Good day, ladies and gentlemen. And welcome to the NovoCure second 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 be given at that time. [Operator Instructions]. As a reminder, today's conference may be recorded. I would now like to turn the call over to Ms. Ashley Cordova, Vice President, Finance and Investor Relations. Ma'am, you may begin.

Good morning, everyone, thank you for joining us to review NovoCure second 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 the link for 2018 second 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 the conference call will include forward-looking statement 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 intend to update publicly any forward-looking statements except as required by law. Following our prepared remarks today, we will open the line for questions. I will remind everyone that our financials for the three months and six months ended June 30, 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. The second quarter of 2018 was strong with continued commercial momentum for Optune and continued progress on key clinical development programs. Before we delve into the execution details for the quarter, I'd like to frame how we think about building long-term shareholder value. We're focused on two clear priorities. First, we are driving commercial adoption of Optune for the treatment of GBM. Second, we're advancing our clinical pipeline in a range of solid tumor cancers, in which we believe tumor-treating fields can help patients. This morning, Asaf will highlight commercial progress during the quarter and Eilon will highlight recent progress in the pipeline. After that, Wilco will discuss our second quarter financial results. But before I hand the call over to Asaf, I want to provide an update on the status of our discussions with Medicare. I'm pleased to announce we submitted a local coverage determination, or LCD, request to the Medicare DME MACs on June 20, 2018. Our decision to file for coverage followed an announcement by the Centers for Medicare and Medicaid Services earlier in June that it developed a pricing methodology for newly-covered DME products that will recognize current commercial pricing and that this information will be taken into account when establishing a new Medicare fee schedule amount. We believe this methodology reflects the significant progress made during our multiyear dialogue with CMS and will generate a commercially acceptable price for the Medicare fee-for-service program. The MACs should make a final LCD reconsideration decision within 90 days of the June 20 submission. The decision will state whether the MACs intend to keep the policy as it is or make it less restrictive. Assuming the MACs decide to revise the local coverage determination, our desired outcome, they would then follow the normal LCD development process. It is always difficult to predict the timing with the US government, but our best guess is that it could take approximately six months for NovoCure to secure Medicare coverage and payment for Optune once we receive a favorable MAC decision to revise the LCD. This timeline is an estimate and we will continue to share material updates as we learn more throughout the process. With that, I will now hand the call over to Asaf to review the quarter.

Thank you, Bill. In the second quarter of 2018, NovoCure demonstrated continued commercial momentum for Optune and continued progress on key clinical development programs. We delivered record quarterly revenue of $61.5 million, up 60% from the second quarter 2017 and 18% from the first quarter 2018. There were two main contributors to second quarter revenue growth. First, we continued to increase active patients. Q2 was our 14th consecutive quarter of active patient growth since the initial presentation of year 14 data. There were more than 2,150 patients on therapy at the end of the quarter, up 49% from the second quarter 2017 and 8% from the first quarter 2018. Second, we continue to increase the average net revenue per active patient and improve our gross-to-net revenue spread. The positive trend in both active patients and reimbursement are supported in part by consistent growth in prescriptions for patients with newly-diagnosed GBM. More than 900 prescriptions, nearly 75%, of the Q2 total were written for patients with newly-diagnosed GBM. This growth reflects our ongoing further marketing efforts, increased awareness of our five-year survival and compliance data, and the updated NCCN guideline. We believe that growth in prescriptions for newly-diagnosed GBM is a sign of increasing physician confidence and belief in Optune. Second quarter growth also reflects our early launch success in Japan where we had 37 patients on therapy at the end of the quarter, contributing over $1 million in net revenue. Globally, we have six active markets, with an average penetration rate of 26% across these markets. We estimate our second quarter penetration was approximately 30% in the US, 20% in Germany and 10% in Japan. We believe there are many more GBM patients who can benefit from Optune than are currently on treatment, and driving adoption across the globe is an ongoing focus. With that, I will now turn the call over to Eilon.

