NovoCure Limited (NVCR) Q4 2021 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to NovoCure Fourth Quarter and Full Year 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised today’s conference maybe recorded. [Operator Instructions] I’d now like to hand the conference over to Ingrid Goldberg. Please go ahead.

Good morning, and thank you for joining us to review NovoCure’s fourth quarter and full year 2021 performance. I’m joined on the phone by our Executive Chairman, Bill Doyle; our CEO, Asaf Danziger; and our CFO, Ashley Cordova. Other members of our executive leadership team are also on the call and available for Q&A. The slides presented today can be viewed on our website, www.novocure.com, by clicking on the link for the fourth quarter and full year 2021 financial results located in the quarterly reports section of our Investor Relations page. Before we begin, I would like to remind you that our discussions during this conference call will include forward-looking statements, and actual results could differ materially from those projected in these statements. These statements involve a number of risks and uncertainties, some of which are beyond our control, including those risks and uncertainties described from time to time in our SEC filings. We do not intend to update publicly any forward-looking statement, except as required by law. Where appropriate, we refer to non-GAAP financial measures to evaluate our business, specifically adjusted EBITDA, a measure of earnings before interest, taxes, depreciation, amortization, and share based compensation. We believe adjusted EBITDA is an important metric as it removes the impact of earnings attributed to our capital structure, tax rates and material non-cash items and best reflects the financial value generated by our business. Reconciliations of this and any other non-GAAP financial measures to GAAP financial measures are also included in our press release in the appendix of the supplemental slides accompanying this presentation and in our Form 10-K filed with the SEC today. These materials can also be accessed from our Investor Relations page of our website. Following our prepared remarks today, we will open the floor for your questions. Financials for the 3 months and 12 months ended December 31, 2021 are available in our press release and in our 10-K both of which released earlier this morning. With that, I will now turn the call over to our Executive Chairman, Bill Doyle.

