NovoCure - Earnings Call - Q3 2025

Executive Summary

• Q3 revenue of $167.2M grew 8% YoY and 5.3% QoQ, beating S&P Global consensus by ~$8.3M (+5.2%); EPS loss of $0.33 beat by ~$0.09, while EBITDA was more negative than consensus given pre-reimbursement lung treatments, HFE rollout, and tariffs; consensus values marked with asterisks retrieved from S&P Global (see Estimates Context).*
• GBM franchise remained stable with 4,277 Optune Gio active patients (+5% YoY) and strong ex-U.S. momentum (France/Japan/Germany); lung (Optune Lua) remained behind expectations at 100 active NSCLC patients, but Japan approval was secured with national reimbursement expected in coming quarters, a key launch catalyst.
• Margin headwinds persisted (73% gross margin vs 77% YoY) from HFE array rollout, treating NSCLC prior to broad reimbursement, tariffs, and a $2.9M Lua array obsolescence provision; CFO now expects FY gross margin to land mid-70% vs prior expectation of low-70%—a constructive update.
• Regulatory pipeline de-risking continues: pancreatic cancer PMA accepted and in substantive review (mid-2026 approval targeted), METIS PMA completion by YE25; Spain coverage for GBM and Japan approval for Lua expand the commercial footprint.
• Liquidity remains strong ($1.034B cash/investments) with $561M convert set to be retired with cash; management re-affirmed adjusted EBITDA break-even in 2027 at ~$700–$750M revenue as new indications scale.

What Went Well and What Went Wrong

• What Went Well

  • Revenue and EPS beats: $167.2M revenue (+8% YoY) and EPS ($0.33) outperformed consensus; GBM steady, FX tailwind +$3.3M, ex-U.S. growth notable. Consensus from S&P Global.*
  • Regulatory/commercial wins: Japan approval for Lua concurrent with PD-1/PD-L1; Spain national coverage for GBM; pancreatic PMA entered substantive review; METIS presented in ASTRO plenary with positive TTIP outcome.
  • Improved FY gross margin outlook: CFO now sees FY gross margin trending mid-70% (vs low-70% earlier), aided by cost reduction progress on HFE arrays.

• What Went Wrong

  • Lung launch lagging: Management acknowledged Lua ramp “harder than expected” with 100 NSCLC patients on therapy; competitive drug landscape and 4-month median therapy duration weigh on traction.
  • Margin headwinds: Gross margin fell to 73% (from 77% YoY) on HFE rollout, pre-reimbursement lung treatment, tariffs, plus $2.9M Lua array obsolescence.
  • Continued losses: Net loss ($37.3M) and adj. EBITDA ($3.0M) negative; EBITDA more negative than consensus, reflecting the above cost dynamics and pre-reimbursement mix. Consensus from S&P Global.*

Transcript

Operator (participant)

Good day and thank you for standing by. Welcome to the Novocure third quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ingrid Goldberg.

Christoph Brackmann (CFO)

Please go ahead.

Ingrid Goldberg (Head of Investor Relations)

Good morning and thank you for joining us to review Novocure's third quarter 2025 performance. I'm on the phone this morning with our Executive Chairman Bill Doyle, CEO Ashley Cordova, and CFO Christoph Brackmann. Other members of our executive leadership team will be available for Q&A. For your reference, slides accompanying this earnings release can be found on our website www.novocure.com on the investor relations page under Quarterly Reports. Before we start, 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 and are 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 will refer to the 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 attributable to our capital structure, tax rate, and immaterial non-cash items and best reflects the financial value generated by our business. Reconciliations of non-GAAP and GAAP financial measures are included in our press release, earnings slides, and in our Form 10-Q filed with the SEC today. These materials can also be accessed on the investor relations page of our website. Following our prepared remarks today, we will open the line for your questions. I will now turn the call over to our Executive Chairman Bill Doyle.

William F. Doyle (Executive Chairman)

Thank you, Ingrid, and good morning. At Novocure, our mission is to extend survival in some of the most aggressive forms of cancer. Through our early years, our efforts focused mostly on the treatment of patients with glioblastoma. Now, with one launch ongoing and two additional launches planned for next year, the scope of our mission has expanded to reach more patients who can benefit from Tumor Treating Fields in multiple solid tumor cancers. As we evolve from a single indication company to a true platform oncology therapy provider, we are focused on three priorities. First, preparing to treat four cancer indications by year end 2026, second, reaching profitability, and third, making disciplined investments that strengthen our product portfolio in the near and the long term. We will begin this morning with a review of our Q3 commercial results in glioblastoma and non-small cell lung cancer.