Thank you, Asaf. Today, I will highlight progress made since the last update in our clinical development program, including an update on mesothelioma. We continue to advance our clinical pipeline in five solid tumor indications with high unmet needs. Across all indications, we are studying tumor-treating fields in combination with the current standard of care with the hope to advance the standard of care without adding incremental toxicity. We believe tumor-treating fields is a broadly applicable platform with multiple opportunities in solid tumor cancers. We don't often highlight our preclinical and early-stage development programs in our quarterly earning calls, but they do drive how we internally think about the significance of tumor-treating fields as a therapy. Beyond GBM and the five indications currently under development, we have preclinical data in an additional 11 cell lines and proof of concept or first-in-human data in an additional two tumor types. Our preclinical research continues to deepen our understanding of tumor-treating fields and inform new areas of potential clinical utility. In our current clinical pipeline, we have Phase III pivotal trials open and enrolling in non-small cell lung cancer, in brain metastases from non-small cell lung cancer and in pancreatic cancer. INNOVATE 3 will be the sixth Phase III pivotal trial to study tumor-treating fields and should open later this year. The INNOVATE 3 trial will study tumor-treating fields in combination with weekly paclitaxel in 540 patients with platinum-resistant ovarian cancer. We intend to establish a partnership with the European Network for Gynaecological Oncological Trial groups (ENGOT) to develop tumor-treating fields for ovarian cancer. The collaboration between NovoCure and ENGOT will facilitate and promote the INNOVATE 3 trial in patients with recurrent ovarian cancer at leading European cancer centers. We also recently opened our Phase II pilot HEPANOVA trial and anticipate first patient…

Thank you, Eilon. And thanks for everyone for joining us on the call this morning. We ended the second quarter in a strong financial position. Total revenues for the second quarter was $61.5 million, growing 60% year-over-year and growing 18% versus the prior quarter. This represents trailing 12-month revenues of more than $215 million. Second quarter revenues exceeded consensus by more than $2 million and reflect above consensus growth in both active patients and net revenue per active patient. Net revenues as a percentage gross billings were 45% in the second quarter, in line with our continued expectations for the full year. The quarter-over-quarter improvement in our gross-to-net spreads reflects improving patient mix and improving approval rates on a case-by-case claims. As an example, in Germany, the approval rate for individual claims exceeded 55% in the first half of the year and continues to trend upwards. Gross profit in the quarter was $41.7 million, reflecting a 68% gross margin. Moving down the income statement, our R&D expenses increased to $11.4 million. We anticipated that R&D expenses will continue to increase in future quarters as we continue to enroll patients in our Phase III pivotal trials. Our SG&A expenses were $37.4 million, including $8.6 million non-cash share-based compensation. While year-over-year revenue growth exceeded 60%, year-over-year SG&A expenses grew by only 20%. Driving operating leverage in our commercial business remains an ongoing focus and we continue to see the results of these efforts. Our second quarter 2018 operating loss was $7.1 million with our existing commercial business continuing to fund the pipeline. Net loss for the quarter was $50.5 million or $0.17 per share. Net cash used in operations was $7.5 million, with an additional $0.8 million used in investing activities, principally related to investments in PP&E. Cash flow from financing activities was $11.2 million and includes proceeds from option exercises in our employee share purchase plan. We ended the quarter with $290 million in cash and investments and continue to believe our strong cash position provides us financial stability and flexibility as we execute on our core strategies. I would like to reiterate how pleased we are with the progress made during the second quarter. We saw continued momentum in both our commercial and clinical activities and are excited about the future. 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, driving commercial adoption of Optune; and second, advancing our clinical pipeline to treat a range of solid tumor cancers. 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]. And our first question comes from the line of Vijay Kumar with Evercore ISI. Your line is open.

Hey, guys. Congrats on a nice quarter here. So, maybe I'll start off with this CMS language, which we thought was incremental and positive. Maybe a couple of clarifications. One, why the LCD route and maybe not a national coverage? And the language around CMS benchmarking versus a commercial, can you give us some clarity on that's going to play out? Is this going to like drugs? You look at the average commercial and it's a percentage off of that or any clarification, I think, would be helpful?

