On April 29, 2021 Novocure (NASDAQ: NVCR) reported financial results for the quarter ended March 31, 2021, highlighting continued commercial strength despite changes in patterns of care in some regions driven by COVID-19, as well as continued progress across the company’s clinical and product development programs (Press release, NovoCure, APR 29, 2021, View Source [SID1234578832]). 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.
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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.
"Over the last several months, we have made progress across multiple clinical development programs intended to determine Tumor Treating Fields’ optimal use," said William Doyle, Novocure’s Executive Chairman. "We continued to increase our understanding of the potential benefits of Tumor Treating Fields when used together with immunotherapies and continued to enroll patients in five late-stage clinical trials in multiple solid tumor types. The accelerated interim analysis of the LUNAR trial and the upcoming HEPANOVA data presentation represent the beginning of what we expect to be an exciting few years of data readouts from our pipeline."
"Our track record of consistent execution and financial strength continued in the first quarter of 2021," added Asaf Danziger, Novocure’s Chief Executive Officer. "We generated $135 million in net revenues with an 80% gross margin, and we invested $46 million in research and development intended to fuel future growth. With 3,454 active patients on therapy at the end of the quarter, we have treated nearly 20,000 patients globally, to date."
First quarter 2021 financial update
For the quarter ended March 31, 2021, net revenues were $134.7 million, representing 32% growth compared to the first quarter 2020.
In the United States, net revenues totaled $85.9 million in the quarter ended March 31, 2021, representing 24% growth compared to the same period in 2020.
In Germany and other EMEA markets, net revenues totaled $35.0 million in the quarter ended March 31, 2021, representing 43% growth compared to the same period in 2020.
In Japan, net revenues totaled $8.3 million in the quarter ended March 31, 2021, representing 28% growth compared to the same period in 2020.
In Greater China, net revenues totaled $5.5 million in the quarter ended March 31, 2021, representing 237% growth compared to the same period in 2020.
For the three months ended March 31, 2021, the increase in net revenues from the first quarter of 2020 resulted primarily from an increase of 359 active patients in our currently active markets and a durable improvement in the net revenues booked per active patient.
We recorded $9.4 million in revenues from Medicare fee-for-service beneficiaries billed under the coverage policy effective on September 1, 2019 in the first quarter 2021, an increase of 32% from the $7.1 million recognized in the same period in 2020. We have gained a good understanding of how to ensure timely processing of Medicare claims and we believe that we have sufficient experience to recognize approximately two-thirds of the expected contribution from Medicare beneficiaries. In the first quarter of 2021, incremental net revenues resulting from the successful appeal of previously denied claims for Medicare fee-for-service beneficiaries billed prior to established coverage reverted to normalized levels from the first half of 2020.
Cost of revenues for the three months ended March 31, 2021 was $26.4 million compared to $24.5 million for the same period in 2020, representing an increase of 8%. 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. Gross margin was 80% for the three months ended March 31, 2021 compared to 76% for the three months ended March 31, 2020.
Research, development and clinical trials expenses for the three months ended March 31, 2021 were $45.9 million compared to $25.3 million for the same period in 2020, representing an increase of 82%. This was primarily due to an increase in clinical trial and personnel expenses for our phase 3 pivotal and post-marketing trials, an increase in development and personnel expenses to support our product development programs, increased investments in preclinical research and the expansion of our medical affairs activities.
Sales and marketing expenses for the three months ended March 31, 2021 were $31.4 million compared to $28.8 million for the same period in 2020, representing an increase of 9%. This was primarily due to an increase in personnel and professional services costs to support our growing commercial business and reimbursement efforts.
General and administrative expenses for the three months ended March 31, 2021 were $31.1 million compared to $26.6 million for the same period in 2020, representing an increase of 17%. This was primarily due to an increase in personnel costs and professional services.
Net loss for the three months ended March 31, 2021 was $4.1 million compared to net income of $4.0 million for the same period in 2020.
At March 31, 2021, we had $864.4 million in cash and cash equivalents and short-term investments, an increase of $21.8 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.
First quarter 2021 operating statistics
There were 3,454 active patients at March 31, 2021, representing 12% growth compared to March 31, 2020, and 1% growth compared to December 31, 2020.
In the United States, there were 2,183 active patients at March 31, 2021, representing 8% growth compared to March 31, 2020.
In Germany and other EMEA markets, there were 1,000 active patients at March 31, 2021, representing 18% growth compared to March 31, 2020.
In Japan, there were 271 active patients at March 31, 2021, representing 22% growth compared to March 31, 2020.
Additionally, 1,402 prescriptions were received in the quarter ended March 31, 2021, representing no change compared to the same period in 2020, and a 1% decrease compared to the quarter ended December 31, 2020. 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 first quarter.
In the United States, 917 prescriptions were received in the quarter ended March 31, 2021, representing a 7% decrease compared to the same period in 2020.
In Germany and other EMEA markets, 382 prescriptions were received in the quarter ended March 31, 2021, representing 16% growth compared to the same period in 2020.
In Japan, 103 prescriptions were received in the quarter ended March 31, 2021, representing 10% growth compared to the same period in 2020.
First 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 $21.1 million for the three months ended March 31, 2021, an increase of $6.1 million, or 40%, from $15.1 million for the three months ended March 31, 2020. This improvement in fundamental financial performance was driven by net revenue growth coupled with an ongoing commitment to disciplined management of expenses.
Recent clinical milestones
Earlier this April, we disclosed that an independent data monitoring committee (DMC) informed Novocure that the pre-specified interim analysis for the phase 3 pivotal LUNAR trial for the treatment of non-small cell lung cancer (NSCLC) was accelerated given the length of accrual and the number of events observed, to date. 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 would provide adequate data regarding toxicity and efficacy, providing sufficient overall power, as well as potentially providing important information regarding efficacy within treatment subgroups.
In April, we concluded our phase 2 pilot HEPANOVA trial investigating TTFields together with sorafenib, a kinase inhibitor, in 25 patients with advanced liver cancer. We have submitted an abstract for presentation at an upcoming medical conference in late June and look forward to discussing the full data set with clinicians, investigators and investors in the future.
In April, the U.S. Food and Drug Administration (FDA) approved our investigational device exemption (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 (Merck & Co., Inc., Kenilworth, NJ, USA). We are currently evaluating clinical trial sites for initiation.
Anticipated clinical milestones
FDA response to IDE supplement incorporating recommended protocol changes to phase 3 pivotal LUNAR trial in NSCLC (Q2 2021)
Presentation of full 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)
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 3 pivotal METIS trial in brain metastases (2022)
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 PANOVA-3 trial in locally advanced pancreatic cancer (2023)
Final data from phase 3 pivotal LUNAR trial in NSCLC (to be determined pending FDA approval of IDE supplement)
Conference call details
Novocure will host a conference call and webcast to discuss first quarter 2021 financial results at 8 a.m. EDT today, Thursday, April 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 2286525.
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.