We will discuss regulatory updates and preparation for anticipated launches in pancreatic cancer and brain metastases, and we will provide updates to our ongoing clinical and product development programs. We will conclude with a review of our quarterly financials and open the line for questions. Our GBM business remains solid and active. Patients have grown between 5% and 12% year over year for the last nine consecutive quarters. We ended the third quarter with 4,277 GBM patients on therapy, our largest patient count to date. The largest contributors to active patient growth in this quarter were France, Japan, and Germany, which grew 27%, 8%, and 7% respectively. We also expanded our international footprint. Last month, we received a positive national coverage decision from the Spanish Ministry of Health. At maturity, we expect Spain to deliver annual net revenue that is approximately half that of France.

We expect full ramp up to take a few years given the fragmented nature of the Spanish healthcare system. In the U.S., our GBM active patient count was flat compared to Q3 2024. While we are proud to be treating approximately 40% of GBM patients in the U.S., we recognize that many more patients could benefit from Tumor Treating Fields therapy. Unlike lung cancer and pancreatic cancer, where most patients seek treatment in community centers, virtually all GBM patients undergo brain surgery at high volume academic centers. After diagnosis, oncologists at academic centers often prioritize enrollment in pharmaceutical clinical trials over new medical device based therapies. This dynamic limits the number of patients offered Optune Geo in academic centers.

Despite the established clinical benefits of Tumor Treating Fields therapy, our commercial team continues to refine its approach within this complex environment, and we remain committed to ensuring that all eligible GBM patients are offered Optune Geo therapy. Turning to non-small cell lung cancer, we've acknowledged that our launch is behind expectations, and in Q3 we did not see a continuation of the linear growth we've seen in the prior two quarters. While we anticipated lung cancer would be our most challenging indication to launch, it has been harder than we expected. We finished Q3 with 100 lung cancer patients on therapy, 94 in the U.S. and 6 in Germany.

What makes advanced lung cancer particularly challenging is the poor overall health status of these patients, the high level of competition from new targeted drug therapies, and the limited median duration of therapy, 4 months versus the 10 months for newly diagnosed GBM. We experienced similar launch challenges in 2011 with our initial launch in recurrent GBM when we introduced our device-based therapy to the neuro-oncology community in an advanced cancer setting. With GBM, we learned that consistent education and follow-on data generation drives prescriber and patient adoption over time. We are anticipating a similar path in lung. To delve deeper, lung cancer is a highly competitive space.

The survival benefit demonstrated in the LUNAR Phase 3 trial remains among the best reported in the post-platinum setting, but the number of systemic drug therapies available across settings makes the transition to a novel device-based modality like Optune Lua seem like a heavier lift for both physicians and patients. Our sales team is tackling this by highlighting specific patient profiles to help physicians better understand where Optune Lua is likely to provide the best benefit. Our primary focus is on patients who have had a durable response to a checkpoint inhibitor plus a platinum doublet and have slow progression with a maintenance checkpoint inhibitor. There is also the challenge of introducing a device-based therapy to a medical oncology community that has limited device experience.

As mentioned, we faced a similar hurdle when we introduced Optune Lua to recurrent GBM, and we know it takes time and hands-on experience for physicians to gain comfort with a device-based therapy. Simply put, a wearable device is novel in the oncology space, and as such, we are connecting experienced Optune and Optune Lua users who can share expertise and tips based upon real-world use with physicians new to the therapy to simplify the integration of Optune Lua into their practices. Looking to the near-term future, an important upcoming milestone for Optune Lua is our Japan launch. Last month, we received approval from Japanese regulators for the use of Optune Lua and checkpoint inhibitors in advanced or recurrent non-small cell lung cancer. Japan has been a consistently strong region for Novocure, and we are planning for strong physician adoption of Optune Lua.

We believe a high prevalence of lung cancer, Japanese physicians' appreciation for device-based therapies, and a local standard of care which frequently utilizes immune checkpoint inhibitors in the first and second lines provides the conditions for a successful launch in Japan. We will be closely monitoring the dynamics of our Japan launch to inform future strategies. Longer term, we are working on two core programs to reach more non-small cell lung cancer patients, LUNAR-2 and product development. LUNAR-2 is our phase 3 trial studying the use of Optune Lua plus checkpoint inhibitors and platinum-based chemo as a first-line treatment for newly diagnosed non-small cell lung cancer. Assuming success, LUNAR-2 will allow us to treat first-line lung cancer patients with Optune Lua and a checkpoint inhibitor, the drug-device combination demonstrating the best efficacy across indications.

