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NovoCure Limited  (NASDAQ:NVCR)
Q2 2019 Earnings Call
Jul. 25, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to Novocure's Second Quarter 2019 Performance Conference Call. [Operator Instructions]

I would now like to introduce your host for today's conference, Ms. Ashley Cordova, Senior Vice President of Finance and Investor Relations. Ma'am, you may begin.

Ashley Cordova -- Senior Vice President of Finance and Investor Relations

Good morning, everyone, and thank you for joining us to review Novocure's second quarter 2019 performance. I am joined today by our Executive Chairman, Bill Doyle; our CEO, Asaf Danziger; our CFO, Wilco Groenhuysen; and our Chief Medical Officer, Ely Benaim. The slides presented today can be viewed on our website, www.novocure.com, by clicking on the link for second quarter 2019 financial results located in the Events section on our Investor Relations page. 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, 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. Following our prepared remarks today, we will open the line for questions. Financials for the 3- and 6-months ended June 30, 2019, are available on our press release and in our 10-Q, both of which we released earlier this morning.

With that, I will now turn the call over to Bill Doyle.

William F. Doyle -- Executive Chairman

Thank you, Ashley, and good morning, everyone. We're pleased to announce a strong second quarter, during which we achieved significant milestones in our commercial business and made progress on drivers of long-term value creation. We achieved our first-ever quarter of positive operating income. Cash flow from the GBM business continues to fund increased investments in our clinical pipeline and further technology development. In May, the NovoTTF-100L system was approved by the FDA to treat malignant pleural mesothelioma in combination with standard chemotherapies via the HDE pathway.

This is our first FDA-approved torso device. We are enrolling 4 Phase III pivotal trials, creating a significant market expansion opportunity treating some of the most aggressive forms of cancer. Beyond the compelling value creation potential of our advancing pipeline, we achieved a number of important milestones in the first half of 2019, and momentum continues into the third quarter. After a multiyear process, in May, the Durable Medical Equipment Medicare Administrative Contractors, or DME MACs, issued a proposed local coverage determination that provides Medicare beneficiaries coverage of Optune for newly diagnosed GBM, subject to certain restrictions.

The proposed LCD was subject to a 45-day public comment period, which closed in late June. Comments were provided to the DME MACs by more than 200 patients and caregivers, 80 healthcare providers and 5 cancer advocacy groups. In addition, 42 members of Congress sent a letter to the CMS administrator urging the removal of any coverage limitations that are not supported by FDA approvals or private market coverage policies. Last week, the DME MACs released the final LCD and fee schedule amount that provides coverage and pricing of Optune for newly diagnosed GBM, effective September 1, 2019.

In response to public comments, the final coverage criteria eliminated or revised many of the restrictive criteria originally proposed. This is a major milestone for Novocure. We are pleased to see the Medicare coverage process come to a conclusion, and we'll continue to work to expand access to Optune for all patients who may benefit. Another progress during the quarter, our partner, Zai Lab, has submitted an application to the Chinese regulatory authorities to designate Optune as an innovative medical device and is pursuing a clinical trial waiver for the GBM indication in China. Should a clinical trial waiver be granted, Zai Lab intends to launch Optune in China before year-end.

With that introduction, I'll hand the call over to Asaf.

Asaf Danziger -- Chief Executive Officer

Thank you, Bill. The second quarter was transformative for Novocure, we achieved record quarterly net revenues of $86.7 million and a gross margin of 76%, generating our first-ever quarter of positive operating income. In May, NovoTTF-100L was approved by the FDA to treat patients with unresectable, locally advanced or metastatic, malignant pleural mesothelioma, or MPM. MPM is a rare cancer that has been strongly linked to asbestos exposure. This approval represents the first FDA-approved treatment advance in over 15 years for the 3,000 Americans diagnosed with MPM annually.

