Okay, great. Hello, everyone. I'm Maxwell Skor, biotech analyst with Morgan Stanley. Before we get started, I just need to read an important disclosure. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures. Great, I would like to welcome Bill Doyle, Executive Chairman, and Ashley Cordova, CFO of Novocure. For those of us who are either new or revisiting the Novocure story, let's start off with a discussion of the base business, followed by an overview of LUNAR and next steps in non-small cell lung cancer, and finally, future opportunities. So to start off with, can you briefly introduce Optune and the theory behind Tumor Treating Fields?
Sure. So first, let me say, good morning, and thanks for having us. It's a pleasure to be here in New York. So I've been involved with Novocure essentially since the beginning. We were founded by a professor at the Technion, a gentleman named Yoram Palti, whose expertise was and is the effect of electrical phenomenon on tissue. And he had the idea, the founding idea that we could use the electrical properties of cells as targets rather than their chemical properties, which is typical with most drugs. And, you know, to maybe unpleasantly dry, you know, drag everyone back to their freshman physics, electric fields exert forces. They push and pull on charged bodies.
So if you have a protein with a negative charge and you put it in an electric field, you can push on it. It turns out that when our cells divide, proteins, tubulin, septin, et cetera, have to be in exactly the right place at exactly the right time to attach to the chromosomes, separate the DNA into the daughter cells. And if for whatever reason, that very delicate ballet is interrupted, those cells, those nascent cells will die. So, one of the tricks, though, is, okay, that sounds good, but how do you get an electric field into the body and into a cell? Turns out that's easier said than done.
But again, Professor Palti and the early team at Novocure figured out that each cell type has a specific frequency of electric field that you can tune and allow the electric field to get into only those cells. And you can think of this almost like the car radio, you know, in your car, the radio in your car. But, you know, the air is filled with every radio station, right? But you tune that radio to allow one frequency in, and therefore, you know, you don't get this, you know, mishmash, you get one station. So, we tune a specific frequency that gets into one type of cell. You know, in our case, clearly we're focused on cancer cells.
We allow that, electric field in, it pushes and pulls on the charged proteins and causes the cancer cells to die. So that's the simple overview. Now, one thing I will say, in the last, you know, 20+ years, we've learned a lot about this basic mechanism. We've learned that other things are going on in addition to this antimitotic effect. One of the most exciting things, and we can talk about this when we talk about LUNAR, is we now know that that cell death is what's described as immunogenic, meaning, we expose the immune system to the proteins within the cell. And what that means is that when we combine Tumor Treating Fields with immunotherapies, we see really exciting synergy and really exciting combination results.
Great. Thank you. So it's been approved in glioblastoma, specifically in the U.S., Germany, and Japan. I'd like to congratulate the team on the recent launch in France. Can you discuss the revenue breakdown by region and how the launch is going so far?
Sure. So I'm going to let Ashley take this one.
Yeah. So I mean, we launched in 2015, in newly diagnosed GBM, which is our largest commercial indication. And so I'd say we're well through kind of the launch trajectory now, and we are continuing to focus on growth. But I would say it's established, reimbursed by all major payers in markets around the world. You mentioned the U.S., Germany, and Japan. Those are our three largest markets, France coming online, but we've also launched throughout many of the rest of the European region. And we do have our eyes towards expanding through the rest of the Big Five EU. The U.S. is our largest market. I'd say it's about two-thirds of our revenue base right now, and as the rest of Big Five EU comes on, it would likely, you know, go to between a half and two-thirds, depending on those launch trajectories.
What we do have is national reimbursement in every market where we are active. I would say there is a very sustainable and strong business and an existing commercial infrastructure in all of the large markets around the world.
Okay. So in your view, what % of the market are you currently penetrating, and what efforts are you taking to increase that %?
Again, I'll let Ashley-
Yeah
... start, and maybe I'll jump in.
