On July 29, 2021 Novocure (NASDAQ: NVCR) reported financial results for the quarter ended June 30, 2021, highlighting commercial strength and strategic investment across clinical, product development and commercial initiatives intended to fuel future growth (Press release, NovoCure, JUL 29, 2021, View Source [SID1234585399]). Novocure is a global oncology company working to extend survival in some of the most aggressive forms of cancer by developing and commercializing its innovative therapy, Tumor Treating Fields (TTFields). TTFields are electric fields that disrupt cancer cell division.
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
(1) Adjusted EBITDA is a non-U.S. GAAP measurement of earnings before interest, taxes, depreciation, amortization and share-based compensation.
(2) An "active patient" is a patient who is receiving treatment under a commercial prescription order as of the measurement date, including patients who may be on a temporary break from treatment and who plan to resume treatment in less than 60 days.
(3) A "prescription received" is a commercial order for Optune or Optune Lua that is received from a physician certified to treat patients for a patient not previously on Optune or Optune Lua. Orders to renew or extend treatment are not included in this total.
"We delivered another quarter of strong performance, generating $134 million in net revenues with a 79% gross margin," said Asaf Danziger, Novocure’s Chief Executive Officer. "The performance of our core GBM business continues to provide our company with the financial resources to aggressively pursue multiple potential growth initiatives. We believe these investments in commercial, clinical and engineering capabilities will enable organizational readiness as we strive to extend patient survival in multiple solid tumor cancers through our Tumor Treating Fields platform."
"Looking to the future, our pipeline is primed for growth," continued William Doyle, Novocure’s Executive Chairman. "We reached several notable milestones since our last earnings report, including FDA approval of our IDE supplement for the phase 3 pivotal LUNAR trial in non-small cell lung cancer (NSCLC), presentation of final data from our phase 2 pilot HEPANOVA study in advanced liver cancer, and we are actively seeking to enroll patients in our phase 2 pilot KEYNOTE-B36 trial in NSCLC. I am proud of our team’s performance this quarter and look to continue our track record of execution in the second half of the year."
Second quarter 2021 financial update
For the quarter ended June 30, 2021, net revenues were $133.5 million, representing 15% growth compared to the second quarter 2020.
In the United States, net revenues totaled $87.1 million in the quarter ended June 30, 2021, representing 7% growth compared to the same period in 2020.
In Germany and other EMEA markets, net revenues totaled $32.7 million in the quarter ended June 30, 2021, representing 29% growth compared to the same period in 2020.
In Japan, net revenues totaled $8.8 million in the quarter ended June 30, 2021, representing 22% growth compared to the same period in 2020.
In Greater China, net revenues totaled $4.9 million in the quarter ended June 30, 2021, representing 130% growth compared to the same period in 2020.
For the three months ended June 30, 2021, the increase in net revenues from the second quarter of 2020 resulted primarily from an increase of 209 active patients in our currently active markets, a sustained improvement in the net revenues booked per active patient, and the launch of Optune in China.
We recorded $8.2 million in revenues from Medicare fee-for-service beneficiaries in the second quarter 2021, a decrease of 24% from the $10.8 million recognized in the same period in 2020. The decrease in revenue from Medicare does not reflect a reduction in active Medicare patients or a decrease in the contribution we ultimately expect from Medicare beneficiaries, but instead reflects the impact from an extended appeal timeline for certain claims billed after established coverage. In the second quarter of 2021, we did not record a material amount of incremental net revenue resulting from the successful appeal of previously denied claims for Medicare fee-for-service beneficiaries billed prior to established coverage.
Cost of revenues for the three months ended June 30, 2021 was $28.6 million compared to $25.5 million for the same period in 2020, representing an increase of 12%. The increase in cost of revenues was primarily due to the cost of shipping transducer arrays to a higher volume of commercial patients and increasing shipments of equipment to Zai Lab. We continue to focus on opportunities to increase efficiencies and scale within our supply chain. This includes evaluating new materials, manufacturers and processes that could lead to lower costs. Gross margin was 79% for the three months ended June 30, 2021 compared to 78% for the three months ended June 30, 2020.