The approval also marks Novocure's first FDA-approved torso indication and, we believe, shows the promise of TTFields in multiple solid tumor types, including some of the most aggressive forms of cancer. We have initiated a phase launch for MPM, shaped by our learnings from our GBM rollout. In 2019, we will focus on satisfying radiation oncologist and driving adoption at approximately 30 centers that, we believe, see the majority of U.S. MPM patients. While the radiation oncologists will be the exclusive prescriber for MPM in the U.S., we know from our GBM experience that communication across the multidisciplinary teams at cancer treatment centers is critical to driving adoption.

As such, our field teams are working to educate the surgeons, pulmonologist and medical oncologists that see MPM patients to ensure they have the information needed to confidently recommend NovoTTF-100L to patients. We are pleased with the early execution and positive initial response. We certified our first MPM prescribers in early June, less than 2 weeks after FDA approval. Certifications are ongoing and information has been requested by multiple sites to support the required IRB approval. We expect our first MPM patient to start therapy in the third quarter. Moving to GBM. More than 2,700 patients were on Optune at quarter's end.

The number of prescriptions for patients with newly diagnosed GBM continue to grow. $86.7 million in Q2 net revenues represent an increase of more than 40% versus the same period last year. We continue to believe the strength of prescriber's recommendation often influences whether or not a patient will start Optune. The confidence and communication skills of individual prescribers can have a noticeable impact on our prescription flow. We have strengthened our physician speaker program to encourage communication across the multidisciplinary teams at GBM treatment centers and to prepare prescribers to confidently recommend Optune to patients. We have also launched a tool to help physicians introduce Optune in a patient-friendly manner intended to increase patient acceptance. The early feedback from both our sales force and physicians has been overwhelmingly positive.

I will now hand the call over to Ely for an update on our advancing clinical pipeline.

Ely Benaim -- Chief Medical Officer

Thank you, Asaf, and good morning, everyone. Tumor Treating Fields therapy has shown promise across a variety of solid tumor cancers. Phase III pivotal trials are ongoing in 4 indications, brain metastases, lung cancer, pancreatic cancer and ovarian cancer, creating the potential for substantial revenue growth driven by a cadence flow of new indication launches commencing as early as 2022.

We also have a Phase II trial open in liver cancer and an additional 12 solid tumor cell lines with preclinical data that have shown a response to Tumor Treating Fields. On today's call, I will give a brief update on the progress of each of our programs, beginning with METIS. METIS is our Phase III pivotal trial testing the effectiveness of stereotactic radiosurgery, plus Tumor Treating Fields, compared to stereotactic radiosurgery alone in patient with brain metastases resulting from non-small cell lung cancer. We have opened the trial to 270 patients, and enrollment is ongoing at more than 85 sites across North America, Europe and Israel.

We anticipate data will be available from METIS in 2021. LUNAR is our Phase III pivotal trial testing the effectiveness of Tumor Treating Fields in combination with immune checkpoint inhibitors or docetaxel versus immune checkpoint inhibitors or docetaxel alone for patients with non-small cell lung cancer, who progressed during or after platinum-based therapy. We have opened the trial to 534 patients, and enrollment is ongoing at more than 65 sites across North America and Europe. We now expect the interim analysis in the second half of 2020 with final data from LUNAR in 2022. At number three, our pancreatic cancer trial and INNOVATE 3, our recurrent ovarian cancer trial, are performing well in their ramp-up phase.

We anticipate final data from these trials will be available in 2022 and 2024, respectively. We are also working to finalize the protocol for our next randomized trial in GBM, intended to support possible label expansion, studying the potential benefit of initiating Optune concurrent with radiation therapy versus initiating Optune post radiation. We will provide updates on these trials as they develop. Beyond our clinical pipeline, there's an increasing interest from the scientific community, driving external research on Tumor Treating Fields broadly. We have 29 investigator-sponsored trials open, studying a range of topics and 30 ongoing Inovitro preclinical studies. The Inovitro is a bench research system which enables independent researchers to study the effects of Tumor Treating Fields in vitro.