Our product development efforts are focused on making the Optune device easier for patients to use through near-term improvements in support services, software, and array design, and longer-term efforts to design a transformative next-generation device. It is critical to underline we believe our efforts in lung are worth it. The investments we are making for the lung cancer indication also paved the way for our anticipated launches in pancreatic cancer and brain metastases in the next 12 months. In summary, our core GBM business continues to grow, reaching more patients in more regions. Our lung cancer launch has been more difficult than anticipated, and we are learning and adapting our tactics. We have two additional launches in cancer indications with extremely high unmet needs anticipated in 2026, where minimal therapeutic options are currently available and that we can access with limited incremental investment.

As our lung cancer and GBM infrastructures will be leveraged, we are confident in our strategic direction, the strength of the clinical data supporting the use of Tumor Treating Fields therapy, and our plans to achieve profitability. With that, I'll turn to Ashley to provide an update on our regulatory and clinical progress.

Ashley Cordova (CEO)

Thank you, Bill. Earlier this year, we had an exciting presence at the ASCO Annual Meeting where data from PANOVA-3 were presented during the Saturday evening plenary with concurrent publication in the Journal of Clinical Oncology. In July, the PANOVA-3 results earned a second podium presentation at ESMO GI where the quality of life data was described in greater detail. PANOVA-3 demonstrated Tumor Treating Fields' ability to extend survival and preserve quality of life in pancreatic cancer, yet another aggressive solid tumor where Tumor Treating Fields has shown a benefit. In August, we submitted our PANOVA-3 data in a PMA package to the FDA for the treatment of unresectable locally advanced pancreatic cancer. The filing was accepted, and we are currently in the substantive review phase with our FDA 100-day meeting scheduled for mid-December. The review is proceeding as anticipated and in line with our previous experience.

We expect FDA approval mid next year. In September, we also initiated the PANOVA-3 filing process with European regulators and are currently preparing our filing in Japan. The pancreatic cancer treatment landscape is similar to GBM, where effective therapeutic options are extremely limited. Feedback from leading pancreatic cancer physicians and advocacy groups on the PANOVA-3 data has been consistently positive, and we look forward to the opportunity to treat pancreatic cancer patients as soon as possible. Moving to brain metastases, we presented the final data from our Phase 3 METIS trial in the plenary session at the 2025 ASTRO Annual Meeting in September, and these data were concurrently published in the Red Journal, the leading publication of the radiation oncology community.

ASTRO is an important conference for Novocure as it hosts the largest gathering of radiation oncologists annually, a group of physicians that historically have best appreciated the benefits of Tumor Treating Fields therapy. This year, the METIS presentation was one of only five plenary selections out of 2,500 submitted abstracts, underlying the community's interest in our METIS data. There is a palpable excitement among radiation oncologists in the potential of Tumor Treating Fields to better control brain metastases given their experience using Optune to treat GBM. The first two modules of the brain metastasis PMA have been submitted to the FDA. We received questions from the FDA regarding our second module, and we are working to close these questions out swiftly. We are prepared to file the third and final clinical module as soon as those questions are resolved.

Our timeline for the full PMA submission is unchanged and we continue to expect to complete the filing by year end 2025. Like the pancreatic cancer filing, we expect a 9 to 12 month review once the clinical module is accepted by the FDA, with the final decision anticipated in the second half 2026. As Bill Doyle discussed, the investments in our lung launch have established the infrastructure needed to launch both the pancreatic cancer and brain metastases indications. Upon regulatory approval, we expect to launch these two new indications by leveraging our existing sales forces. The team detailing GBM will detail brain metastases and the lung sales force will detail our pancreatic cancer indication. We also see significant opportunities to leverage our medical education efforts, creating synergies across tumor types that accelerate awareness and deepen engagement within the medical oncology community.

We expect our existing infrastructure to provide a strong foundation for these new indication launches without the need for substantial additional investment. Turning to Product Development, an enduring reality of virtually all cancer therapies is a trade off between extending survival and the burdens and side effects of receiving cancer care. An overarching goal of our product engineering efforts is to minimize any potential burden of the Optune user's experience, either through improved devices or complementary offerings. We are pursuing projects to improve the therapy experience for cancer patients and physicians across all indications and expect to improve the Optune experience.

Operator (participant)

Ladies and gentlemen, please stand by. Your call will be resumed momentarily. Once again, ladies and gentlemen, please stand by. Your call will resume momentarily. Again, ladies and gentlemen, please stand by. Your conference call will resume momentarily.

