Good day, ladies and gentlemen, and welcome to the NovoCure 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] I would now like to hand the call over to Ms. Ashley Cordova, Senior Vice President of Finance and Investor Relations. You may begin.

Good morning, everyone, and thank you for joining us to review NovoCure's fourth quarter and full year 2018 performance. I am 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 & Development, Eilon Kirson. The slides presented today can be viewed on our website, www.novocure.com, by clicking on the link for fourth quarter and full year 2018 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 three and twelve months ended December 31, 2018, are available in our press release and in our 10-K, both of which were released earlier this morning. With that, I will now turn the call over to Bill Doyle.

Thank you, Ashley, and good morning everyone. 2018 was a particularly productive year for NovoCure. We entered the year with two clear priorities. First, to drive commercial adoption of Optune for the treatment of GBM and second, to advance our clinical pipeline. We finished the year with growth in our GBM business globally and tangible progress in our clinical development program. Highlights included growing our annual revenue by more than 40%, presenting our STELLAR data in malignant pleural mesothelioma, enrolling the first patient in our Phase III pivotal PANOVA 3 trial for pancreatic cancer and signing our collaboration agreement with Zai Lab to bring Optune to China. Specific to the fourth quarter, we continue to grow our GBM business globally and invested $15 million in research and development. We recorded nearly $70 million in net revenues and posted our 16th consecutive quarter of active patient growth since the initial presentation of our EF-14 data. In December, post-hoc analysis of EF-14 was published in the Journal of Neuro-Oncology demonstrating that more time on Optune predicted increased survival. A separate post-hoc analysis presented at ASTRO in October showed that higher levels of energy at the tumor bed predicted increased survival in GBM independent of time on therapy. The Tumor Treating Fields dose density can be defined as the time on therapy times the energy delivered. In our EF-14 trial, patients who received the highest dose densities of Tumor Treating Fields at the best survival outcomes. With this knowledge, our engineering efforts are now geared towards Optune system improvement to increase efficacy and extend survival. Moving outside the brain. We've received comments from the FDA on our application for approval in malignant pleural mesothelioma and are currently preparing our response. We hope to receive approval from malignant pleural mesothelioma in 2019. Approval for…

Thank you, Bill. There were almost 2,400 patients on Optune at year-end. The novel prescriptions for patients with newly diagnosed GBM continue to grow in the fourth quarter. Year-over-year the total number of prescriptions for patients with newly diagnosed GBM grew 40% in 2018. In the U.S., total prescriptions grew 4% quarter-over-quarter. We continue to focus our sales and marketing efforts on increasing physician confidence and belief in the clinical benefits of Optune and increasing adoption in the community setting, particularly among the Asian oncologists. In EMEA, total prescriptions grew 12% quarter-over-quarter, notably net revenues grew 24% quarter-over-quarter, driven by further improvement in the reimbursement approval rate of individual claims in Germany and by increasing adoption in Austria. In Germany, the approval rate for individual claims is now almost 65%. 2018 was our first full year of commercial activity in Japan. We signed contracts with more than 100 hospitals to provide Optune therapy to newly diagnosed GBM patients. In 2018, we filled 162 prescriptions and delivered more than $6.3 million in net revenues. We remain excited about the opportunity to grow adoption of Optune in this key market. Looking forward, we believe there is significant opportunity for further growth in our GBM business across geographies. Our teams continue to focus on driving adoption through physician education, clinical research and well permitted direct-to-patient outreach. We believe there are many more patients who can benefit from Optune than are currently on therapy. With that, I'll now turn the call over to Wilco to review our financial results.