We awarded the inaugural AACR-Novocure Tumor Treating Fields research grants in April and are committed to expanding the program in 2020. We're working to develop similar partnerships with other organizations that share our desire to support and expand innovative research on Tumor Treating Fields.

With that, I'll turn the call over to Wilco to review our financials.

Wilco Groenhuysen -- Chief Financial Officer

Thank you, Ely, and thanks to everyone for joining us on the call this morning. Novocure ended the second quarter in a strong financial position. With more than 2,700 GBM patients on Optune as of June 30, 2019, the number of active patients has grown for 18 consecutive quarters since the initial presentation of the EF-14 data in early diagnosed GBM. More than 12,000 patients have been treated today globally, and trailing 12-month net revenues now exceed $290 million. Second quarter net revenues were $86.7 million, growing 41% year-over-year and growing 18% quarter-over-quarter.

Revenue growth was driven by an increase in active patients and an increase in net revenues per active patient. The increase in net revenues per active patient was primarily driven by improved reimbursement rates, which we believe are sustainable. The improved reimbursement rates also resulted in additional benefit of approximately $5 million to second quarter net revenues that we do not expect to be a significant in future quarters. Gross profit in the quarter was $65.6 million, reflecting a 76% gross margin. Gross margin continues to benefit from ongoing efficiency initiatives and increasing scale.

We believe that the reduction in cost per revenues per active patient is sustainable, and we remain focused on improving this key metric. Moving down the income statement. We continue to increase investments in research and development with $19.5 million R&D expenses in a quarter, up more than 71% versus second quarter of 2018. This was primarily driven by an increase in clinical trial and personnel expenses for our Phase III pivotal trials and an increase in costs associated with medical affairs, regulatory and engineering. As we work to enroll patients across 4 Phase III clinical programs, we anticipate that R&D expense will continue to increase in future quarters.

Our second quarter SG&A expenses were $45 million, an increase of 20% versus the second quarter of 2018 driven primarily by increased marketing expenses related to the launch of NovoTTF-100L for MPM and increased personnel costs. Net loss for the quarter was $1.3 million or $0.01 per share. Cash flow from operations was $9.1 million. Cash flow from the GBM business is funding increased investments in our clinical pipeline and technology development. We ended the second quarter with $284.6 million in cash, cash equivalents and short-term investments, an increase of $28 million from the prior quarter.

Our strengthening financial performance, coupled with our cash on hand, provides with stability and flexibility as we strive to extend survival in some of the most aggressive forms of cancer. Novocure is a global oncology company with a proprietary platform therapy, positive cash flow from an established and growing commercial business and a significant market expansion opportunity from an advancing pipeline in multiple indications. Our focus is unwavering on disciplined execution intended to deliver both sustainable near-term growth from existing indications and significant long-term shareholder value from our pipeline. Thank you for your time this morning.

Now I will turn the call back over to the operator for questions.

Questions and Answers:

Operator

[Operator Instructions] And our first question comes from Vijay Kumar from Evercore. Your line is open.

Vijay Kumar -- Evercore. -- Analyst

Thanks guys for taking my question Congrats on a nice revenue base here. I just want to understand or maybe if you could clarify on the revenue base. The $5 million improved reimbursement, this is sustainable, right? All that you're saying is do not expect a similar incremental increase of $5 million going forward. The magnitude is going to be smaller, but this $5 million, what we saw was sustainable.

Wilco Groenhuysen -- Chief Financial Officer

Good morning, Vijay, this is Wilco. Let me try to give a little bit extra color on the $5 million. As we stated in the script, we saw a substantial improvement in reimbursement rates. So first of all, you have the benefit in revenue from that improvement. But secondly, under the applicable revenue recognition policy, which is ASC 606, you also then have to take a look at the estimated collection rates within your portfolio. And we were able to update those estimations as well, and that's particularly what's driving that $5 million. So it's driven by a substantial uptick in collection, also leading to an adjustment in anticipated collection rates in our portfolio. And we think it will continue at some level, but it's not going to be sustainable in -- as a -- at that $5 million level. And I think from a comparative perspective, $82 million net revenue was probably the right number to compare quarterly performance of 2.

