Good day, ladies and gentlemen. And welcome to Novocure's third quarter 2017 conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will host a question-and-answer session and our instructions will be given at that time. [Operator Instructions] As a reminder, today's conference call is being recorded. It is now my pleasure to turn the conference over to Ms. Ashley Cordova, Vice President of Finance and Investor Relations. Ma'am, you may begin.

Good morning, everyone. And thank you for joining us to review Novocure's third quarter 2017 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 2017 third quarter financial results, located in the Events section on our Investor Relations page. Before we start, I would like to remind you that our discussion during this conference call will include forward-looking results 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. We will first make some brief prepared remarks and will then move to a question-and-answer session. I will remind everyone that our financials for the three and nine-months ended September 30, 2017 are available on our press release and our 10-Q, both of which were released earlier this morning. With that, I will now hand the call over to Bill Doyle.

Thank you, Ashley. And good morning, everyone. Consistent with prior quarterly calls, we will review our progress during the quarter in the context of our core strategic objectives. First, we're focused on driving commercial adoption of Optune for the treatment of glioblastoma. Second, we're committed to advancing our clinical pipeline. And finally, we are dedicated to driving operating leverage in our commercial business and delivering long-term shareholder value. I will provide a pipeline update later in this morning's call. But I'll ask Asaf first to review our commercial activities during the quarter. Asaf?

Novocure reported revenues of $50.1 million in Q3 2017 at 131% versus Q3 2016. This represents our ninth consecutive quarter of single-digit year-over-year revenue growth. We have 1,683 active patients on treatment at the end of Q3 2017, an increase of 71% from the end of Q3 2016 and 15% from the end of Q2 2017. This marks our 11th consecutive quarter of active patient growth since the initial presentation of our EF-14 Phase III pivotal trial data in newly diagnosed in GBM in November 2014. The US and Germany continues to be our largest active commercial markets, together representing 94% of our global prescription volume in Q3 2017. We estimate our Q3 market share was 25% in the US and 22% in Germany. Notably, we saw a favorable shift in prescription mix in Q3 2017, with newly diagnosed GBM representing more than 60% of our total prescription volume. We believe this move towards newly diagnosed GBM should allow active patient growth to outpace prescription growth in the future quarters. Our sales and marketing efforts continue to focus on building prescriber confidence in Optune for the treatment of GBM. For example, at ASTRO in September, we had a significant commercial presence and the five-year survival and quality of life data from our EF-14 trial will feature in an oral presentation. We believe the presentation was well received and radiation oncologists appeared eager to engage with our team and to understand how they could gain access to Optune for the patients with GBM. Also, during Q3, we updated our marketing materials to include the five-year survival data from our EF-14 trial. Optune is the first treatment in more than ten years to increase median survival in newly diagnosed GBM. For five consecutive years, Optune plus temozolomide demonstrated consistently sustained superior rate of survival in newly diagnosed GBM. The five-year survival rate was 13% for Optune plus temozolomide versus 5% for temozolomide alone. Optune plus temozolomide demonstrated superior overall survival for all patients that were analyzed, regardless of [indiscernible] status, extent of reception, age, performance status or gender. We believe our message of unprecedented five-year survival result will resonate with prescribers and patients. Our sales team are now in the field messaging the five-year data to target prescribers. With that, I will turn the call back to bed to review our progress in R&D.

Thank you, Asaf. In addition to our commercial progress during the third quarter, our continued investments in R&D have led to meaningful advances in our understanding of Tumor Treating Fields. Our preclinical research focuses on investigating the multiple pathways through which Tumor Treating Fields exert their effect and complement other anticancer therapies. Preclinical data presented at ASTRO described how using tumor-treating field with radiation therapy may enhance the efficacy of radiation or other DNA-damaging agents. These data provide a scientific rationale for the development of alternative strategies for using Tumor Treating Fields, and served as the basis for the GBA decisions that support a clinical trial studying Optune for the treatment of newly diagnosed GBM in Germany. The proposed GBA trial design will examine the benefits of starting Optune concurrent with radiation therapy and temozolomide prior to the initiation of maintenance temozolomide. On the clinical front, we continue to recruit patients for two ongoing Phase III pivotal trials. Our LUNAR trial in non-small cell lung cancer and our METIS trial in brain metastases for non-small cell lung cancer. In September 2017, the FDA approved an IDE supplement to amend the protocol for our METIS trial, designed to accelerate the pace of enrollment by expanding the eligible patient population. Among other updates, the protocol now allows for the enrollment of patients with infratentorial brain metastases based on new scientific information supporting a specialized array layout to treat infratentorial tumors. We also continue to collect data on patients in our ongoing STELLAR trial, a Phase II in mesothelioma. As a reminder, we enrolled our last patient in the STELLAR trial in March 2017. With a minimum of 12 months follow-up, we anticipate topline data in mid-2018. On the engineering front, in September, we initiated a pilot test of our tan colored transducer arrays in Europe. This is a device improvement stemming directly from patient feedback. Pending successful completion of the pilot test, we plan a full rollout in tan colored transducer arrays in Europe and plan to file a PMA supplement application with the FDA in the United States. We also highlighted our ongoing research on electric field distribution in tissues during three oral presentations at the IEEE Conference in July 2017. This research is critical to understand possible ways to increase efficacy by optimizing the delivery or dose of Tumor Treating Fields. With that, I will hand the call over to Wilco to review our financials.