Thank you, Asaf, and thank you to everyone for joining us on the call this morning. We ended the fourth quarter in a strong financial position. Net revenues were $69.7 million, grown 30% year-over-year and growing 8% quarter-over-quarter. Sequential revenue growth was driven by an increase in active patients. Full year [indiscernible] revenues were more than $248 million. Gross profit in the quarter was $46.6 million reflecting a 67% gross margin. Moving down the income statement, we continue to increase investments in research and development with $15 million in R&D expenses in the quarter. As we work to enroll patients across three Phase III clinical programs, we anticipated R&D expenses will continue to increase in future quarters. Notably, we funded our increased investments in R&D with cash flow from the GBM business. Our fourth quarter SG&A expenses were $40.3 million including $9 million in non-cash share-based compensation. SG&A expenses include increased marketing expenses to support Optune adoption, increases in our sales force globally. Our fourth quarter 2018 operating loss was $8.7 million with operating income generated by the GBM business contributing to investments in research and development. Net loss for the quarter was $15.6 million, or $0.17 per share. We have positive net cash flow from operations in the fourth quarter of $16.8 million with $1.8 million net cash used in investment activities principally related to investments in PP&E. We ended the fourth quarter with $245.9 million cash, cash equivalents and short-term investments, an increase of $18.2 million versus the third quarter. We believe we have an extended cash runway that provides NovoCure with financial stability and flexibility as we execute our core strategies. At NovoCure, we are working to extend survival in some of the most aggressive forms of cancer by developing and commercializing Tumor Treating Fields. With annual revenues approaching $250 million, four indications in our late stage pipeline and a strong balance sheet, we believe we move into 2019, well positioned to deliver both continued near-term growth and significant long-term shareholder value. With that I'll open the call for questions. Operator?

Thank you. [Operator Instructions] Our first question comes from the line of Vijay Kumar of Evercore ISI. Your line is open.

Hey, guys. Thanks for taking my question. So maybe, Bill, I just want to start at the high-level, 2018 was a fantastic year for you guys, a lot of optimism around the pipeline opportunity. I think I've gotten some few questions on guidance. What is that, that we should be expecting, right? And I think you mentioned revenue growth of 40%. How should we be thinking of revenue preparation metric and maybe script volumes? It seems like that script volume number has been a little volatile. So maybe any color on how we should be thinking about in the script volumes?

Hi, Vijay. Thanks very much for the – noting the progress that we made in the year. I'll make a couple of comments and then I'll see if Asaf has anything to add. But, as you know, we do not guide, so start there. Number two, notwithstanding that fact, we believe that we have significant opportunity to grow the GBM business in the U.S.A. and in the other markets in which we participate and in markets where we don't participate. That said, it's – because we have a relatively small indication in GBM and by that I mean relatively small incident and as I've said to many investors, you can't take the incidents and divide by 52 weeks in order to draw a straight line. It is more of what I've always called…

[Indiscernible] some technical problem, he is on the other side of the world right now. So I'll continue. Basically, we continue to grow in newly diagnosed, and we still think that is enough patients that can benefit from the therapy. And we are putting a lot of efforts as usual in adoption. So all in all, we continue to put more patients on therapy every quarter, and we're very happy with that.

And then just maybe one follow-up. I think Bill you mentioned mesothelioma, you've heard from the FDA. Was this the second review cycle? I'm just curious on the approval time line whether this is first half versus second half? Thank you.

Vijay, this is Eilon. I will take that one. So first of all, I'll answer the question directly, this is the first review cycle, okay. We did receive comments from FDA, and we are currently in ongoing and productive discussions with FDA. We're planning on submitting our response soon. And we do expect to get approved in 2019, okay. I'll remind you that this approval – submission is based on the results that we presented at IASLC in 2018 showing a significant extension in median overall survival of the patients treated with Tumor Treating Fields together with standard chemotherapy, okay, compared to standard chemotherapy alone, in fact we saw 18.2 months median survival compared to 12.1 months, which is the expected historical control. Again, we are continuing to have productive discussions with FDA and we will be submitting very soon.

Got you, apologies if I can have one more, on gross margins. I think that number moved Q-on-Q, maybe any comments around what moved the GM line? And I'll hop off.