Ashley Cordova (CEO)

While I tried to connect you.

Operator (participant)

You're back online, you can resume.

Ashley Cordova (CEO)

All right, I am going to pick up at the product development conversation. Okay, welcome back everyone. Turning to Product Development, an enduring reality of virtually all cancer therapies is a trade off between extending survival and the burdens and side effects of receiving cancer care. An overarching goal of our product engineering efforts is to minimize any potential burden of the Optune user's experience, either through improved devices or complementary offerings. We are pursuing projects to improve the therapy experience for cancer patients and physicians across all indications and expect to improve the Optune experience in both the near and longer term. Earlier this year we launched a new patient app in the U.S. which provides patients and caregivers a central location to track their Optune GEO usage, reorder new supplies, access FAQs, and contact Novocure. Over 78% of U.S.

GBM patients are users of the new app and we are now preparing to launch in our international markets. On the physician front, we launched a new portal for GBM prescribers this year which streamlines the prescription administration and ongoing care processes. Over 60% of our target sites are active on the portal and physicians and their care teams tell us that they are pleased with the simplified administrative processes. We also recently submitted our updated MaxPoint GBM treatment planning software for use with the HFE arrays to the FDA and expect approval in upcoming months. As a reminder, the MaxPoint algorithm uses patient MRI scans and physician inputs to create individualized optimized array placement maps as a function of the electrical properties of a patient's brain tissue.

MaxPoint received a Category 3 CPT code in July and we plan to launch it as a product enhancement subsequent to FDA approval. On the array front, we have rolled out our HFE arrays in all material markets and expect to fully complete the global rollout by year end. We are also in the process of bringing many of the HFE array design elements and materials components into our next generation torso array, which we expect to submit to the FDA for approval next year. As a medtech company, we have the unique opportunity to increase adoption and advance patient outcomes for both product and clinical development. Of note, we have two clinical readouts expected in the first half of next year.

The Phase 2 PANOVA-3 trial in metastatic pancreatic cancer should report out in late Q1 of next year, and the Phase 3 TRIDENT results in GBM will follow in Q2. PANOVA-3 will add to the existing pool of data exploring Tumor Treating Fields plus an immunotherapy chemo combination regimen, for the first time in metastatic pancreatic cancer, which continues to be a devastating diagnosis for patients and their families. TRIDENT studies the benefit of starting Tumor Treating Fields concurrently with chemoradiation in newly diagnosed GBM rather than waiting until after a patient's chemoradiation cycle ends. The goal of TRIDENT is to prove Tumor Treating Fields' ability to enhance the cancer cell DNA damage mechanisms of radiation. If successful, TRIDENT could enable radiation oncologists to prescribe Tumor Treating Fields earlier in a GBM patient's therapy journey than its standard of care today, something we know to be important.

Data from these trials will further elucidate how Tumor Treating Fields can best be harnessed to improve the lives of patients diagnosed with these deadly cancers, and we are excited to share these results with you early next year. As we look ahead to 2026, we are on the verge of becoming a true platform oncology therapy provider with four indications expected in market by year end 2026. Our teams are excited about the opportunity to treat many more patients in need and continue our pursuit of profitability in the year to follow. I'll now turn the call over to Christoph Brackmann to review our Q3 financial performance.

Christoph Brackmann (CFO)

Thank you, Ashley. We continued our positive momentum this quarter with net revenues of $167 million, an increase of 8% from the third quarter last year. This was primarily driven by year-over-year active patient growth of 5% in our GBM franchise, notably by strong performance in France, Germany, and Japan. We also had a foreign exchange rate tailwind this quarter of $3.3 million compared to the same period in 2024. We collected $3.1 million from Optune Lua claims in the quarter, including $1.6 million from non-small cell lung cancer collections in the period. As a reminder, reported revenues from non-small cell lung cancer reflect cash collections from approvals and POS from appeals in the quarter. Gross margin for the third quarter was 73%.

The reduction in margin is reflective of the global rollout of HFE arrays, the ongoing launch in non-small cell lung cancer where we are treating patients prior to establishing reimbursement, and increased tariffs in the quarter. We also recognized a $2.9 million expense related to an inventory obsolescence provision for Optune Lua arrays. Moving to operating expenses, our research and development costs in the quarter were $54 million, an increase of 4% from the same period last year. We do not expect R&D expenses to increase materially this year as we ramp down spend on PANOVA-3 and METIS and reallocate those funds to Keynote D58 and LUNAR-2. Sales and marketing expenses in the quarter were $59 million, a decrease of 2% from Q2 of last year. This decrease was driven by lower share-based compensation expenses as disclosed in prior quarters.