Vijay Kumar -- Evercore. -- Analyst

I see. Okay. That's more -- so what you're saying is that $5 million is -- it was more of a one-off because you had a catch up payment.

Ashley Cordova -- Senior Vice President of Finance and Investor Relations

Yes. That's another way to describe it, probably shorter and more efficiently, yes. Thanks, Vijay.

Vijay Kumar -- Evercore. -- Analyst

Okay. And then a couple of other quick follow-ups for me. One, I know script volumes is something that The Street focuses on. It was good to see up sequential increase, up 4%. I think you said first meso patient in 3Q, so that implies no script from mesothelioma in 2Q. Is that correct? And could you just break down the performance, new GBM patient versus recurrent GBM?

William F. Doyle -- Executive Chairman

So first of all, you're absolutely right that we have not received a mesothelioma prescription yet. We expect that in Q3. And so this is entirely GBM. And during the quarter, we saw 1,041 newly diagnosed scripts, and that's a 5% increase from Q1.

Vijay Kumar -- Evercore. -- Analyst

That's helpful, Bill. And then maybe one last one on the interim readout on non-small cell. My understanding was, the second half readout, there was no change in time line versus maybe the prior Q versus 1Q. The expectation was it would be second half 2021. Can you confirm that the time line did not change. And with a follow-up to that. The -- what is the endpoint here, Bill, on the interim readout? Is there a chance that if you have a positive signal, this trial could be stopped? Or -- I'm just curious on what the prespecified endpoints are here.

William F. Doyle -- Executive Chairman

Yes. So I think with all readouts, there's 3 possibilities interim readouts. One is futility signal. That's something that we've never seen in any of our clinical trials, of course. Second is to continue the trial because it's moving on target. And then in exceptional circumstances, the trial can be stopped for success. You'll recall that our GBM Phase III trial was, in fact, stopped due to success at the interim. But I wouldn't want to set the expectation that every single one of our trials will be stopped at the interim for success.

Vijay Kumar -- Evercore. -- Analyst

That's a helpful though. Thank you, guys.

Operator

Thank you. And our next question comes from Esther Rajavelu from Oppenheimer. Your line is open.

Esther Rajavelu -- Oppenheimer -- Analyst

Good morning. Thank you for taking my questions. I had a question on gross margin. Now with Medicare reimbursement for GBM and the launch of -- launch in mesothelioma, can you help us understand the pushes and pulls on gross margin and when you would expect to get coverage for mesothelioma for Medicare?

Wilco Groenhuysen -- Chief Financial Officer

That's a whole bunch of questions, Esther. This is Wilco. Let's start with gross margin. As we stated in our disclosure and -- we're very pleased with the continued progress in improving the gross margin, both revenue growth as well as through efficiency and scale benefits that we see in our cost of goods, which -- you probably recall that we've been treating the patients all along. And that was one of the commitments we made as a company to make the therapy available to all patients, including Medicare patients, while we're entering into this long dialogue we've had with Medicare to come to coverage and fee.

So the costs, the operating expenses are all in our P&L. So the additional revenue that we will now expect to receive from the coverage and the fee that has been published by Medicare will benefit both our top line, but will also benefit our gross margin. MPM, it's a little bit too early to call. I guess that depends on volume. It depends on the progress in reimbursement. Initially, we'll probably put little bit pressure on MPM. But really, it's too early to make any meaningful comment on it.

Esther Rajavelu -- Oppenheimer -- Analyst

Got you. But overall, to me, it sounds like we should expect that Medicare reimbursement benefit to offset the mesothelioma hit on the gross margin line.

Wilco Groenhuysen -- Chief Financial Officer

Yes. I think that's a safe assumption, yes.

Esther Rajavelu -- Oppenheimer -- Analyst

Okay. And then in terms of getting reimbursement for the historically -- for the

historical claims over the last several years, you had mentioned in your press release with the reimbursement that there is a process that you can go through. Can you help us understand that process a little bit better?