Yeah, Vijay, this is Wilco. Thanks for the question. Overall, our gross margin trend is improving – has been improving over a number of quarters, and we expect it to continue to improve with volume increasing. Fourth quarter was affected by a one-time charge related to the opening of our European Operating Center from which we think we can more efficiently serve our EU patients, so it was a one-time impact that affected the gross margin in the fourth quarter and expect further improvement in the future.

Okay, thanks guys.

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

Hey, good morning and thanks for taking my question. So just a couple, would you remind us what was the reimbursement rate in Germany a year ago?

Good morning. As we said, it's about 65% now, which is a considerable improvement. And it's coming from, I think, about 55% – mid-50s in 2017.

Okay. And then the second question is around Sweden. How should we think about the uptick for commercialization in Sweden?

Thank you for your question. It's Asaf. So in Sweden, we are basically right now building our infrastructure to treat GBM patients and we implement the national reimbursement that we have in Sweden in the different areas of Sweden. The reimbursement process over there is signed by a different region. And we feel that we're doing the right thing, and we really know that many patients are going to benefit in Sweden from our therapy.

From revenue standpoint, should we be thinking about the growth in Sweden more or less resembles in Japan last year? Or it will be slower, faster, trying to find a reference point?

It’s difficult to say. We think, overall, the margins – the Swedish market opportunity is about 10% of the German opportunities to put that in perspective. We're very pleased with the national reimbursement, as you know. We're now starting our activities to put patients on therapy. It's very difficult to predict whether it's going to have the identical trajectory as we've seen in Japan. We certainly hope so, but we're working very hard to put more and more patients on therapy.

Okay, thank you. Then my final question is with regards to the evolving cancer therapy landscape. So we know IO or PD-1 agents started to take – to change some of the standard of care. And how are you thinking about potentially running trials with the TTFields in combo with checkpoint inhibitors?

Thank you for that question. This is Eilon. So first of all, it is a very exciting time, I think, in oncology, and with the emergence of checkpoint inhibitors in immuno-oncology, we're seeing really a shift in standard-of-care in various types of tumors. We've already actually taken steps to work together with immuno-oncology, our, LUNAR trial in non-small cell lung cancer allows patients to receive checkpoint inhibitors together with Tumor Treating Fields. The other indications we're working on in checkpoint inhibitors are not yet standard-of-care. And so we have not had planned this ourselves, but we'll definitely keep up to speed with the latest standard of care. And when we plan our future trials, we always take into consideration the latest and emerging therapies. And we know that Tumor Treating Fields can be used effectively at least pre-clinically together with various types of therapies, such as the classic chemotherapies. If it's with taxanes where we know there is real synergy and we know that there is also a additive effect together with immune checkpoint inhibitors. And so all of this together gives us a lot of confidence that we're going to be able to continue to plan our trials and perform ourselves in combination with the latest and most up-to-date standard of care.

Okay, thank you for taking my questions and congratulations for a great 2018.

Thank you.

Thank you.

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

Thanks. Good morning, guys. I appreciate you’re taking the questions. So first of all, I'm curious what you expect to be the key points of focus at next week's Medicare CAC meeting? How you're thinking about the potential outcomes there?

Hi, Cory. This is Bill. Can everyone hear me?

I can hear you.

We can hear you, Bill.