We expect to leverage our current salesforce to launch our pancreatic cancer and brain metastases offerings in 2026 pending FDA approval. G&A expenses for the quarter were $46 million, an increase of 15% from Q3 of 2024. This increase was primarily driven by higher share-based compensation expenses and higher personnel and professional service expenses to support the greater company buildout, particularly in enterprise technology as we invest in our digital infrastructure to enable scale. Net loss for the quarter was $37 million with a loss per share of $0.33. Adjusted EBITDA in the quarter was negative $3 million. While still negative for now, adjusted EBITDA is currently ahead of our internal plans for the year, driven both by solid revenues from our GBM franchise as well as constant prioritization of investments.

We are committed to breaking even sustainably on an adjusted EBITDA basis in 2027 with the revenue contribution from new indications. Our cash and investment balance at the end of Q3 was $1.034 billion. As a reminder, we have $561 million in convertible notes that will come due in the coming days, which we will retire with cash from the balance sheet. We also closed on the second $100 million tranche of our credit facility this quarter. With the cash and short-term investments currently on the balance sheet and funds available through our credit facility, coupled with ongoing expense management, we continue to believe that we have the capital necessary to bridge to our next revenue streams in new indications. At Novocure, we are on the cusp of expanding the reach of Tumor Treating Fields to patients in multiple solid tumor cancers.

The discerning investments we are making today establish an infrastructure capable of treating patients in multiple indications. We look forward to the future treating more commercial patients in established and new geographies, two important data releases in the first half of 2026, and pending approvals in additional indications with high unmet need, and importantly, we are confident in our ability to achieve profitability. We will now open the lines for questions.

Operator (participant)

Operator, thank you, ladies and gentlemen. If you have a question or a comment at this time, please press Star 1 1 on your telephone. If your question has been answered or you wish to remove yourself from the queue, please press Star 1 1 again. We will pause for a moment while we compile our Q&A roster. Our first question comes from Jason Bednar with Piper Sandler. Your line is open.

Christoph Brackmann (CFO)

Good morning. Thanks for taking the questions. I wanted to start first here on Lung. A few questions here. I'm just going to pack in the launch in Germany and Japan. I know super early days, but any comparisons you can make relative to the launch trajectory you have here in the U.S. as we think about how those markets could scale relative to how the U.S. has performed, anything that you can.

William F. Doyle (Executive Chairman)

Take with the slower ramp and adjust.

Christoph Brackmann (CFO)

The go-to-market strategy outside the U.S., and then I'm wondering if there are other factors outside of just physician education that might be helpful here in the U.S., such as securing reimbursement and/or inclusion in NCCN guidelines. Can you help with where you stand on those fronts?

Ashley Cordova (CEO)

Great. Jason, this is Ashley. I'll start and talk a little about the global footprint and then I'll ask Frank to jump in with the specifics. In the U.S., I think really in Germany what I would say is it's still very early days. We're just now entering into the beginning of our third quarter there, and the summer periods in Europe are a thing. As we look ahead, I would say there's no new news coming out of Germany that we've seen. That kind of differs from the dynamics we've seen in the U.S., both in the opportunities to continue to drive growth and in some of the challenges that may come in this education. I would not point to anything specific in those early numbers and say it's early days, and our teams are there executing and building those relationships.

When we look ahead to Japan, we do think that this is a very different market for Optune Lua. We have received approval for Optune Lua in Japan, but we have not yet received national reimbursement. That means our field teams are able to begin the physician education process, but the real launch dynamics will come to bear when we do have physician reimbursement, which we anticipate in upcoming quarters. It is a market we believe will be different for us and an easier market to launch in for a couple of factors that Bill mentioned on the script. The first of which is that there is just a much higher prevalence of lung cancer in Japan. The second of which is the Japanese physicians are more comfortable using device-based therapies, I would say across the board.

The third of which is that we have a local standard of care which is extremely comfortable using ICI across all settings, both first and second line and on the top line growth format. Because we have a single national payer, once we get reimbursement, we're able to see that active patient growth trigger translate to top line and bottom line growth quite quickly. We are preparing for that launch, and again we're quite hopeful that it will be materially different than the trajectory we've seen in the U.S. and Germany. Hi Jason, this is Frank.

