Ashley Cordova - Vice President of Finance and Investor Relations William Doyle - Executive Chairman Asaf Danziger - Chief Executive Officer Wilco Groenhuysen - Chief Financial Officer Eilon Kirson - Chief Science Officer and Head of Research and Development.

Adam Maeder - Wells Fargo Difei Yang - Mizuho Esther Rajavelu - Deutsche Bank Cory Kasimov - JPMorgan.

Good day, ladies and gentlemen, and welcome to the Novocure First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Ashley Cordova, Vice President of Finance and Investor Relations. Please begin..

Good morning, everyone, and thank you for joining us to review Novocure's first quarter 2018 performance. I'm joined today by our Executive Chairman, Bill Doyle; our CEO, Asaf Danziger; our CFO, Wilco Groenhuysen; and our Chief Science Officer and Head of Research and Development, Eilon Kirson.

The slides presented today can be viewed on our website, www.novocure.com by clicking on the link for the 2018 first quarter 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 those 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.

We will first make brief prepared remarks and will then move to a question-and-answer session. I will remind everyone that our financials for the three months and year ended March 31, 2018 are available in 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..

Thank you, Ashley. And good morning, everyone. As is typical, I will start today's call with a quick summary of Novocure's investment opportunity. Novocure is a global oncology company, with a proprietary platform technology, a growing commercial business and significant upside potential.

We have a clearly articulated strategy for building long-term value. First, we are driving commercial adoption of Optune for the treatment of GBM. Second, we are advancing our clinical pipeline in a range of solid tumor cancers in which we believe Tumor Treating Fields can help patients.

Tumor Treating Fields is a cancer therapy that uses electric fields tuned to specific frequencies to disrupt cell division, inhibiting tumor cell growth and causing affected cancer cells to die. In all of our preclinical work and clinical work to date, Tumor Treating Fields has shown a consistent anti-mitotic effect.

We have unprecedented five-year survival results in newly-diagnosed GBM, promising Phase II pilot data in lung cancer, pancreatic cancer, ovarian cancer and mesothelioma and preclinical data in 18 different cancer cell lines.

We believe that in time Tumor Treating Fields will fit side-by-side with the other cancer treatment modalities of surgery, radiation therapy and pharmacology. We continue to advance our clinical pipeline in five solid tumor indications with high unmet needs.

We have Phase III pivotal trials open in non-small cell lung cancer, in brain metastases from non-small cell lung cancer and in pancreatic cancer. We are planning a fourth Phase III pivotal trial in ovarian cancer to open later in 2018. We are also planning a Phase II pilot trial in advanced liver cancer.

The HEPANOVA [ph] trial which will study Tumor Treating Fields in combination with sorafenib. We believe we can make a real impact in patient outcomes in these additional indications and they each comprised market opportunities that are many times larger than GBM.

I am very pleased to announce that we reported positive topline results from our STELLAR Phase II pilot trial in mesothelioma last week. These topline STELLAR results exceeded the results of the interim analysis for all efficacy endpoints and demonstrated clinically meaningful improvements in overall survival and progression free survival.

Novocure received Humanitarian Use Device designation for the use of Tumor Treating Fields for the treatment of pleural mesothelioma in 2017 and we plan to submit a humanitarian device exemption application to the FDA for approval later this year. Mesothelioma is the first indication outside of the brain for which Novocure will pursue FDA approval.

We look forward to sharing the detailed results of STELLER with the lung cancer community at an upcoming medical conference.

In late March, The National Comprehensive Cancer Network or NCCN updated its globally recognized clinical practice guidelines in oncology for central nervous system cancers to include alternating electric field therapy as a Category 1 treatment for newly diagnosed glioblastoma in combination with temozolomide after maximal safe resection and completion of radiation therapy.

This is an upgrade from the prior Category 2A recommendation and reflects uniform consensus that there is a high level of evidence supporting the use of our therapy for newly diagnosed GBM.

While it is too soon to understand how the NCCN guidelines upgrade will impact commercial adoption, we have heard from the field that the uniform support by the NCCN panel is an important visible validation of the clinical benefit our therapy brings to patients and we are extremely pleased with the upgraded recommendation.