I am calling from the Hong Kong Society of Neuro-Oncology. So as a subset the other side of the world. So first of all, just to remind everyone that we have – we're now in the midst of what CMS calls the LCD reconsideration process or the local coverage decision reconsideration process. We submitted our request for reconsideration to Medicare in June 2018. The DME MACs accepted our request in October 2018. Although they said that they plan to follow a new process that they're implementing for all novel DME. So because it's a new process, Cory, we probably know less than, than we would if this were tried and true. As you said, the CAC will meet next week on the 6th. The agenda has been published. And we know that NovoCure will have the opportunity to present our data and our rationale for reconsideration. We also know that there is an hour and 45 minute Q&A session where the CAC members will have the opportunity to ask questions of our team. They will review the key question that Medicare poses to them and then have a summary discussion, this is all in public, for an hour and 45 minutes at the end. At this point in time, we don't have additional details. I'll state that we do know because this is stated in the policy manual that the CAC is an Advisory Committee and the final decision will rest with the MACs. We're prepared to present our, as you know, best-in-category survival data and also Optune's general acceptance within the physician community. And we process the panel will have a fair and open review of our data. We continue to work with Medicare, educate them based on all the new data that was continued to be generated on Tumor Treating Fields. As we've noted in the script, there were tremendous number of publications and presentations in the back half of last year. But other than that, Cory, we're – that's what we know.

Okay, that’s helpful. And then my follow-up question is around these interim data looks that you have for your Phase III trials that will start next year. I'm wondering how much power is built into them at the interim? And do you first see a reasonable likelihood of stopping these trials early for positive efficacy? Or is this more about passing futility analysis? If I recall correctly, EF-14 was stopped at the interim, I think.

Thanks, Cory. This is Eilon. I will take that. Sure, so – first of all, you’re right. EF-14 was stopped early at the interim analysis due to the highly successful overall survival and progression-free survival advantage over the control group. To a certain extent, luckily, at that point, we had already enrolled almost all the patients on the trial, which allowed us also to have a long-term full analysis of the data, which was published in JAMA in 2017. But with that being said, it's very hard to predict what's going to happen in future trials. We'd be happy if that would be the outcome, but we really cannot say what will happen at these interim analyses. We’re not disposing right now the exact split in the alpha or the P-value split between the interim and the final analysis. These are event-driven calculations and it's very specific to each trial. I'm sure that as we get there, we will be discussing this in much detail.

Okay, and it is the non-small cell lung cancer that will have the first interim release based on current event rates, right?

Yes, that’s what it looks like.

Okay, thank you guys. Good luck next week.

Thank you. [Operator Instructions] Our next question comes from the line of Larry Biegelsen of Wells Fargo. Your line is open.

Hey, guys. Thanks. Good morning. Thanks for taking the questions. A couple quick ones for me. Wilco, just to start, last year, you gave us a little bit of "guidance" for the GAAP revenue as a percent of gross billing, I think, 45, 46 at the start of the year. That's what it came in at. For 2019, any color on that? And then, Eilon, on the – just a follow up to Cory's question on STELLAR and LUNAR, any idea that interim analysis would be the first half or the second half of 2020? And I had one follow-up.

Yes, thanks, Larry. Let me take up with the question on gross to net. We did come in at the levels that we expected to come in. I think that’s still a good handle for 2019 as well. Of course, the next material step would be Medicare. The outcome of Medicare would have a potentially substantial impact on that percentage.

Okay, this is Eilon. I will take the second question, Larry. So, again, we – these are event-driven interim analysis. And so, it will really depend how the patients are doing on the trial, both controlled patients and treatment patients. And so it's really hard press to predict exactly where in 2020 this could come in.

Okay, thank you. And then just lastly, on mesothelioma and the reimbursement there. There are funds available for these patients. Any color you can add today on how that might play out once you do get approval. Thanks for taking the questions.

Larry, we don’t have additional color. Our focus right now is on approval. We are expecting that approval this year. We're also preparing for the launch, and – but we don't have any additional color on reimbursement at this time.

All right guys. Thanks for taking the questions.

Thank you. And at this time, I am showing no further questions. I would like to turn the conference back over to Mr. Bill Doyle for the closing remarks.

So, thanks everyone for your continued interest and support in NovoCure. We had really an outstanding 2018. And as Wilco mentioned in his remarks, we feel that we are exceptionally well positioned from all sides really to jump into 2019 to continue execution of our two core priorities, growing the GBM business globally and advancing our clinical pipeline. So thanks again and have a great day.

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone have a great day.