Thank you, Ingrid, and good morning, everyone. We founded NovoCure to explore the novel observation that electric fields can be harnessed to disrupt cancer cell division. Over the subsequent two decades, our team has worked tirelessly to bring Tumor Treating Fields therapy to patients, to extend survival in some of the most aggressive forms of cancer. Over these years, we have completed multiple pivotal clinical trials, built a durable commercial business, treating patients with glioblastoma and gained an immense amount of knowledge and experience, which fuels our confidence in the future. We continue to develop the full potential of the Tumor Treating Fields platform through research, clinical trials and collaborations with academic centers and industry partners. The fundamentals of our business are strong. 2021 was another year of achievement for the NovoCure team. We completed the enrollment of two randomized pivotal trials, the first in recurrent ovarian cancer. And the second in non-small cell lung cancer. We also completed enrollment of a pilot clinical study in gastric cancer, exciting data from the two the top investigator sponsor trials studying TTFields together with immunotherapy were presented at the society of Neuro-Oncology Annual Congress, which could lead to a paradigm shift and the treatment of patients with GBM. We also released data from our pilot clinical study in advanced liver cancer, which demonstrated an encouraging disease control rate and objective response rate in poor prognosis patients. We expanded our collaboration network, which now includes oncology leaders, Merck, Roche, Genentech and GT Medical. We announced we are building a world-class training and development center where partners from around the world can convene to learn the latest advances in the study and use of Tumor Treating Fields therapy, and we generated over $0.5 billion in net revenues. As impressive as this progress may be, we believe it is just the tip of the iceberg as we approach a key inflection point for our company and patients. In today’s call, we will first discuss recent updates in our core GBM business. We will then review developments in our clinical pipeline. Finally, we will close with a discussion of our fourth quarter financial results and the strength provided by our sustainable business model. Our core GBM business is a critical driver of NovoCure’s long-term success. Not only is our GBM business the financial engine fueling significant investment in future growth, it is providing the blueprint for successive successful commercial launches and geographic expansion. COVID-19 was a headwind in 2021. With the Omicron surge repeating patterns of restricted physician engagement, stressed hospital staffing and delayed diagnosis and treatment seen throughout the year. Nevertheless, we generated $535 million in net revenues from our GBM business, an increase of 8% year-over-year. A point of focus for increasing Optune adoption is broadening our penetration of key academic institutions. In the U.S., whether through primary consultations or second opinions, academic institutions see a majority of GBM patient flows and we remain underpenetrated in these settings. We are committed to providing every opportunity for oncologists that academic centers to learn about the science underpinning Tumor Treating Fields therapy and to increase their understanding of the clinical benefits for patients. I would like to highlight two opportunities for academic oncologists engagement. Our IST program and the TRIDENT trial in newly diagnosed GBM. Currently, NovoCure supports 30 active investigator-sponsored trials or ISTs. ISTs explore a variety of clinical topics of interest academicians, including new cancer indications, unique combinations with drugs and other therapies and used in new patient populations. NovoCure’s IST program offers oncologists opportunities to perform research and publish their findings and informs areas for further study, including potential pivotal trials. Our ISTs can also potentially lead to important breakthroughs such as the 2-THE-TOP study conducted by Dr. David Tran, Chief of the Division of Neuro-Oncology at the McKnight Brain Institute at the University of Florida in newly diagnosed GBM. As seen in our press release this morning, we are extremely pleased to announce Dr. Tran’s manuscript was published this week in the Journal of Clinical Investigation. As a reminder, 2-THE-TOP was designed to study Tumor Treating Fields with temozolomide, together with the immunotherapy pembrolizumab. As with our LUNAR trial, 2-THE-TOP explores potential benefits of using TTFields together with immunotherapies and specifically whether TTFields induced cell death leads to an anti-cancer immune response such that a formally cold tumor becomes hot for concomitant use with immunothetherapy. In November, at the Society for Neuro-Oncology Annual Congress, Dr. Tran presented preliminary data, which we found very encouraging. In 19 patients that had greater than nine months of follow-up, progression-free survival reached 11.2 months. For perspective, this compares to the 6.7 months achieved in NovoCure’s pivotal EF-14 study of TTFields plus temozolomide and is nearly a 3 times improvement to the four months of progression-free survival observed from treatment with temozolomide alone in the EF-14 controller. Dr. Tran’s research might prove revolutionary for GBM patients, and they potentially position TTFields as a sensitizer for immunotherapy agents to impact cancers in which they have so far proved ineffective. The 2-THE-TOP study is an example of a clinical researcher performing an IST that is driving the science, exploring the most effective uses of TTFields and may change the treatment landscape for GBM patients. NovoCure sponsored clinical trials provide a second avenue to engage key academic centers. Our TRIDENT protocol is testing the use of TTFields concurrently with radiation therapy rather than following radiation therapy in newly diagnosed GBM. Studying the earlier introduction of Optune in the GBM treatment protocol is critical to NovoCure for two principal reasons. First, shifting the introduction of TTFields to an earlier point in a patient’s treatment journey may lead to extended time on therapy and better survival outcomes. Second, it allows NovoCure to engage additional members of a patient’s oncology team, specific with a radiation oncologists. We believe greater awareness of the benefits of TTFields among all members of the treatment team is key to increasing adoption. We have opened TRIDENT recruitment sites at several of our focus academic centers with the goal of opening TRIDENT sites at all remaining centers this year. Geographic expansion is another key component of our long-term growth strategy. In July, we announced Optune had earned an ASA 3 rating from the French Health Authority. An ASA 3 rating enables our team to engage in reimbursement negotiations with the ultimate goal of achieving national reimbursement in France. We are in the final stages of price negotiations with French Health Authorities and expect to treat patients and trends by the end of 2022. In addition to France, we are establishing the commercial foundations in a number of other markets across Europe and Canada. These new markets create the opportunity to serve more GBM patients as well as establish commercial infrastructure in anticipation of future launches. I would like to close my comments this morning by highlighting our recently announced product development milestones. Preclinical research shows that increasing Tumor Treating Fields intensity enhances the cancer cell killing effect. The practical factor limiting field intensity and daily use is heat generation. We believe our next-generation arrays have the potential to mitigate the skin heating issue. Our research shows our next-generation arrays can deliver a higher, more consistent Tumor Treating Fields intensity to the region of a patient’s tumor. Our next-generation arrays are also designed to be more comfortable and provide greater range of motion. I am incredibly excited about this product development milestone as our next-generation arrays have the potential to improve our therapy in the lives of patients and could be another lever for increasing penetration. We are working with regulatory authorities in anticipation of a limited release in select EU markets later this year. NovoCure is in the privileged position to have large organic opportunities to extend the reach of the Tumor Treating Fields cancer therapy platform into new cancer indications and new geographies. We can further improve our therapy platform through product engineering, and our commercial business is fueling our many growth and product improvement initiatives. The durability of our core revenue streams allows our teams to focus on our strategic priorities, all with the ultimate goal to extend survivals in some of the most aggressive cancers. With that, I will now pass the call over to Asaf to discuss our clinical updates from the quarter. Asaf?

