On October 29, 2020 Novocure (NASDAQ: NVCR) reported financial results for the quarter ended September 30, 2020, highlighting revenue growth and financial strength as well as the advancement of the company’s clinical and product development programs (Press release, NovoCure, OCT 29, 2020, View Source [SID1234569383]). 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.

"We delivered another record quarter of financial performance with $133 million in net revenues and $0.09 in earnings per share," said William Doyle, Novocure’s Executive Chairman. "Our financial strength positions us well to invest in our commercial, clinical and engineering priorities to sustain long-term growth and maximize shareholder value. With readouts from key clinical trials in multiple indications anticipated over the next few years and an increased focus on technology innovation, our confidence in the potential of Tumor Treating Fields to extend survival in some of the most aggressive forms of cancer continues to build."

"We further strengthened our foundation for growth in Q3 with efforts underway to ensure organizational readiness for the company’s next chapter," added Asaf Danziger, Novocure’s Chief Executive Officer. "We ended the quarter with 3,361 active patients on therapy, adding to the more than 17,000 patients treated to-date, globally. With plans to expand access to our approved indications into additional markets, we remain focused on positioning our company to serve many more patients in the future."

Third quarter 2020 financial update

For the quarter ended September 30, 2020, net revenues were $132.7 million, representing 44% growth compared to the third quarter 2019.

In the United States, net revenues totaled $92.6 million in the quarter ended September 30, 2020, representing 51% growth compared to the same period in 2019.
In Germany and other EMEA markets, net revenues totaled $28.2 million in the quarter ended September 30, 2020, representing 15% growth compared to the same period in 2019.
In Japan, net revenues totaled $7.5 million in the quarter ended September 30, 2020, representing 57% growth compared to the same period in 2019.
In Greater China, net revenues totaled $4.3 million in the quarter ended September 30, 2020, representing 205% growth compared to the same period in 2019.
For the three months ended September 30, 2020, the increase resulted primarily from an increase of 610 active patients in our currently active markets, and a durable improvement in the net revenues booked per active patient, as well as an increase in collaboration revenues from our partnership with Zai Lab.

We recorded $10 million in revenues from Medicare fee-for-service beneficiaries billed under the coverage policy effective on September 1, 2019 in the third quarter 2020. 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 third quarter 2020, we also recognized approximately $8 million in incremental net revenues compared to the first two quarters 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 September 30, 2020 was $28.4 million compared to $22.9 million for the same period in 2019, representing an increase of 24%. 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, partially offset by benefits of ongoing efficiency initiatives and scale. Gross margin was 79% for the three months ended September 30, 2020 compared to 75% for the three months ended September 30, 2019.

Research, development and clinical trials expenses for the three months ended September 30, 2020 were $32.8 million compared to $18.8 million for the same period in 2019, representing an increase of 75%. 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 September 30, 2020 were $29.4 million compared to $23.8 million for the same period in 2019, representing an increase of 23%. This was primarily 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 September 30, 2020 were $27.1 million compared to $22.7 million for the same period in 2019, representing an increase of 19%. This was primarily due to an increase in personnel costs, insurance premiums and professional services.

Net income for the three months ended September 30, 2020 was $9.3 million compared to net income of $1.9 million for the same period in 2019.

At September 30, 2020, we had $234.5 million in cash and cash equivalents and short-term investments, a decrease of $91.6 million compared to $326.1 million at December 31, 2019. The decrease in our cash, cash equivalents and short-term investments was primarily due to the prepayment of the 2018 credit facility in the amount of $150 million, partially offset by the cash flow from operations and the exercise of options and proceeds from the issuance of shares.

The 2018 credit facility prepayment included $150 million in principal repayment and $3 million in prepayment premium, plus accrued and unpaid interest and expenses payable through the payoff date. The un-amortized issuance costs in the amount of $0.5 million that were fully amortized upon the repayment and the prepayment premium were included in the Company’s third quarter 2020 finance expenses.

Third quarter 2020 operating statistics

There were 3,361 active patients at September 30, 2020, representing 22% growth compared to September 30, 2019, and 3% growth compared to June 30, 2020.

In the United States, there were 2,218 active patients at September 30, 2020, representing 19% growth compared to September 30, 2019.
In Germany and other EMEA markets, there were 902 active patients at September 30, 2020, representing 23% growth compared to September 30, 2019.
In Japan, there were 241 active patients at September 30, 2020, representing 51% growth compared to September 30, 2019.
Additionally, 1,371 prescriptions were received in the quarter ended September 30, 2020, representing 4% growth compared to the same period in 2019, and a 4% decrease compared to the quarter ended June 30, 2020. In the quarter ended September 30, 2020, 1,117 Optune prescriptions were written for patients with newly diagnosed glioblastoma.

In the United States, 955 prescriptions were received in the quarter ended September 30, 2020, representing a 4% increase compared to the same period in 2019.
In Germany and other EMEA markets, 330 prescriptions were received in the quarter ended September 30, 2020, representing 4% growth compared to the same period in 2019.
In Japan, 86 prescriptions were received in the quarter ended September 30, 2020, representing 2% growth compared to the same period in 2019.
Third 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 $37.3 million for the three months ended September 30, 2020, an increase of $17.2 million, or 85%, from $20.1 million for the three months ended September 30, 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

Data from phase 2 pilot HEPANOVA trial in advanced liver cancer (Q1 2021)
Data from phase 2 pilot EF-31 trial in gastric cancer (2021)
Interim analysis of phase 3 pivotal LUNAR trial in non-small cell lung cancer (2021)
Interim analysis of phase 3 pivotal PANOVA-3 trial in locally advanced pancreatic cancer (2021)
Interim analysis of phase 3 pivotal INNOVATE-3 trial in recurrent ovarian cancer (2021)
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 LUNAR trial in non-small cell lung cancer (2023)
Final data from phase 3 pivotal PANOVA-3 trial in locally advanced pancreatic cancer (2023)
Final data from phase 3 pivotal INNOVATE-3 trial in recurrent ovarian cancer (2023)
Conference call details

Novocure will host a conference call and webcast to discuss second quarter 2020 financial results at 8 a.m. EDT today, Thursday, October 29, 2020. 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 5453859.

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.