Research, development and clinical trials expenses for the three months ended June 30, 2021 were $50.3 million compared to $29.9 million for the same period in 2020, representing an increase of 68%. This was primarily due to an increase in clinical trial and personnel expenses for our phase 3 pivotal, post-marketing and label expansion trials, an increase in development and personnel expenses to support our product development programs, and increased investments in preclinical research and the expansion of our medical affairs activities.
Sales and marketing expenses for the three months ended June 30, 2021 were $34.1 million compared to $28.5 million for the same period in 2020, representing an increase of 20%. This was primarily due to an increase in personnel and professional services costs as we continue to enhance our commercial capabilities in anticipation of potential future approvals in new indications. Accordingly, we are investing heavily in our market access capabilities in order to evaluate opportunities, identify optimal access pathways and successfully gain reimbursement in new geographies.
General and administrative expenses for the three months ended June 30, 2021 were $32.8 million compared to $25.4 million for the same period in 2020, representing an increase of 29%. This was primarily due to an increase in personnel costs and professional services.
Net loss for the three months ended June 30, 2021 was $14.6 million compared to net income of $1.7 million for the same period in 2020.
At June 30, 2021, we had $899.0 million in cash, cash equivalents and short-term investments, an increase of $56.5 million compared to $842.6 million at December 31, 2020. The increase in our cash, cash equivalents and short-term investments was primarily due to the cash flow from operations and the exercise of options.
Second quarter 2021 operating statistics
There were 3,487 active patients at June 30, 2021, representing 6% growth compared to June 30, 2020, and 1% growth compared to March 31, 2021.
In the United States, there were 2,206 active patients at June 30, 2021, representing 3% growth compared to June 30, 2020.
In Germany and other EMEA markets, there were 990 active patients at June 30, 2021, representing 10% growth compared to June 30, 2020.
In Japan, there were 291 active patients at June 30, 2021, representing 24% growth compared to June 30, 2020.
Additionally, 1,450 prescriptions were received in the quarter ended June 30, 2021, representing a 2% increase compared to the same period in 2020, and a 3% increase compared to the quarter ended March 31, 2021. We believe the prolonged disruption caused by COVID-19 is resulting in increased volatility across global health care systems, such as fluctuations in patient volumes and changes in patterns of care in certain regions, which had some impact on our business in the second quarter.
In the United States, 967 prescriptions were received in the quarter ended June 30, 2021, representing no change compared to the same period in 2020.
In Germany and other EMEA markets, 375 prescriptions were received in the quarter ended June 30, 2021, representing 2% growth compared to the same period in 2020.
In Japan, 108 prescriptions were received in the quarter ended June 30, 2021, representing 27% growth compared to the same period in 2020.
Second quarter 2021 non-U.S. GAAP measures
We also measure our performance based upon a non-U.S. GAAP measurement of earnings before interest, taxes, depreciation, amortization and shared-based compensation ("Adjusted EBITDA"). We believe Adjusted EBITDA is useful to investors in evaluating our operating performance because it helps investors compare the results of our operations from period to period by removing the impact of earnings attributable to our capital structure, tax rate and material non-cash items, specifically share-based compensation.
Adjusted EBITDA was $18.1 million for the three months ended June 30, 2021, a decrease of $10.0 million, or 36%, from $28.0 million for the three months ended June 30, 2020. We are encouraged by our stable financial performance in light of our aggressive investments in growth initiatives. While our Adjusted EBITDA for the six month period ended June 30, 2021 was approximately $4 million lower compared to the same period in 2020, we have invested an incremental $61 million in research & development, sales & marketing, and other operational activities to maximize future growth opportunities.
Recent clinical milestones
In April 2021, we announced that an independent data monitoring committee (DMC) informed us that the pre-specified interim analysis for the phase 3 pivotal LUNAR trial for the treatment of NSCLC was accelerated given the length of accrual and the number of events observed. The interim analysis included data from 210 patients accrued through February 2021. After review of the interim analysis, the DMC concluded that the LUNAR trial should continue with no evidence of increased systemic toxicity. The DMC went on to comment that the continued accrual to 534 patients as proposed in the original protocol, given the current rate of accrual and the interim data presented, is likely unnecessary and possibly unethical for patients randomized to control. For this reason, the DMC recommended an adjustment of accrual to approximately 276 patients with a 12-month follow-up following the enrollment of the last patient. The DMC believes this amended protocol will provide adequate data regarding toxicity and efficacy, providing sufficient overall power, as well as potentially providing important information regarding efficacy within treatment subgroups. In May 2021, the FDA approved an investigational device exemption (IDE) supplement incorporating the recommended protocol changes and we now expect final data in 2022.