Thank you, Bill. First, I would like to echo Bill’s sentiment that our 2021 achievements are just the tip of the iceberg for NovoCure. In the next 24 months, we anticipate data from three registrational trials and data from numerous pilot studies, which could be revolutionary for patients and transformational for our company. As we approach this critical inflection point, we are also finalizing protocols for our next wave of clinical development to maintain growth in the future. Last year, we completed enrollment in two of our Phase 3 pivotal trials, LUNAR and INNOVATE-3. As a reminder, our LUNAR trial is studying the use of TTFields with docetaxel or physician’s choice PD-1 inhibitor for the treatment of stage 4 non-small cell lung cancer. LUNAR has a 12-month follow-up from last patient in. We are committed to sharing top line data by the end of the year. The INNOVATE-3 trial in recurrent ovarian cancer also completed enrollment in 2021, and we are awaiting the interim analysis from the independent data monitoring committee. As we recently disclosed, while we are encouraged by the rapid enrollment of INNOVATE-3, not enough events have occurred in the two arms for the DMC to complete their interim review. We expect an adequate number of events in the second quarter, at which time the DMC will complete their analysis, and we will make the findings of their report public. This timing does not impact the time line for data from this trial, which we expect in 2023. Moving to our pivotal METIS trial in brain metastases. We continue to enroll patients and expect final enrollment later this year with data in 2023. Finally, we are pleased to announce that along with our partner, Zai Lab, we have identified a suitable generic ABRAXANE chemotherapy for using China and enrolled our first Chinese patient in the pivotal PANOVA-3 trial in pancreatic cancer. Outside of China, we continue to monitor the impact of the global ABRAXANE shortage to ensure uninterrupted trial enrollment, we continue to expect final data in 2024. Looking ahead, we are excited about our next generation of clinical trials. In mid-2022, we expect data from our pilot study in gastric cancer in partnership with Zai Lab. We are also finalizing the trial protocol for our clinical collaboration with Roche, which will study TTFields together with Roche anti-PDL1 therapy for the treatment of metastatic pancreatic cancer. As we continue to generate data in new indications and combinations, it remains clear that our therapy is capable of impacting cancers in the head, thorax and abdomen and we look forward to continuing our research in cancers in these regions of the body. Before handing the call to Ashley, I would like to take a moment to congratulate the NovoCure team on a successful 2021. As challenging as the last few years have been, I’m excited for the fresh start of a new year. By continuing to commit to our mission today, it is my hope that we will have the opportunity to help many thousands of additional patients in the future. I would like to thank the NovoCure team for their daily dedication to our mission, and I look forward to another year of innovation and success. With that, I will pass the call over to Ashley to discuss our fourth quarter financial performance.