We believe there are many more GBM patients who can benefit from Optune that are currently on treatment and NCCN and Category 1 listing should help us to reach them. With that, I will now hand the call over to Asaf to review our progress during the first quarter.

Asaf?.

Thanks, Bill. We are pleased with our commercial momentum in Q1 2018. We ended the quarter with more than 2000 active patients on Optune. This is a 10% increase in patient on treatment versus the prior quarter and a 59% increase year-over-year. Of note, more than 1250 prescriptions were written for Optune during Q1.

This represents an estimated penetration rate of 29% in the U.S. and 23% in Germany, our two largest markets. Newly diagnosed GBM continue to represent approximately two thirds of our total prescription volume. Growth was consistent across all prescriber’s specialties and driven by strong performance in both the U.S. and Germany.

Our first quarter 2018 prescriptions grew 15% versus the prior quarter and 41% versus the first quarter 2017. In November 2017, we had a significant presence at SNO and we were able to reach many of our neuro-oncologists prescribers.

We believe the volume of data on TTField presented at SNO increased confidence and belief in our therapy in this key customer segment.

We also believe the December 2017 publication of our EF-14 in JAMA, a prestigious peer-reviewed journal [ph] increased confidence and belief in the data and increased awareness of the data in the broader medical community. These events coupled with our ongoing sales and marketing efforts helped drive the commercial momentum we saw in the quarter.

The JAMA publication appears to have served as a capstone event for the communication of our unprecedented five year survival data. Anecdotally, we hear from the field that most prescribers are now confidently discussing Optune as a standard-of-care for newly diagnosed GBM.

The EF-14 publication has given [indiscernible] in the discussion with patients and peers and it appears to have reduced the level of pushback we hear in the field. In Q1 2018, we also launched Optune in Japan.

As a reminder, we distribute Optune through hospitals in Japan and provide patient support services under contractual arrangement with these hospitals. [indiscernible] national reimbursement in December 2017, we began the contracting process. Notably we received the 30 prescriptions in Japan in the quarter, with 20 patients on therapy at quarter end.

This initial progress represent a tangible example of our opportunity to drive growth in our GBM business, through expansion into additional graphical markets. With that, I will turn the call to Wilco to review the financials..

Thank you, Asaf. And good morning, everyone. Our first quarter 2018 revenues were $52.1 million, growing 49% year-over-year and representing trailing 12 month revenues approaching $200 million. Revenue growth was driven by increased Optune adoption in the United States and Germany and initial launch efforts in Japan.

It is worth noting, that the first quarter 2017 included one-time benefit from our cash to accrual revenue recognition transition. Effective January 1 2018, we adopted the new revenue recognition standard, ASC 606 as required by FASB.

If we had reported our first quarter revenues under the prior accounting standards ASC 605, we would have reported revenues of $55.7 million, representing sequential growth of 4% versus the fourth quarter of 2017.

As part of the transition, we booked a cumulative adjustment to retained earnings on our opening balance sheet of $2.2 million of which approximately $1 million in revenue would have been recognized in the first quarter under ASC 605.

An additional $2.5 million in that revenue will be recognized in future quarters under the new standard for a total implementation impact of $3.5 million. Net revenues as a percentage of gross billings was 41% in the first quarter of 2018. This was largely driven by the absorption of U.S.

plan year [ph] deductibles by patient mix and by approval timelines for claims that fall outside of defined reimbursement policies. We believe these trends will recover as we progressed throughout the year toward an approximate 45% of gross billings for the full year 2018.

Gross profit in the quarter was $33.9 million or 65% of net revenues compared to $23.2 million or 67% of net revenues for the same quarter last year. We have ongoing efforts to reduce the cost of revenues with efficiency initiatives and scale and expect gross profit as a percentage of net revenues will improve in future quarters.

Moving down the income statement, our R&D expenses were $11.1 million for the first quarter of 2018 compared to $9.4 million for the same period last year. We anticipate that R&D expenses will increase in future quarters as we continue to enroll patients in Phase III pivotal trial.

