Novocure Ltd (NVCR) 2015 Q4 法說會逐字稿

f>> Operator Good day, ladies and gentlemen, and welcome to the NovoCure, Ltd. Q4 2015 earnings call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Miss Ashley Cordova. Ma'am, you may begin.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us to review NovoCure's 2015 fourth-quarter and full-year performance. I am joined today by Bill Doyle, our Executive Chairman; Asaf Danziger, our Chief Executive Officer; Wilco Groenhuysen, our Chief Financial Officer; and Eilon Kirson, our Chief Science Officer and Head of Research and Development.

Before we start, I'd like to remind you that our discussion 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.

We have around 20 minutes of prepared remarks, and we'll then open up the call for the question-and-answer session. With that, I will now turn the call over to Bill Doyle.

Thank you, Ashley, and thanks to everyone for joining our call this afternoon.

During my remarks, I will briefly recap NovaCure's major accomplishments during 2015, and highlight NovoCure's commercial momentum following the October FDA approval of Optune for newly diagnosed GBM. Asaf Danziger will provide additional color and commentary on the commercial launch of Optune for newly diagnosed GBM in the United States and Europe. Wilco Groenhuysen will share an overview of our key financial statement highlights, and I'll conclude our prepared remarks with a summary of our recently announced phase 2 pivotal trial data in pancreatic cancer, and a view on our 2016 catalyst.

Simply put, 2015 was an exceptional year for NovoCure. Our superb team demonstrated their competence and commitment, with the fourth quarter especially full of notable accomplishments. We don't have enough time on today's call to review each of the milestones achieved in 2015, but I would like to highlight a few of which we are especially proud.

First on the commercial front, in 2015, we emphasized three specific catalysts key to the development of near-term growth: FDA approval, EF-14 publication and geographic expansion. As of December 31, 2015, NovoCure had successfully achieved the first two, with substantial progress made on the third.

We received FDA approval of Optune in combination with temozolomide for the treatment of newly diagnosed GBM on October 5, 2015. On December 15, 2015, the results of our EF-14 phase 3 pivotal trial were published in the Journal of the American Medical Association, with the strong conclusion that adding Tumor Treating Fields, or TTFields, to maintenance temozolomide chemotherapy significantly prolongs progression free and overall survival in newly diagnosed GBM.

Regarding geographic expansion, as of December 31, 2015, 76 patients were on Optune therapy in markets outside the US, representing approximately 12% of our total active population and a 443% growth over the prior year. Germany is our largest currently active market outside the US, with 75% of our ex-US prescription volume.

We're able to bill healthcare payers in Germany for individual cases currently, and each case is evaluated individually on its merits and under the payer's specific rules for such cases. We are pursuing defined coverage and pricing terms in Germany, and are also preparing applications to secure defined reimbursements in Switzerland and Japan.

In the fourth quarter of 2015, we launched our second-generation Optune system in Europe. The second-generation system was designed to improve the convenience and manageability of TTFields therapy for patients, and leveraging novel digital signal generation technology features a TTFields generator that is less than half the size and half the weight of the first-generation system.

The second-generation Optune system, including its battery, weighs only 2.7 pounds. The patient feedback on the new device has been overwhelmingly positive. And we believe this device will benefit compliance, a key goal of ours, as compliance correlates with efficacy.

In December 2015, we filed a PMA supplement application with the FDA for the second-generation system. Assuming that we do not receive excessive comments of requests for additional information from the FDA, we hope to begin marketing the second-generation system in the US in the third quarter of 2016.

On the clinical development front, our most significant recent clinical milestone was the presentation at ASCO GI of PANOVA phase 2 pilot data demonstrating that TTFields may improve survival of patients with advanced pancreatic cancer. Progression-free survival and overall survival of patients treated with TTFields combined gemcitabine were more than double those of gemcitabine-treated historical controls. I'll provide additional detail on the PANOVA trial at the end of my remarks.

In 2015, we also enrolled the first patient in STELLAR, an 80-patient phase 2 pilot trial for patients with malignant pleural mesothelioma designed to test the efficacy and safety of TTFields in combination with standard of care chemotherapy. We expect to finish enrollment of STELLAR in 2017, and anticipate that we will have data for presentation in 2018.

We continue to review the EF-14 pivotal trial data for results of clinical interest. And in 2015, presented both a perspective analysis of EF-14 data that shows the use of TTFields therapy with temozolomide did not adversely affect newly diagnosed GBM patients' quality of life, cognitive and functional capabilities, or their ability to perform daily activities.

And a post-hoc analysis of EF-14 trial data that shows patients who continue TTFields therapy in combination with chemotherapy, including bevacizumab, at first recurrence, lived longer than patients who received only chemotherapy. In addition to our work in the clinic, we continue to publish pre-clinical research to further advance the understanding of TTFields anti-mitotic mechanism of action.

In summary, I am proud of and inspired by NovoCure's accomplishments in 2015. We have an ambitious agenda for 2016, and look forward to extending our consistent track record of successful execution.

I will now turn the call over to Asaf, who will provide additional details on our commercial results in Q4 2015.

Thank you, Bill.