Good morning, Vijay. How are you? So, first of all, we do consider this to be very positive. And it basically starts with the June 10 CMS announcement that it developed a new pricing methodology that will recognize current commercial pricing. I think, as everyone on the call knows, we have essentially universal private pay coverage. And the central issue for us with CMS was that, in fact, that private pay base would be the basis of their calculation. So, the fact that their new policy explicitly states that, I think, is good for NovoCure and it's also good for all innovators in novel medical device technology. This was one of several announcements that CMS makes that shows, I think, a real commitment by CMS to fix reimbursement issues in the DME area and to allow more rapid adoption of technology in healthcare in general. So, for us, again, it's very positive. This results in a two-step process for NovoCure with respect to Optune. As we stated, the first is the LCD reconsideration. This, we expect to take 90 days. We have all of the data that, again, you all know, including the NCCN Category 1 listing, the various JAMA publications that all supports the use of Optune in GBM. And as we stated in the prepared remarks, assuming that the LCD reconsideration is positive, that will then start an LCD development process which historically has taken six months. This is the result of Medicare creating a process that will fix the problem for all advanced DME. And this was, I think, Medicare's intent all along, was not to come up with a NovoCure specific fix, but a fix that would address the overall problem that has historically plagued novel DME.

Just on the LCD versus NCCN, should we now assign this is pretty much a done deal, CMS, or are there still uncertainties around the CMS actually paying for therapy?

Well, I think with the US government, it's never a done deal. I wish it were. I think this is a very positive step. I think, again, the explicit announcement that they would take in to account the commercial pricing, I think the fact that we are very well-positioned in the commercial sphere are all positive. But, again, I don't think we can ever say it's a done deal with the government until, in fact, it is a done deal.

Fair enough. And just maybe one question on the script volumes. Looks like Germany, EMEA was a little like – I know that number moves on quite a bit, but this is something that the Street focused on. And maybe any comments on what happened with script volumes would be helpful. Thank you, guys.

So, let me ask Asaf to comment on the volumes.

Yeah, sure. Thank you for the question. So, our main goal in the last couple of years is to basically increase our adoptions. And we start with indication for recurring GBM and then we came with the indications for newly-diagnosed. And the important thing is to make sure that the patients – most of the patients will be a newly-diagnosed patients. These are the patients who can benefit more from the treatment and these are the patients who can stay longer on treatment. So, what we're really happy to see, it's the shift – basically, in all our markets from recurrent to newly-diagnosed. And this is what we've actually seen in Germany. We, basically, see more patients that can stay longer on treatment and we also can bill for this patient and get payment for that.

So, Vijay, just to underline, it's the growth in newly diagnosed where we're really focused and we've seen extremely positive trends in that regard during the quarter.

Thank you, guys.

Thank you. Our next question comes from Larry Biegelsen with Wells Fargo. Your line is open.

Hi, guys. Thanks for taking the questions. It's Adam Maeder on for Larry. I just want to follow-up on reimbursement and the decision to pursue an LCD instead of NCD. Why the reconsideration and was it rejected in the past? And then, I had a follow-up.

Sure. So, first of all, an LCD is faster that an NCD. So, that's the simplest answer that we can give to the question.

Okay, thanks. And then, just on script trends, in the US, why don't we see more of a benefit from the recent level 1 NCCN guidelines at the end of March? And then, looking ahead, how should we think about Rx trend for the rest of the year? Thanks for taking the questions, guys.

So, as I mentioned before, so NCCN guidance, it's something that we believe that we will start to see the impact in the next couple of quarters. In general, and I will say it again, our goal is to make sure that ideally – if 100 of the script will be from newly-diagnosed, this will be ideal for us. So, we really believe that with NCCN guidance and with the continued trend to move to a newly-diagnosed patient and with our effort to increase adoption, we believe that this will continue.

Okay. And any color as we look ahead?

This is Bill jumping in. We see continued levers for growth. As Asaf said, we have a focus on prescription growth for patients with newly diagnosed GBM. We see that. We see steady growth with, again, more than 900 prescriptions for newly-diagnosed in Q2. We believe that this is a sign of increasing physician confidence and belief. They're not putting their bucket patients on the therapy. They're putting their healthy, newly-diagnosed patients on the therapy. We believe that's positive. As you know, we've discussed that our focus has been to create confidence with physicians and putting patients on at the time of diagnosis is clearly a sign of that. We also continue to work, as we discussed, with helping physicians to develop the skills they need to recommend strongly Optune for newly-diagnosed GBM. In past quarters, I think we have elaborated on the fact that this is a new type of therapy for these oncologists. It's not something that a doctor does to a patient, like surgery, radiation, or putting them in an infusion chair. This is a therapy that the patient has to participate in at home and, therefore, requires a different set of skills for the physician. We're seeing that. And so, we believe that that this will continue. And we're also continuing to drive awareness in the community. Again, approximately 60% of all GBM is treated by medical oncologists and radiation oncologists in the community setting. This a more diffuse setting, meaning that there are more clinicians that are treating fewer patients per clinician. And this is a second focus. So, continue to drive confidence and strength of the physician recommendation and continue to drive awareness in the community. And these are the levers that we think, in the near term, will continue to drive the trends that we've seen.

