On February 25, 2021 Novocure (NASDAQ: NVCR) reported financial results for the quarter and full year ended December 31, 2020, highlighting revenue growth and financial strength as well as the advancement of the company’s clinical and product development programs (Press release, NovoCure, FEB 25, 2021, View Source [SID1234575680]). 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.
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(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.
"Our track record of execution continued throughout 2020 with notable progress made in advancing our three overarching priorities: to drive commercial adoption; to carry out our clinical trial programs; and to deliver product innovations to optimize Tumor Treating Fields therapy," said William Doyle, Novocure’s Executive Chairman. "Despite the complexities posed by the COVID-19 pandemic, we generated nearly $500 million in net revenues and $20 million in net income in 2020. Our financial strength positions us well to invest strategically in science and technology to unleash the potential of the Tumor Treating Fields platform."
"As proud as we are of treating more than 18,000 patients to-date, we remain focused on extending the reach of Tumor Treating Fields therapy to many more cancer patients," added Asaf Danziger, Novocure’s Chief Executive Officer. "With multiple clinical trials expected to read out over the next few years, we believe we are just beginning to unlock our potential to impact oncology. Acceptance of our therapy continues to build within the global oncology community, which reinforces our commitment to our mission to extend survival in some of the most aggressive forms of cancer."
Fourth quarter 2020 financial update
For the quarter ended December 31, 2020, net revenues were $144.0 million, representing 45% growth compared to the fourth quarter 2019.
In the United States, net revenues totaled $97.7 million in the quarter ended December 31, 2020, representing 48% growth compared to the same period in 2019.
In Germany and other EMEA markets, net revenues totaled $33.8 million in the quarter ended December 31, 2020, representing 31% growth compared to the same period in 2019.
In Japan, net revenues totaled $7.9 million in the quarter ended December 31, 2020, representing 42% growth compared to the same period in 2019.
In Greater China, net revenues totaled $4.5 million in the quarter ended December 31, 2020, representing 132% growth compared to the same period in 2019.
For the three months ended December 31, 2020, the increases primarily resulted from an increase of 502 active patients in our active markets and an increase in the net revenues per active patient per month. The increase in net revenues per active patient per month primarily was driven by improving reimbursement approval rates in the U.S.
In the fourth quarter 2020, we recorded $9 million in revenues from Medicare fee-for-service beneficiaries billed under the coverage policy effective on September 1, 2019. We have gained a good understanding of how to ensure timely processing of Medicare claims and have sufficient experience to recognize approximately two-thirds of the expected contribution from Medicare beneficiaries. In the fourth quarter of 2020, we also recognized approximately $11 million in incremental net revenues compared to the first half of 2020 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 December 31, 2020 was $28.1 million compared to $24.8 million for the same period in 2019, representing an increase of 14%. The increase in cost of revenues primarily was due to the cost of shipping arrays to a higher volume of commercial patients. Gross margin was 80% for the three months ended December 31, 2020 compared to 75% for the three months ended December 31, 2019. Gross margin continues to benefit from ongoing efficiency initiatives and increasing scale. Gross margin is also improved with revenue resulting from the successful appeal of previously denied claims for Medicare fee-for-service beneficiaries and tempered by product sales to Zai.
Research, development and clinical trials expenses for the three months ended December 31, 2020 were $44.0 million compared to $23.7 million for the same period in 2019, representing an increase of 85%. The increase primarily was due to increased investments in clinical trials and clinical administration personnel to advance and broaden our clinical development programs, preclinical and basic research to better understand the optimal use of Tumor Treating Fields, product development intended to optimize the delivery of Tumor Treating Fields therapy, and expanded medical affairs efforts to educate the clinical community.
We expect growth in our research and development to continue into 2021 as we work to advance our pipeline programs and increase acceptance of Tumor Treating Fields within the global oncology community. We balance our investments in research and development with our organizational capacity to effectively execute our strategic initiatives.
Sales and marketing expenses for the three months ended December 31, 2020 were $31.4 million compared to $26.8 million for the same period in 2019, representing an increase of 17%. This primarily was due to an increase in personnel and professional services costs to support our growing commercial business and reimbursement efforts and an increase in marketing expenses related to the launch of Optune Lua for MPM.
General and administrative expenses for the three months ended December 31, 2020 were $28.4 million compared to $23.7 million for the same period in 2019, representing an increase of 19%. This primarily was due to an increase in personnel costs, insurance premiums and professional services.
Net income for the three months ended December 31, 2020 was $4.9 million compared to net income of $4.3 million for the same period in 2019.
At December 31, 2020, we had $842.6 million in cash and cash equivalents and short-term investments, an increase of $516.5 million compared to $326.1 million at December 31, 2019. The increase in our cash, cash equivalents and short-term investments primarily was due to convertible notes issued, net cash provided by operating activities and the exercise of options.
Fourth quarter 2020 operating statistics
There were 3,411 active patients at December 31, 2020, representing 17% growth compared to December 31, 2019, and 1% growth compared to September 30, 2020.
In the United States, there were 2,193 active patients at December 31, 2020, representing 12% growth compared to December 31, 2019.
In Germany and other EMEA markets, there were 953 active patients at December 31, 2020, representing 25% growth compared to December 31, 2019.
In Japan, there were 265 active patients at December 31, 2020, representing 38% growth compared to December 31, 2019.
Additionally, 1,411 prescriptions were received in the quarter ended December 31, 2020, representing 2% growth compared to the same period in 2019, and a 3% increase compared to the quarter ended September 30, 2020. In the quarter ended December 31, 2020, 1,160 Optune prescriptions were written for patients with newly diagnosed glioblastoma.
In the United States, 962 prescriptions were received in the quarter ended December 31, 2020, representing a 4% decrease compared to the same period in 2019.
In Germany and other EMEA markets, 349 prescriptions were received in the quarter ended December 31, 2020, representing 22% growth compared to the same period in 2019.
In Japan, 100 prescriptions were received in the quarter ended December 31, 2020, representing 8% growth compared to the same period in 2019.
Fourth quarter 2020 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 $34.8 million for the three months ended December 31, 2020, an increase of $17.5 million, or 101%, from $17.3 million for the three months ended December 31, 2019. This improvement in fundamental financial performance was driven by net revenue growth coupled with an ongoing commitment to disciplined management of expenses.
Anticipated clinical milestones
Final data from phase 2 pilot HEPANOVA trial in advanced liver cancer (Q2 2021)
Interim analysis of phase 3 pivotal INNOVATE-3 trial in recurrent ovarian cancer (Q3 2021)
Interim analysis of phase 3 pivotal LUNAR trial in non-small cell lung cancer (Q4 2021)
Final 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)
Final data from phase 3 pivotal METIS trial in brain metastases (2022)
Final data from phase 2 pilot EF-33 trial with high-intensity arrays in recurrent glioblastoma (2022)
Final data from phase 3 pivotal INNOVATE-3 trial in recurrent ovarian cancer (2023)
Final data from phase 3 pivotal LUNAR trial in non-small cell lung 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 fourth quarter and full year 2020 financial results at 8 a.m. EST today, Thursday, February 25, 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 3965899.
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.