Our SG&A expenses for the quarter were $35.5 million compared to $27.2 million for the same period last year. Driving operating leverage in our commercial business remains an ongoing focus and we continue to see the results of these efforts. While revenues grew 49% year-over-year.

SG&A expenses excluding the impact of non-cash share based compensation increased by 19%. Our first quarter 2018 operating loss was $12.7 million compared to an operating loss of $13.4 million for the same period last year. The increase in gross profit from our GBM business continues to fund increased investments across the business.

Net loss for the first quarter of 2018 was $20.7 million or $0.23 per share compared to a net loss of $18 million or $0.21 per share for the same period last year. Net cash used in operations was $16.8 million for the first quarter of 2018, a reduction in cash burn of more than $10 million versus the first quarter of 2017.

During the first quarter we paid annual employee bonuses, as well as the final milestone payment of $5.5 million to the Technion. At March 31 2018, we had $111.6 million in cash and cash equivalents and $104.7 million in short term investments for a total balance of $216.3 million in cash, cash equivalents and short term investments.

We believe our strong cash position provides financial stability and flexibility as we execute on our core strategy. I would like to reiterate how pleased we are with the progress made during the first quarter. We saw continued commercial momentum driven by ongoing sales and marketing efforts.

The December 2017 publication of the final EF-14 data in JAMA and our strong presence at SNO in November 2017. We launched Optune in Japan demonstrating our opportunity to drive growth through expansion in additional geographic markets.

Additionally NCCN guidelines were updated to include alternating electric field therapy with temozolomide as a Category 1 recommendation for newly diagnosed glioblastoma.

Just last week, we reported positive topline results from our STELLAR Phase II pilot trial in mesothelioma and now plan to submit a Humanitarian Device Exemption application to the FDA for approval. Novocure is a global oncology company with a proprietary platform technology, a growing commercial business and significant upside potential.

We are focused on two clear priorities. First, try for [ph] commercial adoption of Optune and second, advancing our clinical pipeline to treat a range of solid tumor cancers where we think Tumor Reading Fields can help patients. We believe we are well positioned to execute on both fronts. With that, I'll open the call to questions.

Operator?.

Thank you. [Operator Instructions] The first question will come from the line of Larry Biegelsen of Wells Fargo. Your line is open..

Hi, guys. It's Adam Maeder in for Larry. Thanks for taking the questions. I want to start with mesothelioma. Last week you announced that the final data from the STELLAR study was better than the interim study in all efficacy endpoints. Overall survival has not reached in the interim analysis.

Do you have that data in the final analysis and what can you share there?.

Yeah. Adam, good morning. We'll turn that question over to Eilon Kirson..

Hi, Adam. Thanks a lot for the question. So we are currently not certain [ph] of the numbers, I can tell you that the both overall survival and progression free survival exceeded what we've seen into the interim analysis.

The interim analysis as you said didn't reach the median, but definitely the results that we see now would - you know, had they reached the median and as you extrapolate we're way beyond that. And so we're very pleased with the result and they definitely demonstrated clinically meaningful improvements in both OS and PFS..

Okay. Thanks for that. And then maybe just two quick follow ups, one with meso [ph] how quickly can you file with FDA. I know the HDE review time is typically 75 days. Once approved, how quickly do you think you can launch the meso indication? And then how should the street think about incremental SG&A spend with the launch of the new indication.

And then separately, Medicare fee for service reimbursement is still pending. So just wondering what the latest is with the discussions with CMS? Thanks..

So Adam, I'll take the first of those three and allow the team to answer the other two. We're planning to submit the HDE this year, okay. And just to remind you, we do have a humanitarian use device designation for pleural mesothelioma which we received in 2017. That allows us to go in the direction of an HDE application.

The moment the data is ready and fully baked, we expect to have a pre-submission meeting with FDA and then plan to file in the second half of 2018. As you said, it does have a 75 day review time to respond to the application, okay.

So we cannot say exactly what the response will be, but we - I think you can get that sort of I think guidance for timelines that FDA [indiscernible].

Okay.

And just any color on incremental SG&A spend with the launch of the new indication?.