Thank you, Asaf. NovoCure finished the year in a strong financial position. Our core GBM business generated a record $535 million in net revenues in 2021, an 8% increase from the prior year. The durability of our commercial business enables continued investment in initiatives designed to drive greater revenue in the future. This includes expansion of our clinical pipeline, new product development and organizational readiness efforts in anticipation of potential future launches. In the fourth quarter specifically, we generated $133 million in net revenue. Unlike the fourth quarter of 2020, we did not recognize material revenue from our Medicare backlog. We also saw our net revenue per active patient per month come in slightly lower in the quarter, specifically due to negotiations with German payers. We have reached an agreement with the largest public payers in Germany, which enabled long-term price stability and greater operational efficiency and provides a strong foundation for negotiations in new markets. We ended the year with 3,587 patients on therapy, a 5% increase from the same time last year. This reflects year-over-year active patient increases of 4%, 6% and 16% in the U.S., EMEA and Japan, respectively. New markets coming online and greater penetration in current markets will continue to drive our active patient volumes in 2022, with full year active patient growth expected between 2% and 5%. Moving down the P&L. Our gross profit in the fourth quarter was $104 million with a gross margin of 78%. This is the seventh consecutive quarter in which our gross margin has been 77% or higher. We continue to evaluate opportunities to reduce our cost of goods sold as we expand our geographical footprint, launch product innovations and prepare for new indications. We believe one of our best uses of capital is research and development. Our R&D initiatives are designed to unlock new cancer indications, expand addressable patient populations and enhance our product offer. 2021 was a record year for R&D investment, as we invested more than $200 million for the first time. For perspective, we invested $132 million in R&D in 2020 and $79 million in 2019. While we expect the level of R&D investment to stabilize over time, in 2022, we plan to pursue incremental R&D investments intended to unlock additional indications and excess the greatest number of patients. SG&A expenses in the fourth quarter were $70 million, an increase of 17% from the fourth quarter of 2020, bringing our full year SG&A expenses to $263 million. Last year, roughly $6 million was specifically invested in programs to reach new patient population, either through geographical expansion in GBM or pre-commercial build-out for future launches. Moving forward, we anticipate incremental investment in SG&A will focus on initiatives intended to reach new patient population. Our net loss for the fourth quarter was $0.25 per share or $26 million. As we have said many times today, we believe we are approaching a key inflection point for our company and are investing strategically to ensure we meet the moment. Our focus remains on organizational readiness activities and investment and growth drivers ahead of managing for maximum earnings. Our adjusted EBITDA for the quarter was $2 million, bringing our annual total to $61 million compared to $115 million in 2020. This decrease was in part due to an incremental investment of $60 million in research and development initiatives net of share-based compensation as well as $6 million invested in programs designed to reach new patient population. Looking ahead, we are still at the beginning of our journey as a company, and we plan to invest accordingly. We generated $83 million in cash flow from operations in 2021 and ended the year with $938 million in cash and short-term investments on the balance sheet. Our cash position continues to be bolstered by our durable GBM business, and we believe this gives us the flexibility to pursue a variety of long-term organic growth opportunities without finance constraints trade-off. As we close the books on 2021, we are incredibly proud of what we have achieved. We crossed the $500 million net revenue threshold. We have multiple pivotal trials set to read out in coming years that could exponentially increase the number of patients that can benefit from our therapy. And finally, we are investing strategically to ensure our team is fully primed execute when the time comes. The fundamentals of our business are strong, and we look forward to another successful year in 2022. With that, I will turn it back over to the operator for Q&A.

[Operator Instructions] Our first question comes from Jason Bednar with Piper Sandler.

Hey, good morning. Thanks for taking the questions. Bill or Asaf, I’ll start with you. Just wondering if you can offer any additional visibility today on when we’ll actually see the updates on INNOVATE-3, the interim analysis and/or the gastric cancer trial? I think we all understand there aren’t specific days or weeks you’ll necessarily point to. But I guess as we’re all trying to prepare appropriately, I’m wondering if there’s anything you see from your side that allows you to dial in with a bit more detail some of the timing on either of these studies? And I guess, on INNOVATE-3, in particular, I don’t want to over read the comments today, but you previously talked about the interim analysis coming in early 2Q. I don’t think I heard that early qualifier today. Am I over reading that?

So, good morning, Jason. Just before we – and I’m going to turn it over to Asaf to answer the question about the interim and the gastric trial. But I just wanted to call out for everyone on the call a little late breaking news. We were very pleased to learn that our Founder, Yoram Palti, Professor Emeritus of the Technion, yesterday was awarded the Israel Prize for his work in cancer therapy and specifically for developing the Tumor Treating Fields platform. The Israel Prize is considered the highest honor that Israel gives to a civilian. And I just wanted to mention that and congratulate Professor Palti. And with that, Asaf, you want to make just a few comments about the interim and the gastric trial?

Thank you for your question. Let’s start with the gastric. The gastric is a trial that we did recruit all the patients, and we are right now collecting the data. Besides that, we’re all waiting to announce about the data, but I cannot have anything like that. The interim analysis, which is going to happen soon. Our expectation and we share it with you when we will have that the trial will continue as planned. It’s not changing anything about our data that we’re going to basically to announce after the follow-up. So you can take it as we believe that the trial will continue as planned.

Yes. So – and following up, Jason, so you asked, should you read in anything, to the wording, there’s nothing to read in here. We expect the interim here in Q2, and we’re all looking forward to the gastric data mid this year.

Okay. All right, helpful. And also congrats to Professor Palti. Bill, maybe on the clinical pipeline. Over the past year, you’ve talked about several new Phase 2 and Phase 3 studies that are in various planning stages. You spoke to another one, I think, as far as an update here today. You’ve got a lot of capital at your disposal with all the cash on the balance sheet. So getting these trials started isn’t a matter of financial resources, but I guess, has there been a rate-limiting factor that’s kept this next wave of clinical development from really formally layering into the pipeline? And then any timing you’re willing to commit to and when we might see more details in any of those studies that you’ve discussed in the past?