So we're about 40% penetrated in the markets in which we're active right now. And that reflects NCCN Category 1, standard of care designation. It reflects a significant amount of ongoing clinical research with our IST programs and our phase four post-marketing studies. But it does not mean, you know, it does mean that there are more patients that could benefit from Tumor Treating Fields than are currently receiving Optune. There's no biological pathway limitation, there's no genetic mutation, there's no reason other than the strength of the physician recommendation that every patient should not, you know, every patient should have access to Optune.
We are focused on, you know, ongoing physician education and awareness, ongoing data generation to make sure that physicians that are interested in researching the science behind Tumor Treating Fields have the chance to really roll up their sleeves and get, you know, in the research process. Yeah, and I mean, we are committed to a path to growth for, you know, years to come.
Okay.
You know, to add to that, we're often asked, you know, "Are you a biotech or a med tech?" And, you know, the truth is, we're pioneers. And, you know, we like to think of ourselves as the best of both worlds. We are delivering a therapy that provides an effect that is similar in general to the effects that are provided by pharmacological therapies. We do trials like it's a biotech, so we do phase III trials to generate evidence. That said, we deliver our therapy via a home use medical device. So this means that, as far as the clinicians go, it's not just changing one bag on the infusion pole for another bag.
So, we have been very busy since the end of 2015, when we launched, educating neuro-oncologists, radiation oncologists, about the benefits of this therapy. And again, as Ashley said, we now receive prescriptions for about 40% of the eligible patients. I will say I'm not satisfied with that because the other 60%, can benefit. The other thing that is a little bit different, and is more, akin to med tech, the launch trajectories of drugs typically go, you know, way up, hit the patent expiry or competitive, point and then, you know, drop way down. If you look at the very successful medt ech franchises, they grow more linearly over a much longer period of time.
As we continue to innovate and, you know, I always carry, you know, a show and tell, this is our latest array that's being rolled out in Europe right now, has many advantages for the patients, which we can also discuss. But there's a whole new group of patents that have been filed to cover this. So our ability to continue to defend our position in the market is much longer than... You know, assuming we invest and innovate, is much longer than you know, the typical drug. So we're after the rest of this market. It's not. There's no magic bullet to getting there.
There's a combination of things that we're doing, you know, one of which I would say is really invigorating our digital engagement with patients. So every patient knows about it and is walking into their clinician's office asking for it. So, yeah, more to come in the GBM business.
Okay, I think that's great background. And finally, just to touch on, revenue expectations over the next 6-12 months.
So, I mean, revenue will go as active patients go. That's how we are, you know, innovative, we often say in the therapy, but also in the business model. We bill per month of therapy and effectively have a recurring subscription revenue stream. So for every month of therapy, we send the payers a bill for one monthly service charge, which includes all the arrays, the device, all of our technical support, et cetera. We now have established reimbursement in all of our active markets for that month of therapy, and we net around $12,000 per month. So you can, you know, as we look ahead, we don't provide specific guidance, but you can look at the active patient trends and say revenue should trend in line with active patient growth.
Okay. So I think that's a good point, for us to move on to non-small cell lung cancer, and the regulatory path ahead. A few months ago, you reported that the phase III LUNAR trial met the primary overall survival endpoint. If you could, take us through the trial design, the profile of the patients enrolled in the trial and any key takeaways from the dataset?
Sure. So that's a great question, as we're just rolling off the World Lung Conference in Singapore over the weekend, where we presented some additional data. But starting further back, so the therapy and the mechanism of action I described can be achieved in any part of the body where we can deliver those electric fields, you know, back to the car radio. Turns out we know we can do this in the head, neck, chest, and abdomen. So all of the really difficult solid tumors are our target. We started in glioblastoma, which is, you know, thankfully for all of us, a relatively small indication, although as Ashley, you know, has described, we've built this, you know, $500 million+ business that we intend to continue to grow.