Yes. So Adam, this is Bill. We are – as Eilon just said, we're right now scrubbing the data and prepare to file. We're also developing our full launch plan right now and finalizing that, so we don't have any guidance on exact SG&A spend, but we are assuming launch in 2019..

Okay, thanks.

And then just - so I threw a couple of questions together there, just lastly on the Medicare reimbursement?.

Yes. So with respect to Medicare, we continue to engage in active discussions with CMS. The discussions have been extremely constructive. They're focused right now on billing and appropriately pricing our billing code for Optune. And we want to ensure that CMS and Medicare calculate the pricing correctly.

We all know that they don't have a defined timeline. I know it's frustrating to you, you can imagine that it's frustrating to us as well. But again, it feels as if we're making real and tangible progress towards reaching a resolution..

Thanks very much..

Thank you. The next question will come from Difei Yang of Mizuho. Your line is open..

Hi, good morning. Thanks for taking my question. So just a couple on the financial side. Wilco, would you be able to show a little bit more color on cost of goods sold. What has changed in Q1 and maybe give us a little bit more color on the different initiated – initiative that you're trying to improve on that front.

And then gross to net, are we – is the gross to net stable for this quarter? Then I have a follow up on mesothelioma..

Okay. Good morning. I'd be happy to answer the financial questions. So to start with the - to start with the gross to net, as you've seen in the quarter, our gross to net was slightly over 41%. We expect for the full year, as we also mentioned in prior earnings call debt to be 45% approximately for the full year.

Certain things happened in the first quarter, as you do not tend to see in other quarters, such as deductibles in the U.S plan, yes, which tend to kick off with calendar years. When you go to the cost of goods sold, as you've seen we’ve – we’re in pretty much a growth mode. We've passed 2000 active patients in the first quarter.

We showed substantial script growth, we’re expanding geographically. So sometimes infrastructure needs to be expanded slightly and those costs are not always absorbed immediately you have to then deliver the growth and realize that. So as we said in the call, we are committed to operating leverage both in our SG&A expenses, as well as in our COGS.

And we expect our COGS as a percentage of revenues to decrease throughout the year..

Okay. Thank you for that color. And then congrats on mesothelioma, the value [ph] was very impressive. So just a quick question on reimbursement.

So sitting here once you get the approval do you expect the reimbursement discussion will take as long as the GBM or you think GBM has cleared away, maybe we'll see quick adoption by the payers?.

You know, so that's impossible question to answer precisely.

I do think that the fact that this is or will be a second indication and that we’ve done literally decades of prep work now in terms of preclinical research and you know, the volume of peer-reviewed publications in GBM, when we started GBM we were literally educating all of the constituencies, KOL, payers on what TTField in fact were.

All of that work is been done. So I do expect that we'll be able to focus on the data trial results and the benefit to patients. And you know, inevitably that will be a shorter conversation..

Okay. Thank you, Bill. And final question on mesothelioma ex-U.S.

strategy, do you have enough data to file ex-US or do you foresee additional trials before you can file?.

So, I’ll answer that….

Great. Thank you..

So we're currently evaluating the different approval pathways in other geographies, so we don't have an assessment at the moment. But we do believe that if this data is good enough for FDA, it will also be good enough for other geographies..

Okay. Thank you for taking my question. Thanks..

Thank you. The next question is from the line of Esther Rajavelu of Deutsche Bank. Your line is open..

Hi, there. Thank you for taking my questions. I am calling in for Gregg Gilbert. I have two. Can you discuss enrollment trends in the LUNAR and METIS trials and any initial trends you're seeing in the PANOVA III trial? And if he can provide some clarity on you know, on timing of interim readouts? That would be helpful..

Maybe Asaf, can address that..

Yeah. So, thank you for the questions. We are not discussing recruitment for the trials enrollment. However, we still anticipate last patient in for PANOVA in 2022 and LUNAR in 2019..

Thank you. And then my second question….

Yeah. Go ahead..

Sorry.

And then on METIS?.

So on METIS you know, we have no interim analysis planned on METIS. So this is part of the - of the protocol and also last patient will be in 2019 plan..