Yes. So as you stated, we’re in – and we mentioned this, we’re in the privileged position that we are not limited by capital to invest. And from our perspective, these trials are underway in the sense that in liver, for instance, we’re actively working on that trial. We haven’t announced the protocol yet because we’re in discussions with the FDA. We’re actively working on additional trials in core areas in non-small cell lung cancer, there’s going to be additional news, for instance. And of course, if the gastric Phase 2 is reads out as we all hope and expect, that will be followed by clinical trials there. So from our perspective, we’re hard at work at the next wave. It’s – if we don’t announce the trials until we’re through with the FDA, and we actually have a finalized protocol. So no new updates in terms of timing, but we wanted to signal and you should rest assure that the next wave is underway.

All right. Very clear. Thank you so much.

Our next question comes from Cory Kasimov with JPMorgan.

Hi, thank you. This is Gavin on for Cory. Thanks for taking the question. I guess a couple for Ashley. You talked about active patient growth for 2022 in the 2% to 5% range. I’m just curious if you could provide additional color on where that growth is coming from, from a geographic perspective, primarily in the context of you discussed the net revenue per patient decline primarily from Germany? So any additional color there would be great. Thank you.

Yes. Thank you for the question. So I think the short answer is we continue to focus on growth in all of our active markets. So we have opportunities, we believe, to increase penetration, both in our large, more mature markets, such as the U.S., Germany and Japan as well as through expansion into new markets such as France and the continued development of markets we’ve expanded into over the prior year. So the short answer is in all of the above. I think specifically with regards to net revenue per active patients, what we now have, I would say, is a fairly stable assumption that you can use, if you just look at the Q4 numbers moving forward. And so while geographical growth will impact that patient mix somewhat, we are in a stable position, I would say, where you can look at our Q4 numbers and take that number out moving forward. So I’m going to pause there and ask if there’s any additional follow-up. The short answer is we’re focused on both increasing penetration as the key academic centers in our large mature markets and on expanding into new markets.

Okay, great. That makes sense. And then I guess just a follow-up to that on the gross margin. I think you alluded to some efforts being made to reduce the cost of goods sold. So I guess more specifically, what are those efforts? And are we around the margin profile that you expect to be somewhat stabilized?

Yes. So this is our seventh quarter with a margin above 77%. And I think a lot of the margin swings that you’ve seen in recent quarters have more to do with Zai purchasing than they do with the fundamental efforts that we have to drive ongoing efficiencies. We do believe that margin profile is sustainable. As we expand geographically, we would expect some modest pressure on the top line, but we believe we have to stay ahead of that with the efficiencies that we’re getting, just naturally true scale and through the maturation of our supply chain. I do have Wilco on the call is why I don’t know if there’s anything he would add.

Thank you, Ashley. Good morning. I think I’d like to point out, I’d like to reemphasize what Ashley was pointing out that we’ve seen significant high in the 70s gross margins over a number of quarters. We actually improved our gross margin year-on-year by 1 full percent. We have a number of initiatives going on to address opportunities to further improve margin, which will play out in the foreseeable future. So I think current performance improving with a full percentage point with future improvements in the pipeline.

Great. Thank you.

Our next question comes from Kevin DeGeeter with Oppenheimer.

Hey, great. Thanks for taking our question. I guess I want to follow-up on the comments with regard to introduction of next-generation array. Specifically, how should we be thinking about any clinician education or just sort of use or familiarity adjustments with the introduction in Europe of the right later in the year? And then as we think about potential U.S. and more global introduction of that next-generation array, maybe specific to the U.S. the rate-limiting steps from either regulatory or supply chain perspective to a broader introduction of that array?