William F. Doyle -- Executive Chairman

Yes. So from the beginning, as Wilco said, we made the strategic decision to provide our therapy to Medicare beneficiaries while our discussions with Medicare are unfolding. Throughout that period, we appealed all denials through the heavily backlogged ALJ process with CMS. We expect to continue to do that. And there's no doubt that the recent approval will likely help our appeals through the ALJ process. And I don't think it is appropriate for us to talk about any potential settlement discussion at this time.

Esther Rajavelu -- Oppenheimer -- Analyst

Got you. And then my last question is on the international front. About -- the Japanese market, about what proportion of patients treated in Japan are medical tourists from China? Do you have any estimates on that? Or are they all sort of Japanese nationals?

Asaf Danziger -- Chief Executive Officer

I -- it's a good question. It's Asaf. All our Japanese patient or the patient that we did in Japan, they're all Japanese patient.

Esther Rajavelu -- Oppenheimer -- Analyst

Got you. Thank you very much.

Operator

Thank you. Our next question comes from Cory Kasimov from JPMorgan. Your line is open.

Cory Kasimov -- J.P Morgan -- Analyst

Hey, good morning guys. Thanks for taking my questions. First one is just going back to reimbursement, trying to understand the dynamics a little bit better for 2Q and, more importantly, going forward. So you obviously had a nice uptick in revenue per patient in the quarter, even excluding that $5 million onetime payment. This is obviously before Medicare is kicking in. So can you talk a little bit about this run rate from prior quarters to 2Q and then how we should be thinking about it going forward?

Wilco Groenhuysen -- Chief Financial Officer

Yes. Overall, as we said, we see overall improvement in reimbursement rates. Net revenues per active patient in the quarter were about $10,000 per month. And we've seen, for instance, in the U.S., a 7% year-over-year improvement in that. So this -- the $5 million and then the substantial improvement in reimbursement rates are predominantly a result of improved reimbursement in the United States.

Cory Kasimov -- J.P Morgan -- Analyst

Okay. And then with Medicare reimbursement kicking in on September 1. Can you just remind us of the percent of patients within your approved indications that will fall within this channel?

William F. Doyle -- Executive Chairman

Sure. So we've consistently said that about 25% of our patients are Medicare patients. The approval of coverage is for newly diagnosed patients and approximately 75% of those 25% are newly diagnosed, and we would expect a -- the substantial majority of those to be covered under the new policy.

Cory Kasimov -- J.P Morgan -- Analyst

Okay. That's helpful. And then last question is with regard to the narrowing and refining of time lines for some of those key upcoming trials, LUNAR, in particular. Is that being driven by initial event accrual or pace of enrollment going from 2022 to 2H '20 for that interim?

William F. Doyle -- Executive Chairman

Yes. It's principally the pace of accrual. As we're getting further into trials, we're able to refine the accrual patterns a little more specifically, and that's why we updated that particular number.

Cory Kasimov -- J.P Morgan -- Analyst

Okay, great. Thanks for taking the questions.

Operator

Thank you. Our next question comes from Gregg Gilbert from SunTrust. Your line is open.

Gregg Gilbert -- SunTrust -- Analyst

Yes. Hi. On the LUNAR question, a follow-up on that. Are you finding any issues with the number of patients that are rapidly moving to PD-1s in the front line? And is that slowing enrollment? And what drove the pushout on the PANOVA time line as well? And then I have a couple of follow-ups.

William F. Doyle -- Executive Chairman

Yes. So first of all, the PANOVA time line has not been adjusted. The only adjustment was on LUNAR. We don't see any particular difficulty in recruiting patients as a result of any one particular factor. It is a busy area, though, as you know, because there are other combination trials ongoing. And that may have some net effect. But it is really not a big deal.