Okay. And then my second question was on the uptake trends you're seeing in Japan and maybe if you can compare that to the initial trends you saw in the U.S.

and EU where you launched without reimbursement in place?.

So, yeah. This is a great question, thank you for that. So I was actually last week in Japan and I can tell you that - I think the main difference between Japan and other market is, that we start – we launched and we have a national reimbursement, which is a totally different game comparing to all the other geographies.

So you know, I will give you the backlog. We will start to launch with - you know, in the U.S. before we had reimbursement. So the challenge in Japan its totally different challenge. The business model is different. We basically contract hospitals and we are building the hospitals.

So I believe and I'm very happy with the progress in Japan in the first quarter. And you know, we were right now in launch mode and we're very happy with the results so far..

So I have one follow up on that.

So given that you’re billing the hospital directly, do you see the fill rate being different than what you've experienced in other markets where you send the device to patients?.

So is it too early to talk about fill rate, so right now we're not seeing any - I cannot say anything about it right now..

Okay. Thank you..

[Operator Instructions] The next question is from Cory Kasimov of JPMorgan. Your line is open..

Hey. Good morning, guys. Thanks for taking my question. I have a couple following up on some of the earlier questions.

And I guess first for the HUD exemption application for mesothelioma, does that 75 day review clock start from the time you file the application or is there a window for the FDA to accept it first and then it begins?.

I'll take that one. This is Eilon, Cory. So actually it starts from the time you – well, the time they accept it. So you know, the moment they get the [indiscernible] cover letter and that's when their 70-70 clock starts..

Okay. All right. And then I also wanted to follow up on the Medicare reimbursement, I know you guys get asked about this all the time and are frustrated by it.

But, now between the five year data, the JAMA publication, the updated guidelines where your Category 1 therapy now, I mean, what more on your end can you do to facilitate this? And I'm curious how some of these recent developments have maybe have impacted the negotiations to the extent there is some consistent kind of back and forth that's going on?.

Yeah. So Cory, first of all, good morning. This is Bill. You're absolutely right, but I think the steady drumbeat of achievements that validate the data certainly help our discussions. And I think that's the reason that we're seeing the - what we think constructive or positive dialogue that we're engaged.

Again, I wish there were a timeline, you wish there were a timeline, but now particularly with the NCCN upgrade there's no question that were standard of care and this is you know, of course, helping the discussions..

Okay.

And then final question I have is I wonder if you can give any more details on the plans for the liver cancer study that you mentioned in your prepared remarks that's pending, in terms of how big is this going to be and are you to the point now where you're comfortable going in and starting with maybe a randomized study or is this going to be - should we expect a single arm trial to start with sorafenib?.

I'll answer that Cory, its Eilon. So we are starting with both the pilot study, when it gets into treating different parts of the body, you know with our systems in fact, we do need to establish safety and tolerability before we go into our Phase III which is also requirement by the regulatory agencies.

Maybe over time that you know, theoretically this requirement will go down, but for now it's still in place. And so we are definitely going to start with a pilot study. It's relatively small single launch study with sorafenib..

Okay, great. Thanks for taking my questions..

Thank you. There are no further questions in queue at this time. I'd like to turn the call back over to Mr. Bill Doyle for closing remark..

So thank you very much. And I want to thank everyone for their interest in Novocure. I just want to reiterate that - and thank our team for what was an extremely great quarter. We saw commercial momentum accelerate with more than 2000 active patients on therapy, and of course, great quarter-over-quarter prescription trends.

Now that you know, we have trailing 12 month revenue of approaching 200 million you know, we're certainly an established global player in oncology and that was also underlined with the Japanese launch. As I mentioned in the answer to Cory's question of the NCCN guidelines upgrade to Category 1, clearly cements us as standard of care in GBM.

And the STELLAR results, I think paves the way you know, maybe it's the first step, first tangible step on the path to bringing TTFields to a variety of other very hard to treat solid tumors that we've mentioned. Each one of which is - presents the opportunity there is multiples of the of the GBM opportunity. So I want to thank you for your interest.

And again, I want to thank our team for their excellent performance during the quarter..

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Everyone have good day..