Sure. So as I mentioned in the comments, we are extremely excited about the potential for improving our platform. And it’s one of the big differences, of course, between a device-based therapy and a drug-based therapy. Within a device-based therapy, now that we have the financial power to build and invest in product development, we can – and we know we have the opportunity to improve the delivery of the therapy. And that improvement is focused on a few areas. First and foremost, improving efficacy by increasing the intensity. But we’re also very focused on improving the patient experience. So making it easier for the patient to use more comfortable. And then finally, to Wilco’s comments, we’re – as we develop new products, we’re focused on supply chain, manufacturing with the ultimate goal to make them more efficiently, less expensively. So all of those opportunities exist, and we’re focused on them. With respect to your specific question, the rate limiting step is regulatory. We have the supply chain in place or we’re putting it in place. And in terms of training physicians, we do not expect any, if you will, barrier or headwind. If anything, it will be a tailwind because we expect these arrays to be much more comfortable, much more easy to use for patients. So the reason that we’re not giving any more specific dates is that we’re confident that we can provide the rollout – begin the rollout in Europe in the end of this year based on where we are with the regulators in the EU. The U.S. process is a little more a function of the FDA. We’re engaged, but it’s too early for us to give a timing of a U.S. rollout.

Thanks for taking our questions.

Our next question comes from Lei Huang with Wells Fargo.

It’s Lei calling in for Larry. Thanks for taking my questions. Just on your guidance to start out the 2% to 5% activation growth for in 2022. That was your growth, obviously, for 2021, and you mentioned some of those full headwinds that affected the growth at the start of the call. So my question is, as you look at the 2% to 5%, could it be better than 5% as we think about COVID abating going through 2022? Or put another way, I guess, what are you assuming at the low end of the growth that would make the growth slow quite a bit versus last year?

Yes. Thanks for the question, Lei. And I do think it is important to anchor that 2% to 5% on the growth from last year, which was the 5% and that is the message we see here that we see kind of a stable engine of growth, a durable and a sustainable engine of growth in our GBM business that continues to generate the cash to fuel innovation. So that is the anchor there is that 5% growth came in 2021. I would say, we see – at this point, we have no reason to change that active patient growth expectation of the 2% to 5%, and that’s still roughly what we – that’s in line with what we expect for the full year. It’s too early for us to refine them, I would say that that’s still the landscape we see looking forward.

Fair enough. Okay. Then on the PANOVA study. So on the Q3 call, that study was delayed a bit because of the supply issue. I think on today’s call, you mentioned monitoring the global supply situation. Can you tell us if it’s gotten better, worse, anything on the margin you can provide just as far as supply situation versus what you saw in Q3?

Sure. So Ely Benaim is with us here, and he can comment on the PANOVA trial.

Yes, thank you for the call. Yes, we have been monitoring very closely all over the world. The major deficiencies are in the state. So we have compensated really with looking at other areas – geographic areas to the enrollment of the PANOVA trial. We’re very happy that we were able to assure a generic paclitaxel and that paclitaxel hold in China. And we already have our first patient that was enrolled in the study, and we expect many more on such a large population. So right now, our guidance is we’re still going to have last patient in sometime early in 2023, and we signing that data in 2024. So we are really not concerned. We’re just working very hard to procure the drugs for the patients.

Got it. Thank you. If I may just ask one more. Is there any update on the third-generation TTF generator? Thanks.

Yes. So no update on the TTF generator. The last update was that we were able to introduce the small neuro form factor into our torso applications. And as we stated, I think the next wave of product improvements are going to be on the array side and also the continued rollout of our MAXPOINT system for mapping – for clinician mapping.

Our next question comes from Greg Fraser with Truist Securities.

Good morning, and thanks for taking the questions. My first one is on geographic expansion, which is a key part of your growth strategy for GBM. What are the important markets where you plan to take Optune next beyond France and Canada? And how should folks think about when those markets could become material revenue generators?

So Pritesh Shah, our Chief Commercial Officer, is with us this morning. So Pritesh?

Great. Greg, thank you for that question. So what I would say is when we think about market expansion, particularly for GBM, but also for our future expansion, we want to make sure that we have a foundation built in the large markets in Europe and across the globe such that we can continue to grow glioblastoma, but also pave the path to introduce lung cancer and to introduce ovarian cancer, so on and so forth. So as you would expect, we’re looking at the larger markets that we’re not active in today. And that would principally mean if you think about EU4 plus The UK, any market that we’re not in, currently, we look to explore opportunities to enter those. We’re starting this effort with France. We started our market effort in France close to two years ago, and we hope to bring that to fruition at some point this year which would transcend France from a pipeline opportunity to an active market opportunity for us. And the work that we do there then will transcend into opportunities in other countries like UK, Spain and other markets that would be meaningful opportunities for the business, but also to expand our mission into these geographies.