Thanks again.

Thank you. Our next question comes from Gregg Gilbert with Deutsche Bank. Your line is open.

Thanks. Good morning. I have a couple – a few. Wilco, first, it sounds like gross to net improvements are driven by things that seem sustainable. If we look at the gross to net in the quarter, would you say that's a good level to use for future quarters or should we see continued improvements from here?

I think what you see in the second quarter is a continuation of what we expected to happen in the second quarter when we came out of the first quarter. I think it's an example. The approval rate in our German market is improving. We're getting better at these case-by-case collection efforts. We've seen some improvement in the United States as well. So, I think getting to 45% point is a solid improvement over the first quarter and we expect that to continue for the full year.

Okay, great. Switching over to mesothelioma and that opportunity, can you talk about what proportion of that patient group is in the Medicare segment? And is it fair to assume you would treat those patients for free if you don't secure Medicare coverage by then, as has been the case for GBM?

I think that's a little bit early to say anything about. In terms of patient population, when you look at the US, incidence about 80% of eligible patients would probably be on the Medicare. We're focusing on the only HDE application right now and get the approval and we're finalizing our launch plan. So, these are things that we're working on. We do want to emphasize that we're very pleased with the developments that Bill was just outlining on CMS discussions. We probably will not engage in CMS discussions on mesothelioma until GBM is resolved.

Okay, great. Lastly, perhaps for Eilon, I know that the slide with the timelines on your Phase III readouts, et cetera, is unchanged. But can you update us, at least anecdotally, on how enrollment is going on your ongoing studies? Thanks.

Sure. Glad to do that. So, as you know, we don't update on exact enrollment. We are on track for meeting the projected last patient in and data releases that we have released. I can give a little bit more color on, basically, trial by trial. But I think the biggest point is that for METIS, we are now – operationally, we're fully open. So, all of our sites across the world are open, with the majority of the sites in the United States. So, we basically completed enrollment of sites. And we're really focusing more on the patient screening and enrollment aspect of the trial. I do think that this is also important for us because METIS does focus on radiation oncologists, okay, which is – it's more than just a trial-specific population of physicians. It' actually a strategic imperative for us across all of our indication, okay, to educate radiation oncologists on tumor-treating fields. And actually, METIS is one step in that direction. So, as I said, we're on track to last patient in in late 2019 and data in 2020. For LUNAR, for our non-small cell lung cancer trial, we're still in the stage of increasing number of sites, okay. We have more than 30 sites across the United States and Canada right now. And we're working very hard to support the IRB approval processes and all the different aspects of site startup. So, that's really most of our emphasis at the moment on the LUNAR trial. I will stress the fact that PANOVA 3, our pancreatic trial, is still in very early stages of clinical ramp, okay? We have 13 sites currently open and we're opening sites all the time. Interestingly, in pancreatic cancer, we're seeing a lot of interest from investigators, okay? In fact, we have more requests than we can entertain for opening sites, including major academic centers. So, I think the enthusiasm there is there and we're now acting upon it.

Thanks for the update.

Thank you. Our next question comes from the line of Cory Kasimov with JP Morgan. Your line is open.

Hey, guys. This is Shawn on for Corey. Congrats on the quarter and thanks for taking my questions. So, I guess, in the event that Optune is approved for mesothelioma, will you be able to sort of leverage the ongoing conversations with payers, both in the US and ex-US, especially in terms of Medicare reimbursement? I'm just wondering if there's sort of some of the groundwork that's already being laid in your current conversations that can be used to bring forward in your subsequent conversations for other indications?

Yeah, this is Bill. And, again, as Wilco said, I think it's a little early to talk specifics in mesothelioma. However, I think the inference in your question is absolutely correct. When we started, of course, with GBM, it was a conversation about what is tumor-treating fields therapy. It was often the conversation that included a lot of physics, a lot of preclinical explanation, and I think we are well beyond that now with the established approvals and reimbursements for GBM. I expect it will be a very different conversation and will certainly start in a very different place than the very basic place that we started with GBM.