Thank you, Bill. And good morning, everyone. Our third quarter net revenues grew 131% to $50.1 million compared to $21.7 million for the same period last year. Sequentially, net revenues for the third quarter were up 31% from the second quarter of 2017. 70% of our net revenues came from the United States, with the balance from EMEA, principally Germany. Revenue growth was driven by an increase in active patients, improvement in collections from our active patients and a one-time benefit from the transition to accrual-based revenue for a portion of our German payers in the third quarter. Net revenues as a percentage of gross billings improved to 49% in the third quarter from 44% in the second quarter, driven by the previously referenced one-time benefit in Germany, an increase in the approval rate for German claims and an acceleration of cash collections in the United States. In the fourth quarter of 2017, without the benefit from a transition to accrual-based revenue, we estimate that net revenues as a percentage of gross billings will be approximately 46%. We are engaged in constructive dialogues with the government payers in the United States, Germany, Switzerland and Japan. We expect that any positive reimbursement decision resulting from these discussions would be the next likely trigger to drive a significant improvement in net revenue as a percentage of gross billings for future claims. Gross profit in the quarter was $35 million or 70% of net revenues compared to $10.6 million or 49% of net revenues for the same quarter last year. The improved margin was driven both by improved net revenues as a percentage of gross billings and by the ongoing efforts to reduce our cost of revenues with efficiency initiatives and scale. Moving down the income statement, our R&D expenses were $9.3 million…

Thank you, sir. [Operator Instructions] And our first question will come from the line of Tao Levy with Wedbush. Please proceed.

Yeah, hi. Good morning.

Good morning, Tao. Maybe a couple of clarifications. First, Wilco, can you quantify the one-time sort of benefit from the accounting, from the accrual accounting that you received? I assume that's mainly in Germany, right?

It was mainly in Germany. Good morning, Tao. As I mentioned, our overall gross to net revenue – net revenues as a percentage of gross billings was about 49% in the quarter, without which it would've been approximately 46%. So, I estimate it's some $4 million benefit in the third quarter from that switch to accrual-based rev rec in Germany.

Got you. And congratulations on being cash flow positive from operations. But that includes this one-time benefit, right? So, we shouldn't assume continued cash flow positive out of Novocure going forward. Is that fair?

No, I don't think it includes that. The accrual basically goes to accounts receivable [indiscernible] collected. So, the cash flow is more a reflection of our ability to improve collection.

And in terms of a go-forward basis, should we assume you remain cash flow positive?

That would be guidance, Tao. And you know how we feel about that.

All right. And then, last one –

If I can interrupt you for one second [indiscernible], when you look at our improvement in cash flow over the last year, it is a leverage story and management of working capital story. And as I explained to you in the prepared remarks, we grow our revenue by 131%, SG&A grew by 11%. If you take out non-cash share-based comp, it was essentially flat. So, that leverage, the quality of the cash flow improvement is sustainable.

Perfect. And then, lastly, Japan reimbursement, any news on that front? I would have thought you would have heard something by now. Thanks.

Thank you. It's Asaf. Basically, there is no news as we continue the negotiation with MJW [ph] and there is no new news.

Okay, thank you.

Thank you. Our next question will come from the line of Gregg Gilbert of Deutsche Bank. Please proceed.

Good morning. I have a few. First, I'll start with Bill on one of my favorite questions on CMS reimbursement. Can you describe the tenor of those discussions? And you're still viewing this, I hope, as a when, not an if.