Got it. A couple of questions on the pipeline. Can you narrow down when you anticipate readout from EF-33? And then on the 2-THE-TOP study, do you have a sense for when additional data could come out from that study? And if that data is supportive of further evaluation of IO plus TTFields for GBM? What will be the next steps for development? Thanks.

Yes. So I’m going to turn the mic over to Uri Weinberg, our Chief Science Officer. And I realize that it is very late breaking on a heavy news morning. But we did announce today that Tran’s fundamental research was published in JCI today. And we think it’s – his results are profound. So Uri, maybe if you start there and then we can comment on the potential next steps.

Sure. So I’ll take a couple of minutes to describe the key points from these top-tier publications. We had evidence of increased immune system response, following TTFields application in multiple models. Nevertheless, Dr. Tran’s groundbreaking and the independent research in TTFields really provides a very comprehensive explanation for that and more importantly, suggests that we could exploit it better for patients. So these main findings are that TTFields induced a focal disruption of the nuclear envelope of cancer cells, leading to cytosolic release of large micronuclei clusters. And this leakage of genetic material basically led to the recruitment of intracellular DNA sensors, which are part of the innate immune system and activation of inflammasomes. These are complexes of proteins, which could elicit deploy inflammatory anticancer response. And indeed, following this inflammasome activation, production of pro-inflammatory cytokines and Type 1 interferon took place. Then in an animal model, pre-treatment of GBM cells with TTFields led, again, to inflammasome activation and induce protective immunity also in poorly immunogenic GBM tumor. So Dr. Tran and his team then also translated these findings to patients showing that TTFields activated adaptive immunity in GBM patients. They are the same Type 1 interferon trajectory, which was accompanied by T cell activation that we would like to see so much against the tumor cells and clonal expansion of these cytotoxic T cells acting against the tumor. So I will summarize that all of these findings suggest the use of TTFields to generate this antitumor immunity that we aspire to have and the memory response as well against GBM tumors and potentially other solid tumors or in other words, it provides the scientific explanation to the ability of TTFields to turn cold tumors hot and therefore also make such tumors more susceptible to immune checkpoint inhibitor treatment. So thanks for your patience throughout this quick summary of trends really canonical publication in a top-tier journal. As for your question, 2-THE-TOP study is another independent investigator-initiated study that is still being run by Dr. Tran and his team. And so we are unable to be precise about the anticipated completion of the study. But again, it’s the follow-up period. It will take some additional months. And I’m sure that Dr. Tran will be able to summarize his findings in another publication. As for the EF-33, the gastric cancer study, we – sorry, was there a question about the gastric cancer or about the…

EF-33.

The – yes, so we are going to share the results from this study this year, as we have previously announced.

Yes. So to underline, we were already extremely impressed and enthusiastic as we described in the text with the clinical outcomes reported by Tran at the Society of Neuro-Oncology Meeting in November. Of course, we’re eagerly awaiting data from LUNAR, which incorporates an arm in lung cancer with Tumor Treating Fields and anti-PD-1 therapy. And the fact that he’s been able to now describe the mechanism of action that supports the observation, I think, is leading us to back in terms of thinking about the next wave of trials. This is clearly an important input for us and for our partners, Merck and Roche and potentially others. So the fact that Tumor Treating Fields as a sensitizer or has the potential to be a sensitizer for immunotherapies, we think, is an important finding.

Great. Thanks for the color.

Our next question comes from Jason Wittes with Loop Capital.

Hi, thanks for taking the questions. First, as a follow-up to the last question, you mentioned LUNAR does have a PD-1 arm. How does this new data on immuno sensitivity impact your thinking there? One, do you expect to see a signal and two, will we be able to tease it out based on how you design that trial?

So of course, the Tran’s publication is very encouraging in the context of the LUNAR study, where TTFields are combined with either chemotherapy docetaxel that also showed synergy with Tumor Treating Fields in multiple models and also immune checkpoint inhibitors, any of the approved ones for this patient population. Now we are even more encouraged than before that the combination therapy could augment the efficacy of immune checkpoint inhibitors because the TTFields application that is concomitant to the application of immune checkpoint inhibitors is anticipated to make the tumor cells become more immunogenic, ones that are becoming more susceptible, more exposed, more vulnerable to the natural immune system of each individual patients and making them hopefully more responsive to immune checkpoint inhibitors in this setting. And this is what we aspire to see. Of course, we’re as curious as all of you to see the results later this year.