Gregg Gilbert -- SunTrust -- Analyst

Okay. I apologize. I thought PANOVA was adjusted versus the prior time line. Maybe I have old info there. And then as it relates to the trends in Europe. Can you talk about demand trends there, given the sequential decline in prescriptions and I think active patients were relatively flattish quarter-on-quarter? Anything we should be aware of in Europe?

Asaf Danziger -- Chief Executive Officer

It's Asaf. Thank you for your questions. So let's talk about the big picture in Germany,

our prescription year-over-year grew by 18%. Last quarter, it was a shows quarter relatively of selling day by 6%. We still believe that there's many patient in Europe that can benefit from the therapy, and we will continue to push our business forward. We don't see any significant event besides the thing that I just mentioned.

Gregg Gilbert -- SunTrust -- Analyst

Okay. Then lastly, I don't think you answered this part, the process and the time line

for Medicare reimbursement for mesothelioma, is that something you can walk us through?

William F. Doyle -- Executive Chairman

Sure. So specifically, the coverage policy takes effect on September 1. But meso -- I'm sorry.

Gregg Gilbert -- SunTrust -- Analyst

Yes, for meso. You don't get that one for free, right?

Asaf Danziger -- Chief Executive Officer

No. I will take it. So we always say that we will approach Medicare since 75% of the meso patient are Medicare population. We always mentioned that we will approached Medicare for coverage and pricing after our approval on GBM. So we will continue to work with Medicare, and it's very similar to our process with GBM. So we cannot define any time line right now.

Gregg Gilbert -- SunTrust -- Analyst

Okay. Thanks, guys.

Operator

Thank you. Our next question comes from Difei Yang from Mizuho Securities. Your line is open.

Difei Yang -- Mizuho Securities. -- Analyst

Hi. Good morning, and thanks for taking my question. So a quick one with regards to mesothelioma commercial coverage. Would you walk us through on the process you are expecting and the rough time line to get the size of the population covered?

Asaf Danziger -- Chief Executive Officer

Yes. Sure. This time I realize the question is about mesothelioma, right? So focused on GBM the last 5 years. So this will also follow the same process that GBM followed initially. So clinicians will prescribe the therapy to patients. And if they're privately insured, we'll then approach their carriers on a named patient basis. And then when volumes become at a certain level, we can then work to establish coverage policies in those carriers. So this will take us through sort of a standard policy, just for everyone on the line. We don't expect material revenue in 2019 as we work through this process.

Difei Yang -- Mizuho Securities. -- Analyst

So Bill, from your experience with GBM, is this something like this is a lengthy process, maybe it takes 2 to 3 years to get majority of the patient covered?

William F. Doyle -- Executive Chairman

So I don't think it's going to take 3 years. But it really is a function of getting the patients on therapy and then applying to the carriers. I think the fact that this is a small indication with relatively few patients compared to other areas in which we're working actually makes it a little bit easier than some of the larger indications.

Difei Yang -- Mizuho Securities. -- Analyst

Okay. Thank you. Then I wonder if you could make comments with regards to the time line to the decision from China side, whether the GBM trial can be waived. Is this a 2019 decision?

William F. Doyle -- Executive Chairman

So our expectation is the decision is a 2019 decision.

Difei Yang -- Mizuho Securities. -- Analyst

Okay. Thank you.

Operator

Thank you. Our next question comes from David Nierengarten from Wedbush Securities. Your line is open.

David Nierengarten -- Wedbush Securities -- Analyst

Thanks for taking my question. It's on GBM. According to my math, yes, duration of treatment, would have had to increase it for the quarter. I know you don't generally talk about that. But going forward with Medicare reimbursement, the patients, of course, are colder, would you anticipate a change in trend in duration of therapy? Or maybe to put it another way, have -- if you could remind us if there are any differences in duration on treatment in the clinical trial by age, just going on prior data or real world data that you've disclosed in scientific meetings.

Asaf Danziger -- Chief Executive Officer

Hi. Thank you for the question. So we are not expecting the treatment duration difference at all, and we were not talking about exact treatment duration. And that's -- from our experience in different trials, there's no meaningful treatment duration difference between ages.