But we're now focused on, you know, the difficult and larger cancers of the chest and abdomen. First up for us will be non-small cell lung cancer, which is the largest still cancer in terms of, you know, new diagnoses and number of patients. So the LUNAR trial, and this is typical of many new therapies, did not start in the first line, but started in—it's actually the second or third line, but we recruited patients after they failed platinum chemotherapy. And typically, today, when patients are diagnosed with non-small cell lung cancer that can't be removed, you know, can't be surgically removed, they'll receive a platinum chemotherapy, and today very often with immunotherapy. So KEYTRUDA, in fact, is the, is the typical combination.
So we recruited patients with metastatic disease. This is important, so disease that had already spread beyond one lung, who had failed their first-line therapy, and in some cases, had failed their second-line therapy if they received platinum in the second line. Those patients were then randomized to receive either physician's choice immunotherapy or docetaxel, and those are the most common second-line treatments in metastatic non-small cell lung cancer. And then they received it either with tumor treating fields or as a single agent. So there were four arms, if you want to think of it, in this trial. Our primary endpoint was to compare all the patients who received tumor treating field therapy.
Again, whether they received docetaxel or immune checkpoint inhibitor with Tumor Treating Field, compared to all the patients who just received the monotherapies, and that's the primary endpoint. We hit that primary endpoint with statistical significance and a clinically meaningful extension. So we were delighted because there hasn't been any progress in this stage of the disease since the original KEYTRUDA trial, now 7-8 years ago. You know, for those of you who follow the KEYNOTE trials, it was KEYNOTE-010, so that lets you know how long ago this was. In addition, we had powered secondary endpoints, where we looked at each of those subgroups. So we looked at the subgroup that received Tumor Treating Fields plus docetaxel and Tumor Treating Fields plus immunotherapy.
These were relatively small groups. The trial itself was relatively small, 270 patients total, which again, for those of you who follow these cancer trials, you know, it's actually quite small. We saw a trend to statistical significance, but we didn't hit the statistical significance in the docetaxel arm, but, you know, a nice effect. And we saw actually tremendous benefit, and I alluded to this earlier, when we combined with the immunotherapy. So, these were just great results. We're very excited about the trial. At World Lung, we showed additional data related to what's called the TPS score, but the PD-L1 expression of the tumor.
And you really see how Tumor Treating Fields magnifies the effect of immune checkpoint inhibitors. I mean, in the group that expresses between 1% and 49%, their median overall survival with immune checkpoint inhibitor alone was about 9 months. When you add Tumor Treating Fields, that increased to 19 months, so, you know, more than doubling. So I'll take a pause there, but we're now in the regulatory process to get the approvals worldwide, and, our... We anticipate launching in our key markets next year.
Great. And if we can kind of drill down a bit on the treatment paradigm and how it's evolved over time-
Yeah.
If KEYTRUDA has moved up in lines of therapy, where you see your device fitting into the treatment paradigm, and any feedback you've gotten from physicians?
Yeah. So this is a key question, and, you know, if I'm honest about it, I would say it's probably, at least at the moment, where our view of our opportunity diverges from the market's view. And our view is based, one, on the data, and two, on our discussions with clinicians. So, the first step for us, just as I described the education process with neuro-oncologists that we started in, you know, the 2010s, we've now started that education process with thoracic oncologists. The specific point you mentioned is that when we started the trial, the immune checkpoint inhibitors, again, KEYTRUDA and its close relatives, had not yet moved to the first line, so it was a standard second-line treatment.
Over the course of the trial, KEYTRUDA has moved to the first line, and, you know, depending on, you know, the data that you, that you see, around 75-80% of patients receive it in the first line. So the, you know, sort of the negative thesis, if you will, the bear thesis is fabulous data, Novocure, but sorry, no patients. I couldn't disagree with that more, and I'll come back to, first, our. The the label that we expect will be based on the primary endpoint that will say Tumor Treating Fields in combination with either docetaxel or immune checkpoint inhibitor after platinum failure. These are patients for whom there's no good option, and today they will either continue on their immunotherapy or they'll stop their immunotherapy and get docetaxel.
