NovoCure Ltd. Q3 FY2026 earnings call

• Optune Geo (GBM): Achieved record active patient counts (4,729) with strong growth in both established and new markets. The Phase III Keynote D58 trial, evaluating Optune Geo with pembrolizumab, is on track for end-of-year enrollment.
• Optune Maya (Brain Metastases): PMA application for NSCLC brain metastases is under FDA review, with a final decision expected by year-end and a potential launch in early 2027.
• Optune Pax (Pancreatic Cancer): Launch momentum slowed in the U.S. due to practice capacity issues caused by the recent launch of Deraxan Racib. However, clinical value recognition remains high, and the company is initiating trials (PNOVA-5 and PNOVA-6) to explore combinations with KRAS inhibitors.
• Optune Lua (Japan): Strong commercial execution with $4 million in revenue from Japan. Reimbursement for Optune Pax in Japan is expected in H1 2027, positioning Japan as a significant future market.
• Operational Efficiency: Structural changes are accelerating the path to profitability. R&D expenses increased 8% YoY to $58 million due to Keynote D58, while S&M and G&A expenses decreased by 9% and 5% respectively, largely due to lower share-based compensation.

The company reported total net revenue of $193 million, representing a 16% year-over-year increase. This growth was driven by a 19% increase in active patients and a one-time benefit of $4 million from improved approval rates in the U.S. and Germany, partially offset by a $2 million foreign exchange headwind. The Optune Geo franchise remained the core driver, with $181 million in revenue contributed by 4,729 active GBM patients (an 11% YoY increase). The emerging segments contributed $8 million from Optune Lua (255 active patients) and $4 million from Optune Pax (276 active patients). Gross margin improved to 77% from 73% in Q3 2025, reflecting supply chain efficiencies.

• Revenue: Raised full-year 2026 net revenue guidance to $736–$743 million, implying 12–13% growth. This includes $30–$34 million from Optune Lua and Optune Pax collectively.
• Gross Margin: Expects to maintain gross margins in the mid-to-high 70s through Q4 2026.
• Profitability: Committed to achieving adjusted EBITDA breakeven on a full-year basis for 2026. Management cautioned against expecting straight-line sequential improvements due to typical Q4 seasonality and launch preparations for 2027.
• R&D Expenses: Expects R&D costs to remain flat to slightly declining in 2027, with further reductions anticipated after the completion of major Phase III trials (Keynote D58 and Lunar 2).

• Competitive Disruption in Pancreatic Cancer: The rapid adoption of Deraxan Racib has overwhelmed medical practices with insurance appeals and skin toxicity management, significantly limiting NovoCure's access to physicians and slowing Optune Pax prescription volumes in the U.S.
• Reimbursement Delays: Establishing reimbursement within two years of launch is expected but not guaranteed; delays could impact cash flow and market penetration, particularly for Optune Maya and Optune Pax in new regions.
• Clinical Trial Execution: Success depends on timely enrollment and data generation from Keynote D58 and upcoming combination trials (PNOVA-5/6); any setbacks could delay standard-of-care establishment.
• FX Volatility: Foreign exchange fluctuations created a $2 million headwind in Q3, posing ongoing risk to international revenue translation.

Q: Vijay Kumar asked about the sustainability of the strong adjusted EBITDA performance and the path forward given quarterly fluctuations.

A: CFO Christoph Brackmann confirmed commitment to adjusted EBITDA breakeven for the full year 2026 but warned against expecting linear quarter-over-quarter improvement. He noted that Q4 is typically difficult to estimate due to preparation for next-year launches, and the company allows flexibility in its guidance range rather than committing to a straight-line projection.

Q: Larry Biegelsen inquired about 2027 growth expectations and the timeline for Optune Lua and Pax reimbursement in Japan.

A: CEO Frank Leonard reaffirmed the goal of double-digit top-line growth. He highlighted Japan as a major tailwind, noting that Optune Lua is gaining momentum and Optune Pax reimbursement is expected in Q1 2027. He emphasized that pancreatic cancer incidence is higher in Japan than the U.S., making it a sizable market where prices have been reset favorably.

Q: Jason Bednar asked if Optune Pax prescribing activity dried up after competitors launched and how R&D trends will look post-Keynote D58.

A: Frank Leonard clarified that patients are not leaving Optune Pax for Deraxan Racib in large numbers; instead, practices are overwhelmed by the competitor’s launch logistics, limiting NovoCure’s access. Regarding R&D, CFO Brackmann stated that expenses should decline beyond 2027 as major Phase III trials conclude, assuming no replacement with equally large studies.

Q: Jessica Fai questioned why the revised annual revenue guidance implied a sequential drop in Q4 despite a record Q3.

A: CFO Brackmann explained that Q3 included a $4.4 million one-time benefit from approval rate increases. Excluding this one-time item, the underlying run-rate supports the midpoint of the raised guidance, accounting for normal seasonal variations and collection risks in Q4.

Q: Kevin DeGeeter asked about the primary learning objectives of the VeriSTEM collaboration trials regarding KRAS inhibitors.

A: CMO Uri Weinberg explained that the PNOVA-5 and PNOVA-6 trials aim to demonstrate feasibility, tolerability, and safety of combining Optune Pax with KRAS inhibitors. The goal is to gather clinical evidence supporting concomitant use, potentially revealing synergistic benefits, which would solidify TT fields as part of the standard of care alongside emerging targeted therapies.