Frank Leonard (President)

Thank you for the question to pivot back to the U.S. and talk about learnings and tactics. I think one thing we would acknowledge is in the launch we initially pursued large volume academic practices where you do see large populations of stage 4 non-small cell lung cancer being treated because obviously you're trying to go after the patient volumes that you can capture. The challenge that we found in that setting is that, number one, they're just not comfortable with devices as a starting point. You're introducing a new workflow, a new modality into the practice. What we have found more effective as we pivot is in those larger volume practices you can find the doctor who perhaps is seeing stage 3, but occasionally is consulted on stage 4 and is hyper interested in Tumor Treating Fields.

We do have an example at one large academic practice where, starting with somebody who is seeing one or two patients a month, they're now consistently prescribing three or four patients a month because they're pulling them in from the med onc practice. We're trying to lean into that tactic right now of not necessarily finding the doctor with the highest volume, but finding the highest interest and their willingness to be an advocate within their practice to pull it in. Thank you and happy to provide more color.

Christoph Brackmann (CFO)

Terry, maybe just as a quick follow-up, anything on commercial reimbursement to get updated on, and anything on NCCN guidelines that we should be monitoring? As a follow-up, it's been pivoting hard. In Spain, I know you referenced that as a market that has a different structure to it. It's going to take maybe a little bit longer than France to ramp up. I think probably maybe a bit more normal or comparable to Japan back in the day.

William F. Doyle (Executive Chairman)

I guess with the trajectory of.

Christoph Brackmann (CFO)

That adoption, is that something we should expect to be linear, or is it more back end loaded? How to think about that ramp up when it starts happening.

Ashley Cordova (CEO)

Yeah. Jason, this is Ashley on the NCCN guidelines. Just as a reminder, we submitted at the end of last year. We know that the package and the application was reviewed in early July, and we would expect the updated guidelines to be published in the upcoming months. We really don't have any more insight on the progress there beyond that. I will note that in the commercial setting, which is where we're now able to submit for reimbursement and approval, we are seeing honestly approval rates above our internal expectations. This is going well in lung. The payers are responding to the strength of the data. We would expect that to continue to be the case in all scenarios. I think the real unlock on the reimbursement side for lung will be Medicare, of which NCCN guidelines is a key input. It's not the end of that journey.

I think commercial reimbursement is going well, Medicare is a much longer journey which we started and which NCCN guidelines will support. In Spain, I think it is a good reference to the Japan rollout of Optune Lua 7 years ago because we do have to contract hospital by hospital despite the national reimbursement. It really is, I would say, in an administrative processing phase. Time will tell. What we said is that we think it won't be overnight, but it will ramp up over the course of a couple of years, and I think it will be a continuing driver of top line growth for us both in the active patient numbers and in revenues over the next two years.

Christoph Brackmann (CFO)

Okay, helpful, thank you.

Operator (participant)

One moment for our next question. Our next question comes from Vijay Kumar with Evercore ISI, your line is open.

William F. Doyle (Executive Chairman)

Hi, this is Kevin on 4VJ. I have a few more questions on lung. You talked about the launch being behind expectations.

Frank Leonard (President)

Are you able to share what your

William F. Doyle (Executive Chairman)

Initial expectations or targets were for lung? Second, on LUNAR-2, would you say this termination is at all connected to your latest views on the lung cancer market broadly? Lastly, if you can share the year-to-date spend on that program before it was terminated. Thank you.

Ashley Cordova (CEO)

Yeah, Kevin, this is Ashley. Thanks for the question. Unfortunately, the answer to all of those is I would say no, meaning we're not able to share that sub level of detail and we're not sharing the internal launch expectations. What I will say, though, what we can say is that we always knew that this would be a slower ramp than it would be if we were a little white pill. We know that across our device, linear growth was what we anchored people to. Now what we're saying is we knew it would be hard. It's somewhat harder than we expected, but we do continue to look ahead to growth, and again I would point both to ongoing trajectory in the U.S. and Germany and to hopefully a step function increase in that growth from Japan. That's where we are with LUNAR overall.

With LUNAR-4, the story there really is about actually the disciplined investments and what we were able to save by looking at the ability to gather that data from real-world evidence, which in the U.S., I will remind you that approximately 90% of our patients on Optune Lua for non-small cell lung cancer have had prior ICI exposure. We are able to look at the real-world evidence and the experience in the U.S. and publish over time that data to answer a very similar question that LUNAR-4 was asking. We do know it is still a very relevant scientific question. We are committed to kind of exploring that question, but it is a far more cost-efficient way for us to do that through real-world evidence.

Christoph Brackmann (CFO)

Yeah, Vijay, Kevin, sorry, this is Christoph. Just to add to what Ashley said, the savings we expect is in the mid to high single-digit million. It's actually quite worth it to do.