Great. And then, maybe you can talk a little bit about the genesis of the liver cancer program. Just wondering why this indication specifically. And maybe, what have we seen so far that gives you confidence.

Eilon, can you talk a little bit about work in liver.

Yeah, I'm happy to do that. So, first of all, let's go back to the basics. Tumor-treating fields are definitely – they're a platform technology. It's one mechanism or one basic set of mechanisms that should work in multiple different solid tumor types. All of our preclinical evidence to date has shown that really any cancer type we've tried to treat preclinically, we've had success. There are, of course, treatment parameters and different optimizations we can perform at the preclinical level and we translate that into the clinic. And I alluded to that in the prepared remarks as well. There's a lot of preclinical work which goes in and we usually don't share this and we don't talk about it too much. But we don't just jump into a clinical trial. The HEPANOVA trial, our liver cancer – beginning with our liver cancer program, is based on good, strong preclinical data. It's also based on simulation studies on distribution and field intensities that we can achieve within the liver, which are very good. And, of course, the safety results we have to date from our existing data set from pilot clinical trials in the torso that have shown no additive systemic toxicities with chemotherapies. And so, we feel very confident moving into another disease state where local, regional control of the disease can lead to improved patient outcomes.

Perfect. Thanks, guys.

Thank you. [Operator Instructions]. Our next question comes from the line of Difei Yang with Mizuho Securities. Your line is open.

Hi, good morning. And thanks for taking my questions. So, just a quick one really from research perspective. Now that you have positive readouts on mesothelioma, how do you think about the probability of success for non-small cell lung cancer? The reason I'm asking that is that both are related to lung. And do you see any potential read-throughs?

Eilon?

Yeah, sure. First of all, our very encouraging on mesothelioma, actually they give us a certain level of confidence in something which we understand, but physicians don't necessarily always get. And that is the distribution of the fields within the body. So, electric fields with the chest, okay, do penetrate the entire chest cavity and can reach the disease no matter where it is there. We have data from a 42-patient non-small cell lung cancer pilot study, which was published in lung cancer a few years back, which actually showed tolerability, safety and very promising efficacy of tumor-treating fields in advanced non-small cell lung cancer. So, I think that, together with the promising mesothelioma data, actually does give us a lot of confidence and it gives the physicians confidence. I think those are doing the study, the lung cancer study, this is a therapy which can be applied to the lungs, it can be used potentially to treat non-small cell lung cancer should the study results be positive. And when we combine tumor-treating fields with other therapies, such as immunotherapies, and taxanes specifically, we do see potential synergy preclinically, which we're trying to move into clinical utility in the LUNAR study.

Okay, thank you for sharing your thoughts. And then, I just have a quick question on the CMS process. So, Bill, would you update us for that 90-day LCD decision? And additionally, roughly, how many devices you think are in the same category of Optune right now?

Again, I can confirm that the 90-day process for the LCD decision – and, again, we submitted on June 20, so that's the benchmark. With respect to the other devices in the category, again, I don't really have an idea, to be honest, but it would cover things like Optune, which are therapies that are quite advanced and that are used by the patient in the home setting. I think, if you look, there are more modern medicines like this in the category. An issue that CMS has had is that, traditionally, this was the group that focused on things like oxygen bottles and walkers, and they just were not equipped to deal with things like Optune. So, this was part of the reason why it was a multiyear process. It was a fundamental issue with CMS. And particularly, in the last year, we've seen a real determination by the administrator and her chief lieutenants to solve this problem. And we are very happy finally with the progress that that made. And again, that's why we submitted. We thought we had a very good case for LTD determination, given all the advancements and all the data that have been presented. But we were not willing to submit until there was a statement about the pricing methodology.

Okay. Thanks for the additional color.

Thank you. And I'm showing no further questions at this time. I would now like to turn the call back to Mr. Bill Doyle for closing remarks.

So, I want to thank everyone for their interest in NovoCure. I think management was extremely pleased with the progress that we've made during the quarter, both in terms of growing and refining our GBM business and, of course, the progress that we're making in the clinical pipeline. And I do want to take this opportunity to thank all of the NovoCure employees worldwide. As you can imagine, a company that is a relatively new company that's growing a global business and running the number of Phase III clinical trials, plus the preclinical work that we're doing requires incredible dedication from a really incredible team. And I want to thank them. So, take care, everyone, and we'll see you next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a great day.