Ely Benaim -- Chief Medical Officer

Remember, David, we have been treating this patient population for years.

David Nierengarten -- Wedbush Securities -- Analyst

Yes. Okay. Thank you.

Operator

Thank you. [Operator Instructions] And we do have a follow-up from Vijay Kumar from Evercore. Your line is open.

Vijay Kumar -- Evercore. -- Analyst

Hey guys, Just one quick clarification. The reimbursement, you step-up the $5 million that you mentioned, Wilco, was this related to the commercial side or on the Medicare side?

Wilco Groenhuysen -- Chief Financial Officer

Thanks, Vijay, for the follow-up question. It is related to the commercial side. And it is a result, as I said, of improved reimbursement performance. We hope that the performance will continue to improve, and that's why we stated that we don't think it's going to be as significant as we saw in the second quarter. But we are working very hard to get better and better at reimbursement. And then your question on Medicare, we do think that with billing starting and the coverage and the fee being effective on September 1, our experience with commercial payers and Medicare is not going to be any different.

It's just to go through, let's call it, administrative ramp-up process, where it takes a certain period of time before paperwork, processes, everything has been ironed out. So we do expect that to affect to a certain extent, which is very difficult to predict, to be honest, in Q3 and probably also somewhat in Q4. So it's not like flip the switch, 75% of 25% are being reimbursed at 13.2%. It's going to take a little while before all these processes are honed and working smoothly.

Vijay Kumar -- Evercore. -- Analyst

This is helpful. Thank you.

Operator

Thank you. And we do have a follow-up from Gregg Gilbert from SunTrust. Your line is open.

Gregg Gilbert -- SunTrust -- Analyst

Thanks. Perhaps premature, but in the lung setting, your population is obviously not the large frontline setting. But maybe you could give us a little color on how many years you think it would take to be able to access the frontline setting, assuming your current trial goes as you hope.

William F. Doyle -- Executive Chairman

Sure. So Gregg, I think it'll require another clinical trial. And so it's probably 3 to 4 years or more to move to frontline. This is an area that we haven't really planned out in detail yet. So I'd say it's typical with our -- with any one of our indications.

Gregg Gilbert -- SunTrust -- Analyst

Okay. Thanks.

Operator

Thank you. And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Bill Doyle for any closing remarks.

William F. Doyle -- Executive Chairman

Sure. So first of all, I want to thank everybody on the line, and thank you for your continued interest in Novocure. As Asaf said during his remarks, Q2 really was a transformative quarter for Novocure. We received Medicare coverage and reimbursement. I think as you know, this is something that we've been working on for years. We see -- we received FDA approval for mesothelioma, our first torso indication. We've increased our gross margin and had strong revenue growth, which resulted in our first-ever quarter of positive operating income.

I think this is particularly important, given that this is -- the backdrop here is continued growth in funding for our R&D and our technology development, and we're still generating positive operating income. We made continued progress in our Phase III clinical program, which is clearly the driver of our long-term value expansion. And we all couldn't be more thankful for the contributions of our team. We couldn't be more thankful for the contributions of our clinicians and our patients, and we feel particularly well positioned today as we drive forward in our core strategies. So thank you all.

Operator

[Operator Closing Remarks].

Duration: 38 minutes

Call participants:

Ashley Cordova -- Senior Vice President of Finance and Investor Relations

William F. Doyle -- Executive Chairman

Asaf Danziger -- Chief Executive Officer

Ely Benaim -- Chief Medical Officer

Wilco Groenhuysen -- Chief Financial Officer

Vijay Kumar -- Evercore. -- Analyst

Esther Rajavelu -- Oppenheimer -- Analyst

Cory Kasimov -- J.P Morgan -- Analyst

Gregg Gilbert -- SunTrust -- Analyst

Difei Yang -- Mizuho Securities. -- Analyst

David Nierengarten -- Wedbush Securities -- Analyst

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