As mentioned, we received FDA approval of Optune in combination with temozolomide for treatment of newly diagnosed GBM on October 5, 2015, just three business days into the fourth quarter. Upon receiving the FDA approval, our commercial team immediately started executing our commercial launch plan with a focus on reaching newly diagnosed GBM patients and prescribers. With a simple, clear message, we now have the proof of extending overall survival in newly diagnosed GBM.

We have been working to (inaudible) with this terrible disease, we operate and will continue to operate with extensive agencies to get our therapy to patients. I'm extremely proud of our performance last quarter, and I am pleased to see this momentum continue in 2016.

557 prescriptions were written in the fourth quarter of 2015, representing 109% growth comparing to the same period in 2014. This growth was largely achieved due to the peer review publication of the EF-14 trial data in JAMA on December 15, 2015. These matters includes two prescriptions from Japan not included in the preliminary results released in January.

The United States remains our largest currently active commercial market, with 499 prescriptions written in the fourth quarter of 2015, representing 102% growth compared to the same period in 2014. We estimate that approximately 9,300 patients a year are handed that prescription with options, based on the incident rate of disease progression and medical eligibility. With a 2015 prescription fill rate of 73%, our 499 prescriptions in Q4 represent a penetration rate for filling prescriptions of more than 15% in the United States for the treatment (inaudible) patients during the first quarter of options for the treatment on newly diagnosed GBM.

We see this commercial momentum continue early 2016, with a year-to-date penetration rate of more than 20% in the United States. A full [access] will be provided on Q1 earnings call in early May.

We believe that the majority of the recurring GBM cases are treated and managed by the approximately 150 to 200 new oncologists, in larger (inaudible). And before our FDA approval for newly diagnosed GBM, our sales team focused their effort on these new oncologists. We believe the newly diagnosed GBM patients are largely treated in the non-epidemic community-based practice where the recreational oncologists and medical oncologists, in addition to all in place of the new oncologists, often play a key role in the treatment decision.

As of December 31, 2015, we have certified 244 centers in the United States, more than half of these centers are community-based practices. As of the end of February 2016, we had more than 300 certified centers in the United States.

Optune treatment is now available in 48 of the 50 United States and District of Columbia. At the end of 2015, we have 31 colleagues in our US sales force, compared to 14 colleagues at the end of 2014. This sales force expansion is critical to ensure we have coverage both in the epidemic and at the community setting, and the core specialties that treat GBM.

We believe that the time we spend reaching out to the physicians to share GBM clinical data and support the education process is critical to establishing durable market penetration. We expect to further expand our sales force size as required. We often get asked about concentration of prescriptions by physicians, while these are not metric we plan to have this on an ongoing basis.

I want to provide some context and how quickly we are beginning to see our prescriber base diversify as we move into newly diagnosed GBM settings. More than 200 unique US prescribers wrote prescriptions for Optune therapy in the fourth quarter of 2015, including more than 60 first-time prescribers.

The portion of Optune prescriptions written for patients with newly diagnosed GBM was more than 35% in the fourth quarter of 2015. Our near-term focus is on commercial execution. Our [sales colleagues] are committed to reach target prescribers who see GBM patients on a regular basis. And once engaged with these clinics, to deliver a strong, clear message on the benefit of Optune in newly diagnosed GBM, and the ease with which they can incorporate Optune in their clinical practice.

We know this is important to you, but we also recognize at the core of our corporate culture that is the most important to patients. We believe we have the focus and the urgency needed to get the job done, and I look forward to updating everyone on our continued progress in the first quarter on our next call.

With that I will hand it over to Wilco.

Thank you, Asaf, and good evening, everyone. Before I delve into the financial results, I'm going to spend a few minutes on our key operating statistics. Asaf has already run through the prescription volume detail, so I will start with active patients.

There were 605 active patients on Optune therapy at December 31, 2015, reflecting 169% year-over-year growth. 529 of the active patients were in the United States, 74 were in Europe, primarily Germany, and 2 were in Japan. Continue to see active patient growth in the first quarter, and recently crossed the 700 active patient threshold.

We bill a single monthly fee at the start of each month of therapy for each active patient. The monthly charge for Optune is $21,000 in the United States, and EUR21,000 in the European Union.

For the year ended December 31, 2015, gross billings increased to $110.8 million, compared to $45.8 million for the same period in 2014, representing 142% growth. We continue to have productive dialogue with commercial health plan administrators to secure positive coverage policies and contracted rates for Optune therapy, facilitated by the recent publication of EF-14 data in JAMA.

With the recent issuance of positive coverage decision by Anthem, health plans covering more than 97 million Americans now provide positive coverage of Optune. This represents approximately 56% of commercially insured lives in the United States.

In the United States, we received total cash payments, net of indirect taxes, of $31 million during the 12 months ended December 31, 2015. These cash payments represent an average of approximately $14,000 per charged month in the United States. The difference between billed and paid amounts consists of indirect taxes, disputed underpayments, patient financial assistance, charitable care, and discounts.