So, that's correct. Again, as we said in previous calls, unfortunately, CMS doesn't have a clock. So, it's very difficult for us to predict the when. But all of the progress that we've made in terms of the presentation of five-year data, the presentation of sub-group data where, in fact, we showed the lowest hazard ratio of any subgroup in the over 65 population, the continued increase in adoption in the commercial market, all of those factors are positively affecting the discussions. And, again, while I can't predict the time, I believe it's a matter of time and not a matter of yes or no.

And how would you compare this sort of group versus other countries in thinking about reimbursement? Is it different than the different regions in terms of what they are stuck on?

Every region is different. Some have very specific, defined processes. I think the appreciation of the data is similar in all jurisdictions, but the process through which the therapy is ultimately paid for is almost completely different country by country.

Got it. In terms of the competitive landscape for GBM, can you comment on anything that's in late stage development that you have your eye on that could affect the competitiveness of your product? I suspect you think Optune could be used in combination with other things, but can you frame that for us in terms of your thinking of other late-stage GBM approaches that are out there?

Yeah. I'll ask Eilon to say a few words on this topic.

Okay. So, thank you very much. We continue always to evaluate any data that comes out in GBM. We don't comment on rumors of what may come out. We always look at different combinations, the best combinations to try with Tumor Treating Fields. And everything we've tested to-date pre-clinically has actually shown very nice effect together with emerging therapies, be they new checkpoint inhibitors or standard chemotherapies. And so, in any case, we believe that Tumor Treating Fields can serve as the basis for any new treatment which comes out.

Maybe one last follow-up. Sorry to go one extra bit. To what degree are you talking about – or talking to other companies about clinical trials that involve Optune outside of the GBM setting or do we have to kind of wait for you to validate in later-stage trials Optune by itself or in your own studies before you have in external collaboration sort of strategy outside of GBM? Thanks.

Well, we're talking to multiple companies about various combinations, both at the preclinical level and the clinical level. We released a trial that is starting basically with marizomib. Marizomib which is a [indiscernible] where they're going to be doing an arm with Tumor Treating Fields and marizomib. And again, based all our data to-date, all our preclinical data and clinical data, Tumor Treating Fields can serve a very good backbone for future trials testing new therapies.

Thanks.

Thank you. [Operator Instructions]. Our next question will come from the line of Lei Huang with Wells Fargo. Please proceed.

Good morning. It's Lei calling in for Larry Biegelsen. And thanks for taking my question. Can we just talk about O-US for a minute? So, O-US revenue was almost $15 million in the quarter. Was $4 million the one-time benefit from Germany?

Good morning, Lei. This is Wilco. Yes, that's correct. $4 million was related to the German switch.

Okay.

Approximately. This is not an exact number. Approximately $4 million.

Okay, fair enough. So, even if we take out that approximately $4 million one-time benefit, it was still a pretty healthy increase quarter-over-quarter in terms of revenue growth versus – the prescription growth and active patient growth was a little more modest. What's driving that revenue growth to be more – a lot more robust versus the prescription growth and patient volume growth?

Yeah. So, first of all, thanks for bringing it up. I think we've shown significant revenue growth even if you exclude that one-time bump from the switch to accrual in Germany. This is a function largely of active patient count. We've had more than 200 active patients in the quarter, substantial active patient growth in the United States, substantial active patient growth in Europe. And it all leads to quarter over quarter – if you net out that $4 million, still very substantial revenue growth, with, as I said during the call, SG&A essentially flat, leading to the leverage. And I'd like to emphasize it one more time, the first positive cash flow quarter in our history.

Okay, great. Thanks. And then, can you give a number of training center – Optune training centers in US and O-US? I didn't see in the slides or the press release.

We have almost 700 training centers in the United States, 663 to be precise. In Europe, we have approximately 230 certified sites. And as you know, we're also preparing for Japan upon reimbursement. We have about 150 certified sites in Japan.

Got it. And just on Japan, if I can ask one more, how confident are you that you could hear something on reimbursement before year-end?

As I mentioned before, we're still working under the assumption, which was the old assumption, that we will have our reimbursement this year.

Okay, all right. Thank you.

Thank you. Our next question will come from the line of Cory Kasimov with JPMorgan. Please proceed.

Hey, guys. This is Shawn on for Cory. Thanks for taking the question and congrats on the quarter. Just a couple of quick ones for me. So, first, can you kind of remind us which other European markets you're in. I know it's currently Germany and Austria at the very least. But which other ones are you currently in and what other EU markets might you be looking to get into in the near term?

So, thank you for your questions. So, right now, we're mainly in Germany. And the other countries are Switzerland, Israel, and Austria. In Austria, we already announced a couple of weeks ago, we have national coverage and we already have a contract with Austrian government. And we're not planning to approach any other countries in the near future.