Ingrid Goldberg (Head of Investor Relations)

Got it.

Christoph Brackmann (CFO)

Thank you.

Operator (participant)

One moment for our next question. Our next question comes from Jessica Fahr with J.P. Morgan.

Christoph Brackmann (CFO)

Your line is open. Hey, this is Tanmay on for Pritesh, and thanks for taking a question. My first question is we now know that activations for non-small cell lung cancer grew to 100 in 3Q, but given the sequential decline in prescription, could you probably just expand on the underlying dynamics there? My second question would be if you could expand on the gross margin trajectory and over what time horizon can we think about that recovering or maybe not even exceeding historical levels? Thank you.

Frank Leonard (President)

Sorry, could I just ask to clarify the first question around prescription and patient volumes?

William F. Doyle (Executive Chairman)

Yeah. Okay.

Christoph Brackmann (CFO)

For the non-small cell lung cancer, we now have 100 patients in 3Q. However, we see a sequential decline in prescription volume. Could you maybe just expand on the underlying dynamics there?

Frank Leonard (President)

Thank you for the question. Yes, what we do see is that we focus internally. Our big focus is on active patients. There's always a bit of noise in prescription volumes because it's a question of some practices write prescriptions before they've really educated the patient. Some practices only write the prescription when they're ready for the patient to start. I think we need a few more quarters in lung cancer before we really settle into what a fill rate would look like. For right now I would ignore the noise around prescriptions.

Christoph Brackmann (CFO)

I can take the question on gross margin. We had, maybe just to take a step back, in the quarter we had a gross margin of 73% at the beginning of the year. What we said is what we would expect during the year is the gross margin to come closer to lower 70s, driven by a couple of headwinds. One is the rollout of the HFE arrays. Two basically was the lung cancer indication where we launched before getting reimbursement. Then there was another headwind that came to it.

William F. Doyle (Executive Chairman)

It was tariffs.

Christoph Brackmann (CFO)

If you now look at it all together, we're actually pleased with the cost reduction journey that we have been able to accelerate on the HFE arrays.

Ingrid Goldberg (Head of Investor Relations)

So.

Christoph Brackmann (CFO)

As a result, for this year, we see the gross margin get closer to kind of the mid-70% as opposed to the lower-70%. Now, when we look ahead, our gross margin will be impacted by the launches and the launch trajectories. That really comes back to the fact that in order to get reimbursement, for us, it's a process, it doesn't come with approval. We will be starting to read patients in markets where we expect to be reimbursed before we have the actual reimbursement. There will be a gap between starting off patients and getting reimbursement. That will impact our gross margin. Quite honestly, the more successful we are, the more it will impact the gross margin during this transition period.

I think what's important is we are somewhat in control of this because we can accept the patients or not accept the patients if you don't get reimbursement in the timeline that we want. Our gross margin, there will be a little bit of noise as we go through the launches. We expect it to come back to higher levels when we are through this period, which is in the higher 70%.

Ashley Cordova (CEO)

I would just say in all scenarios, when we look at profitability as defined by adjusted EBITDA, we remain committed to that path and can see getting there throughout those launches.

Christoph Brackmann (CFO)

Got it. Thank you.

Operator (participant)

One moment for our next question. Our next question comes from Jonathan Chang with Leerink Partners. Your line is open.

Ashley Cordova (CEO)

Hey, this is Yiwen Ong for Jonathan. Thanks for taking our questions. One more on the Optune Lua launch in lung. You reported 84 unique prescribers. Can you provide some clarification on whether that's specific to Q3 or that's cumulative since the launch or something else? One follow-up, if I may, on profitability. Can you provide more color on what goes into your goal of breaking even in 2027? Thank you. That stat is specific to Q3, so that's an easy answer. I will point out the takeaway there, that it's been consistent across quarters. What we're seeing is that we're able to bring both new prescribers into the Optune Lua treatment journey and we're retaining existing prescribers. When we think about that mix between new and returning, we see about a 50% split there, which is a nice trend as we look ahead.

I will often remind everybody, when we look at the profile of patient we're getting, we are seeing that patients, approaching 90% of them, have prior ICI exposure. We're also seeing it used in a combination that we know is relevant.

Frank Leonard (President)

Yeah.

Christoph Brackmann (CFO)

Sorry, on the adjusted EBITDA, your line was a bit faint. What exactly was your question?

Ashley Cordova (CEO)

Just more color on what goes into your goal of reaching the break even in 2027.