Okay. Thank you. And then maybe just on ovarian, the data safety monitor committee is going to comment. But should we expect much from that other than continue the trial? Or is there some type of more significant data point that we might get out of that outcome?

Yes. So you asked me to guess, we believe that we will continue to drive it as planned. This is our assumption.

Yes. It will not be a data that we don’t see the data. We just get the thumbs up from the DMC.

Okay. That’s where I just want to clarify that. And then on the next-gen arrays, you mentioned regulatory is a limiting step. I don’t know if you can add a little more color in terms of what your discussions have been with the regulatory committees, especially the FDA. Are they looking for a full trial to get them approved in the U.S.? And also related to that, would they even be looking for specific trials for each indication? Or I’m just curious on kind of what you think the pathway might be at this point?

So our approach will be to incorporate the – all the innovation and improvement of the – in our way, not through a clinical trial. So this is basically our path. We still – neither the other side would agree to that. But historically, this is the way that we do.

Yes. And the only other thing I’ll add just while we’re talking about arrays, we’re really excited about this next generation array. But it’s not the last generation array either. Now that we have the R&D capacity, we see a lot of an exciting pipeline, if you will. We talk about pipeline of indications, we see a pipeline and the product improvements as well.

Great. Thank you. I’ll jump back in queue.

[Operator Instructions] Our next question comes from Vijay Kumar with Evercore ISI.

Hey guys, thanks for taking my questions. Bill, maybe my first one on the LUNAR, the slide deck had the patient – U.S. patient opportunity has 46,000. I think there have been some questions on, is that 46,000 TAM, given this is a second-line therapy in chemo failure. And I think the markets you if patients are given IO drugs, like do we still have 46,000 patients or chemo failure. So maybe just talk about the LUNAR, TAM and opportunity given this changing standard of care that we’re seeing?

Yes. Great. Vijay, this is Ashley. I can jump in. That 46,000 in the K represents what we believe is the patient population that actively treat second line – treat second line from non-small cell lung cancer. So given our trial design, we are post-platinum failure, so second line treatment clearly. And as the first line evolves, I think we’re going to have to evaluate that ultimate potential, but we do believe that 46,000 represents the portion of patients that actively seek second line treatment for non-small cell lung cancer in the U.S. And of course, that’s just the U.S. number. So this is an opportunity that’s multiple fold that size when we look at the global potential.

Okay. Maybe one on the clinical trial side here for the trial design change on LUNAR with the follow-up now being 12 months. I guess, when I look at the slight deck, your Phase 2 non-small lung cancer, median overall survival was 13 months. So I guess if the follow-up is 12 months, and we know from Phase 2, your survival is going to be beyond 12 months. So maybe just talk about this trial design change to 12 months and whether that incorporates? Can we even see a median overall survival in the treatment arm because clearly, your Phase 2 was about 12 months?

Sure. So I’d like to remind everybody that DMC thoroughly reviewed the entire data set from the LUNAR study, including an evaluation of the number of events, which is required to achieve a full readout of the results at the end of the follow-up. I would also like to remind everybody that it has taken longer than expected for all of us to accrue the LUNAR study, making the number of events accumulated on this study, higher the point in time where the interim analysis was taking place. So in order to achieve a valid analysis of the full data set, what we need is enough sufficient follow-up period for the entire study population, not just for the last patient that was enrolled in the study and we are going to have that towards the end of the follow-up period.

Got you. And Ashley, if I may, one last one. The active patient volume of two to five. Should we assume a couple of hundred basis points headwind from Germany this year. So revenue outlook for fiscal 2022 as perhaps in the low single-digit range?

Yes. No, it’s an excellent question. And what we do believe so, again, the active patient is the unit assumption that’s tied to our revenue, which is then obviously has a price assumption as well. So our recommendation is that you should look at a Q4 price as you model out the 2024 growth. So that includes the headwind in Germany, but I will point out that we do have tailwinds with a full year of Medicare plus administrative ramp up. So net-net, I think we’re at a stable price is how I would think about it.

That’s helpful. Thank you, guys.

I’m showing no further questions in queue at this time. I’d like to turn the call back to William Doyle for closing remarks.

So again, I want to thank everyone for your interest in NovoCure. We are excited to continue our progress in 2022, and we’re anticipating a tremendous change in our company as we prepare for the readouts of LUNAR and INNOVATE and the launching of our next wave of clinical trials. So thanks to everybody.

This concludes today’s conference call. Thank you for participating. You may now disconnect.