have really outstanding people here, and I think what we have to do now is take a step back and on the R&D side say, "Okay, what does the future of R&D look like at Novocure? How are we going to conduct clinical trials? How are we going to be the device in these indications where drugs are evolving every year as opposed to every five or 10 years like it used to be?" And I think that once we get that strategy articulated both internally and externally, you'll see pretty quick execution because we have the right people.
That's great, and kudos to you guys for kind of once you've been in the seat really taking responsibility around how you guide the street to forward-looking expectations, both from a financial perspective and an operational perspective. I think you guys have done a great job. Maybe just one final question before we wrap up for you, Frank. What do you think might be misunderstood about the story, and what are you most excited for looking at the next 12 months?
In terms of the story broadly defined, I think that the breadth and diversity of our overall business is sometimes missed because for so long, we were a glioblastoma business, and we were a glioblastoma business in the United States. Over the last two years, our business in France grew to maturity. Our business in Germany, after a trough, has returned to growth. We've been able to get national reimbursement in Spain. We've put the right structure in place so that our team can execute in these smaller markets. We've grown GBM outside of the United States, and in the United States , and then we've paired that with now a strong early launch in PANC. We acknowledge now we have RASONQUE on the market, and that is going to create some disruption in terms of practices and our ability to get into practices.
We have seen a good early launch into Q2. We have also seen a good launch in non-small cell lung cancer in Japan. Our revenue streams are diversifying, our geographic footprint is diversifying. I think to just really put a final statement out there, what I highlight over and over again is that our business in Japan today is the fourth largest business in our portfolio. That is largely due to the fact that the incidence of GBM is relatively low in Asian populations and specifically in Japan. As we move into these bigger indications of lung cancer and pancreatic cancer, where the incidence is either on par or greater than Western populations, Japan has the ability to be that financial driver for the business for more than just 2027.
We feel like we have a really strong, durable, stable revenue base. We have good controls now over our operating expenses. I think now it is up to us to figure out, okay, then what does this look like not just over the next one year or two years, but where do we go from here in terms of maximizing the clinical benefit of Tumor Treating Fields?
That is great. Well, congratulations on all the progress.
Thank you.
Thank you for joining us at the Morgan Stanley Healthcare Conference. Great to have you here.
Thank you very much. We appreciate it.
Thank you.
Thanks for having us.