For patients who really want to, you know, make it to the graduation or the wedding or the, you know, the next big holiday, clinicians don't have anything to offer them. When we talk to the clinicians, they tell us first they have a group of patients often described to us as, you know, the, the smoldering recurrence. These are patients, many of whom they keep on their immunotherapy into the second line, or now when they see our data, they'll say, "We'll definitely keep them on in the second line," and to whom they will add our therapy. The other group, again, the docetaxel group, as I said, there's a clear trend there. You know, I'll remind everyone that our therapy has no systemic tox.
So, you know, for so many therapies, you know, you weigh the, you know, the potential benefit with the potential tox. In our case, you know, there's no tox. So what does that say to me in terms of market opportunity? In the second line, it's not going to be $22 billion or whatever KEYTRUDA is going to be. But I don't know how it can't be. And, you know, we will see, we will prove it, but I don't know. I don't believe it can be anything but a multiple of our GBM business. And clearly, if you look, you know, not too far ahead, the obvious place for this is in the first line. So we have a group of trials that are in various stages. Again, a therapy with no systemic tox that magnifies the effect of immunotherapies.
I think that's the future of solid tumor cancer treatment. And as we look forward in our R&D programs across tumors, that's clearly where we want to be.
Great. Let's touch on the regulatory process. Could you give us an update on the PMA submission and timelines around potential approval?
Yeah. So, as you say, this, in the U.S., goes through the PMA pathway, at the FDA. We expect that, filing to be made, this year. So, you know, here we are mid-September, so, you know, in the near future. In Europe, it goes through the CE pathway. We have already filed all the modules. That will also give you a hint, too, because it's the same data, that has already been filed in Europe, will soon be filed in the U.S. And the same is true for Japan, which, you know, I don't want to forget Japan. We're also in the final stages of preparing the regulatory filing. So what does that mean in terms of approval?
You know, we can never predict, predict with precision, when the regulators will, will do their work. But we're planning, actually, for first, the European launch, on the early side of next year, and then the U.S. and Japan on the, I can call it the later side of, of next year.
Great. I'd like to just touch on the 2 additional readouts you have coming up. So brain metastasis, you have a program with top-line data anticipated in 1Q2024. Could you frame expectations for that readout?
Yeah, sure. So, you know, I can do them in parallel-
Yeah, definitely.
Because the second one is PANOVA in pancreatic cancer. So both of these trials are fully enrolled. So we're now at the, you know, sort of counting down the follow-up from the last patient in. And as you said, METIS in brain mets will be in the first half of the year, and PANOVA and pancreatic cancer will be in the second half of the year. The METIS trial is a little bit of a unusual trial for us, and it turns out trials in brain metastases are a little bit unusual for all therapies. So first of all, this is a trial treating brain mets from non-small cell lung cancer, so we include it in our thoracic program.
This is the most common brain metastasis, and very often, unfortunately, patients with more advanced lung cancer will have metastases in the brain. There's not a good treatment for brain mets. Today, patients will receive stereotactic radiosurgery, you know, Gamma Knife, when they have a few mets. But ultimately, when the mets, you know, exceed 8, 9, 10, 12, it's not practical. Formerly, patients would receive whole-brain radiation, but that is so toxic that today they just wait until, you know, the very end for whole-brain radiation. So we're adding our therapy as a monotherapy after stereotactic radiosurgery, compared to the watchful waiting. The endpoint is progression within the field. So that's the setup for that trial, and again, that'll report in the first part of next year.
The PANOVA trial is more of our typical trial, and again, terrible cancer, pancreatic cancer, depending on how you count it, the second largest cancer, you know, as bad as GBM in terms of the prognosis. And for that reason, we didn't have to start in the later lines. We were able to start as first-line therapy with docetaxel, and pancreatic cancer is, when it's diagnosed, it's either diagnosed late, when it has spread, or it's diagnosed when it, they call it locally advanced, where it has spread just around the pancreas. That's what we're treating. So, you know, we get asked, you know, based on everything you know today, if you were to go back, you know, five years when this trial started, how would you, you know, redesign it?