Christoph Brackmann (CFO)

This is really no change in messaging. I mean, this is very consistent with commentary in the past. What we said is that we would expect to break even on an adjusted EBITDA level at the revenue of around $700 million to $750 million. The range is really explained by two main items. One is the level of R&D expenses, which is driven by the pace of enrollment in phase 3 trials, in essence. Two, the dynamics that I just talked through in terms of during launch years, we have an impact on gross margin. Both levers are now in our control. Again, we expect to break even on adjusted EBITDA level at a revenue level of $700 million to $750 million. We expect this to be during 2027. We'll be there on a sustainable basis, meaning up to then we could be close.

This quarter we were very close, minus $3 million. We believe we'll be sort of bouncing around this break even on adjusted EBITDA level during 2027. We believe it will be on a sustainable level.

Ashley Cordova (CEO)

Got it.

Ingrid Goldberg (Head of Investor Relations)

Thank you.

Operator (participant)

One moment for our next question. Our next question comes from Emily Bodnar with H.C. Wainwright. Your line is open.

Emily Bodnar (Analyst)

Hi, good morning. Thanks for taking the question. I guess on the long side, I was curious with how the launch is going currently. Do you have any kind of internal changes to your expectations for what the opportunity could look like at peak and kind of more color on how we should be thinking about ramp maybe for next year and also what learnings you've had from the launch so far that you can kind of use to make sure the pancreatic launch doesn't kind of fall into a similar pattern. Thank you, Emily. That's a great question. I'll start with a little bit of what our expectations are internally and then ask Frank to provide some of the learnings. Zooming out, long is hard, but we do know it's worth it given the opportunity, both long term but also across the entire facility portfolio.

Ashley Cordova (CEO)

The interment cost for spending is actually quite negligible when we look at the investments we would be making today versus the investments we need to be making for pancreatic and brain metastases as we look ahead. We have adjusted our internal expectations. We are making sure that we have motivated field teams that are focused on the right targets driving growth. I will say when we look at investments, the investments we have made are investments in the platform and they will establish that infrastructure that will treat the full portfolio over the next year. While we're always looking at those discerning investments, I will say we really are now looking at the platform and again, we're confident that those are the right ones as we look to this path to profitability with top line growth coming from four products on the market in the end of the year.

I'm going to ask Frank to provide specifics on Tibbets in the market.

Christoph Brackmann (CFO)

Thank you.

Frank Leonard (President)

First, to go to the question around how do we view the long term value? We still see the long term value in helping non-small cell lung cancer patients. There's a tremendous unmet need in the second line. As we look even further ahead to the LUNAR-2 trial, there's huge opportunity within first line treatment. For us, given the data set that we have, we believe we have a compelling reason to be in this market helping the patients. In terms of learnings and pivots, I think Bill in his opening noted the need for education and additional evidence as you work into a new community of doctors. On the education front, I think, one, we have the advantage that we are in market already, so physicians are hearing about our lung indication.

By extension, when we go into and have approval to actually market to PANOVA, they won't be naive to the messages. Number two is to take a direct learning from lung in terms of the education that we need to do. I'd say we've learned that we need to educate not just the physician, but the practice, the nurses, the physician's assistants, and really everyone in the practice on therapy because you don't know where the patient will direct their question, their first question about the device. I think that's in the real tactical side of things, but it's things that we now know we need to do to be successful in our next medical oncology launch. Bill also mentioned the need for continued evidence generation.

I think one thing we've done for PANOVA is ensure that at FDA launch, we're also in the process of closing out the PANOVA-3 data set. Trying to take those learnings and really lead towards an excellent launch in PANOVA.

Ashley Cordova (CEO)

Great. Thank you.

Operator (participant)

I am not showing any further questions at this time. I would like to turn the call back to Bill Doyle for any further remarks.

William F. Doyle (Executive Chairman)

Thank you, Kevin. I'd like to conclude the call where I began. Everyone in Novocure comes to work every day to help patients extend their survivals in these really aggressive cancers. We've been working very hard for years to help patients with GBM, and we are now excited and in the middle of our preparation to become a true platform company serving again patients in four indications by the end of next year. Our pipeline's on track. We were very pleased with the clinical recognition received for PANOVA-3 and METIS. On the financial front, again, we expect now four diversified revenue streams and we're committed to marching forward toward profitability. We have an exciting 15 months ahead. Six major country level launches, two important data readouts, and meaningful product improvements that we continue to focus on and will be rolling out.

With that, I want to thank the Novocure team for all their hard work and for your attention and support today.

Christoph Brackmann (CFO)

Thank you.

Operator (participant)

Ladies and gentlemen, that concludes today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.