Okay, that's helpful. So, regarding the METIS trail, you talked about expanding the patient population. I believe it was by including patients that had infratentorial – sorry, I didn't hear that that clearly. But, regardless, does this change your thinking at all in terms of the time frame for the readout? Does it push it forward at all?

Well, thanks for the question. This is Eilon. We're still assuming the same time line, okay? We don't think this is going to push the timeline in any way.

Okay, great. And then just one more quick one. Can you maybe share the current patient mix between the tumor-naïve patients and tumor-refractory patients in GBM?

Yes. So, the way that we think about it is based on when the patient starts the therapy during their course of their disease. So, we have two buckets of patients. We have patients who start after the radiation therapy. We call those patients the newly diagnosed patients. And then we have patients who will start later in the course of their disease, after they have progressed, and those are the recurrent patients. We've shown in our data that while both groups benefit, patients who start earlier benefit more. And so, it's been one of our objectives to encourage prescribers to prescribe earlier in the course of a disease rather than wait till recurrent. And that mix continues to shift towards newly diagnosed. In this quarter, we've describe that approximately 60% of our prescriptions were for newly diagnosed and 40% were for recurrent. And that is an increase from where we've historically.

Okay, perfect. Thanks so much, guys.

Thank you. Our next question will come from the line of Difei Yang with Mizuho Securities. Please proceed.

Good morning. Thanks for taking my questions. Just a couple. First of all, do you see a difference between the German patients versus the American patients on compliance rate? If there is a gap, is there any way certainly to bridge the gap to improve compliance rate?

So, the question is – we don't see any difference. They are pretty similar.

Okay, thank you. And then, I think Bill talked about technology improvement, the next generation technology, et cetera, earlier. Could you frame it for us from patients' perspective? What are the key benefits for patients?

Sure. First of all, if you take one step back, we have ongoing engineering efforts to continue to improve the technology, both from a convenience perspective because, again, we want to make it easier and easier for patients to comply. And we also believe that by improving compliance ultimately, we will improve efficacy for patients as well. So, it's very important to us. The biggest change to-date, I think, we've talked about was the rollout of our gen 2 device, which was a major improvement for patients, significantly reducing the size, weight, noise, increasing battery life, et cetera, of the device. We continue to look for opportunities to further improve the field generator. But we've now turned our significant attention to the arrays. One of the things that we've heard consistently – and for those of you who are not familiar with the details of the therapy, our transducer arrays, from day one, have been sort of a bright surgical white color. And patients have consistently asked for more flesh tone or Band-Aid color to make the arrays a little less conspicuous. And so, that product is now being piloted in Europe. And we assume successful conclusion of that pilot and then the rollout in the USA. It's a PMA supplement in the US. So, we have to file. And as soon as we get that signoff, we'll roll it out in the US. From there, there's a whole host of other opportunities to further improve the arrays. We're focused on the hydrogel of the adhesive. There are more modern hydrogels available than when we originally designed the arrays. We're looking at ways to make the arrays more comfortable. We're looking at ways of improving the connectivity to the device. So, I would expect over time to see a whole host of additional improvements. But the first would be the rollout of the tan arrays.

Okay, thank you. Then my final question on the transition from cash to accrual-based accounting. So, where are we on the very high level? Are we 50% down, 75% down?

I think so. First of all, we mentioned that net revenues as a percentage of gross billings was 49% in the quarter, substantial improvement from the second quarter where it was 44%. If you take out that one-time benefit of switching to accrual, it's essentially a 46%. And that's what I would recommend. Looking at net revenues as a percentage of gross revenues and modeling it out, that percentage and the development of the percentage, which will be also triggered by national reimbursement decisions that – as we just talked about, that will go up over time with those decisions if they are favorable. That's probably the better way of modeling out our net revenue as a percentage of gross billings.

Okay, thank you. Well, congratulations for a great quarter.

Thank you. Thank you.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session for today. So, now, it's a pleasure to turn the conference back over to Mr. Bill Doyle, Executive Chairman, for some closing comments remarks. Sir?

So, thank you everyone for participating in our Q3 call. I think Wilco nicely summarized our progress over the last two years. And I just want to take this opportunity to thank our team globally. It's been an incredible amount of effort, hard work that's gone into the growth and the progress that Wilco described. Looking forward, as Wilco also said, we're just at the beginning and we have a lot more work to do, patients to help and we've got the team to do it. So, thank you all.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude the program if we may all disconnect. Everybody, have a wonderful day.