You know, the good news for us is because it's first line, which is where we see the best effect, and because we're treating the full extent of the cancer, we remain, you know, particularly optimistic about the trial results and the market opportunity, in part because the patients have so few options here, and we're in the first line.
Okay, great. So, moving on now, you have a lot going on. How should investors think about capital allocation going forward? Specifically, how should we think about spend going into the potential approval on that?
Yeah, that's a great question, and one where I think we are also uniquely positioned because we have this rich platform and the opportunity to continue to develop, both clinically but also on the product development side. But we have a very strong commercial business today in GBM that generates $500 million of revenue today. We talked to the potential for growth, but today, it's both $500 million in revenue and about $100 million in cash that it throws off, if you consider the kind of foundational R&D that we need to just maintain the organization and the ongoing data in GBM alone. We've been able to take that $100 million and invest it in the growth of tomorrow, and we do that principally in two areas. We're accelerating our pipeline, right?
So as we think of the core clinical development, and our focus there strategically is to take Tumor Treating Fields earlier in the treatment journey, in indications where we have established efficacy and in combination with an IO, if at all possible, right? So if we think about case in point, what that looks like, it's LUNAR- 2. Principally right now, that's up and running. It's LUNAR- 3, which is both of those are in combination with IOs first-line non-small cell lung cancer. We're investigating in our KEYNOTE-B58 trial, in collaboration with Merck, what if we add an IO on top of Optune and temozolomide in newly diagnosed GBM? So those are two examples of many, where we're trying to take Optune and position it earlier in the treatment journey. We also invest in the infrastructure needed to drive future growth, whether it's geographical expansion or early commercial marketing.
So we're preparing for a successful lung launch. We've made significant investments there. We will continue to do that. I will say, if you look at our SG&A spend right now, that reflects the organizational build-out. It does not yet reflect a dedicated field force. I think that will be the final step-up that we see to prepare for launch, but it does reflect the kind of backbone infrastructure that we need to successfully commercialize multiple indications.
Okay.
And maybe to you know, underline what's implicit in what Ashley just described, we're a company with high growth potential, but we're not dependent on capital market access. You know, fortunately or unfortunately for me, we do have many more opportunities to invest in than you know, than the cash that we're throwing off, and we're looking at all the usual options about you know, how we can get this therapy to even more patients. But the enterprise is stable, and we have plenty of gas to invest significantly in growth. We just have more opportunity than you know, than we can tackle from a financial perspective.
In the last minute or so, could I get your view overall on the stock price, what you're hearing from investors, or any takeaways?
I'll start, and, you know, and then I'll give it to Ashley. As I said, you know, I'm not going to sugarcoat our stock price, although that creates an opportunity, obviously. I think there is a big disconnect between our opportunity to grow in lung than we're given credit for right now. And I think there's a huge disconnect between the what the market is telling everyone and our opportunity to grow in brain mets and pancreatic cancer in the relatively near future. Yeah, that's just where we are at the moment.
Yeah, and all of this is built on a very strong, you know, de-risked commercial business, which is active today, and with the additional lever of product development. I think that is, as we think about what makes Novocure unique, it is both the innovative therapy and using electric fields to treat cancer, but it is also the ability to advance both on the clinical development front, but also on the product development front, and really play in the sweet spot where kind of biotech meets medtech. Again, on a foundation of financial strength that comes from the GBM business. So we're as excited about the future as, as we ever have been. It feels like a lot of these milestones are closer.
You know, we've been talking about them for years, but they're now within the kind of upcoming 24 months, if we think about the lung launch and the opportunities to further expand the pipeline. So it's an exciting time.
Great. Thank you, everyone, for joining us.
Thanks for having us.
All right.
Thank you.