In April 2021, the FDA approved our IDE application to initiate the KEYNOTE B36 phase 2 pilot trial to study TTFields with pembrolizumab in first-line NSCLC through our clinical collaboration with MSD (a tradename of Merck & Co.). KEYNOTE B36 currently has five clinical trial sites actively evaluating patients for enrollment.
In May 2021, we entered into a clinical trial collaboration with GT Medical Technologies, Inc., to develop TTFields together with GT Medical Technologies’ GammaTile Surgically Targeted Radiation Therapy for the treatment of recurrent GBM, expanding our research in the treatment of GBM. We plan to conduct a phase 2 pilot study to test the safety and effectiveness of neo-adjuvant TTFields followed by resection, GammaTile Therapy, and adjuvant TTFields for recurrent GBM. This clinical trial collaboration presents an important opportunity to study the radio-sensitizing effect of TTFields in solid cancer tumors with other treatment modalities.
In July 2021, we announced the final results of our phase 2 pilot HEPANOVA trial investigating TTFields together with sorafenib, a kinase inhibitor, in 27 patients with advanced liver cancer. Historical control data showed an objective response rate of 4.5% and disease control rate of 43% for patients treated with sorafenib alone. In 21 evaluable patients, HEPANOVA showed a 9.5% objective response rate and 76% disease control rate, as well as 5.8 months of progression free survival. These results are even more encouraging when considering the poor prognosis of the study population. Over half of the patients in HEPANOVA were categorized as Child-Turcotte-Pugh Class B compared to 5% in the historical control, indicating significant liver functional compromise. Of the patients who received at least 12 weeks of therapy (n=11), the disease control rate reached 91% with an objective response rate of 18%. These data demonstrate that TTFields have the potential to extend survival in advanced liver cancer. Our team, along with trial investigators, are actively designing a phase 3 pivotal trial that contemplates TTFields therapy together with the current standard of care, including immunotherapy, and have engaged the FDA regarding the use of TTFields in advanced liver cancer.
The enrollment timelines for our METIS trial are reliant on clinical site expansion in regions that continue to be materially delayed as clinical sites devote significant resources to the COVID-19 global pandemic. Our clinical affairs teams are focused on accelerating enrollment at existing clinical sites, but our efforts are challenged by a heavy reliance on virtual engagement and, as a result, we now anticipate a two-quarter delay in last patient enrollment for METIS, with final data in 2023. It is estimated that between 20% and 40% of patients with NSCLC develop brain metastases. Together with LUNAR and KEYNOTE B36, the METIS data represent an important opportunity to demonstrate the efficacy of TTFields at multiple stages of lung cancer.
Anticipated clinical milestones
Interim analysis of phase 3 pivotal INNOVATE-3 trial in recurrent ovarian cancer (Q3 2021)
Data from phase 2 pilot EF-31 trial in gastric cancer (2022)
Interim analysis of phase 3 pivotal PANOVA-3 trial in locally advanced pancreatic cancer (2022)
Data from phase 2 pilot EF-33 trial with high-intensity arrays in recurrent glioblastoma (2022)
Final data from phase 3 pivotal LUNAR trial in NSCLC (2022)
Data from phase 3 pivotal METIS trial in brain metastases (2023)
Final data from phase 3 pivotal INNOVATE-3 trial in recurrent ovarian cancer (2023)
Final data from phase 3 pivotal PANOVA-3 trial in locally advanced pancreatic cancer (2023)
Conference call details
Novocure will host a conference call and webcast to discuss second quarter 2021 financial results at 8 a.m. EDT today, Thursday, July 29, 2021. Analysts and investors can participate in the conference call by dialing 855-442-6895 for domestic callers and 509-960-9037 for international callers, using the conference ID 1926805.
The webcast, earnings slides presented during the webcast and the corporate presentation can be accessed live from the Investor Relations page of Novocure’s website, www.novocure.com/investor-relations, and will be available for at least 14 days following the call. Novocure has used, and intends to continue to use, its investor relations website, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.