Generally, NovoCure's average time to collect on billed charges in 2015 was between four and five months. This cash payment metric does not include our experience with patients covered by the Medicare fee-for-service program, as we have not received material payments from that program, any invoices remain open as we appeal the coverage details. In 2015, the percentage of our US active patient population who are beneficiaries of the Medicare fee-for-service program range from 20% to 25%.

As a reminder, for US GAAP, we currently recognize revenue when cash is collected. Cost of revenues reflects costs incurred for patients on Optune therapy in the period. Gross margin, as a percentage of revenue, is negatively affected by timing of revenue recognition based on cash collections, which often results in costs being incurred in one period that relate to revenues recognized in a later period.

Net revenues for the fourth quarter were $12.4 million, an increase of 226% versus prior-year quarter. This brings our full-year revenue to $33.1 million, an increase of 114% versus 2014. The growth in 2015 was driven by increased demand for Optune therapy after the initial presentation of EF-14 trial results in November 2014, and by sales and marketing efforts in newly diagnosed GBM following FDA approval in October 2015.

2015 cost of revenues were $20.6 million, an increase of 105% versus 2014. The increase was primarily driven by the increase in active patients, partially offset by, amongst others, the per unit transducer array cost reduction due to implementation of an automated transducer array production line. Again, gross margin as a percentage of revenue is affected by timing of revenue recognition based on cash collection.

2015 research, development and clinical trial expenses were $43.7 million compared to $40.4 million in 2014. The increase was primarily driven by an increase in clinical trial expenses required to support our five ongoing clinical trials and an increase in personnel costs. Ongoing R&D costs will continue to be impacted by the number of clinical trials, particularly phase 3 pivotal trials open in any one period.

2015 sales and marketing expenses were $38.9 million, compared to $21.2 million in 2014. The increase was primarily driven by an increase in marketing expenses to support the launch of Optune for the treatment of newly diagnosed GBM and an increase in personnel costs. Our fourth-quarter sales and marketing expenses reflect the level of investment we anticipate will continue in 2016, as we work to establish Optune as the standard of care for glioblastoma.

2015 G&A expenses were $33.9 million, compared to $24.1 million in 2014. The increase was primarily driven by an increase in personnel costs to support the growth of our business, an increase in legal services, facilities and costs associated with preparing for the IPO, and professional services related to our SAP ERP system. 2015 personnel expenses included $11.9 million non-cash share-based compensation costs. This is an increase of $7.3 million versus 2014.

Our balance sheet remains strong. As of December 31, 2015, we had $269.4 million in cash, cash equivalents and short-term investments. Our 2015 cash burn from operating activities, purchases of PP&E and field equipment was $110 million.

With that, I will now turn it back over to Bill to provide a quick update on our clinical progress and key takeaways.

Thank you, Wilco. As I mentioned earlier, I want to spend a moment on the recent presentation of the first cohort of PANOVA phase 2 pilot trial data.

The first cohort of this prospective single-arm study included 20 patients with advanced pancreatic cancer whose tumors could not be removed surgically, and who had not received chemotherapy or radiation therapy prior to the clinical trial. The primary endpoint measured the incidence and severity of treatment-related adverse events.

As a result of TTFields therapy, 10 patients experienced treatable contact dermatitis. No serious adverse events related to the TTFields were reported. PANOVA patients who received TTFields therapy with first-line gemcitabine experienced a median progression-free survival of 8.3 months, a median overall survival of 14.9 months, and a median one-year survival of 55%.

A phase 3 study of the efficacy and safety of nab-paclitaxel plus gemcitabine, compared with gemcitabine alone, in patients with advanced pancreatic cancer, published in the October 2013 New England Journal of Medicine, showed that patients who received gemcitabine alone experienced a median progression-free survival 3.7 months, a median overall survival of 6.7 months, and a median one-year survival of 22%.

Progression-free survival and overall survival of patients treated with TTFields combined with gemcitabine were more than double those of the gemcitabine-treated historical controls. 30% of the evaluable tumors had partial responses, compared to 7% with the gemcitabine alone historical controls. Another 30% had stable disease.

The PANOVA trial includes a second cohort, testing TTFields plus gemcitabine and nab-paclitaxel in an additional 20 patients. While we have not specifically performed pre-clinical studies regarding the combination of TTFields with nab-paclitaxel, pre-clinical studies using TTFields have demonstrated synergistic benefits when used in combination with taxane-based chemotherapies. The presence of TTFields was shown in these pre-clinical studies to increase cancer cell sensitivity to taxane-based chemotherapies by more than 1,250 times.

Given these first cohort results and the synergistic effects shown in pre-clinical models when TTFields therapy is combined with taxane-based chemotherapies, we are even more optimistic about what the second cohort will show when nab-paclitaxel is added to the treatment regime. Based on the positive data shown in the first cohort, we've accelerated our planning of a phase 3 pivotal trial in pancreatic cancer. We will provide additional updates on future calls.

Before we open the call for questions, I want to spend a few final moments on our 2016 milestones. As the Asaf mentioned, 2016 will be a year focused on commercial execution. We anticipate that NCCN guidelines will be updated in 2016 to include Optune for the treatment of newly diagnosed GBM.

We believe that both the recent JAMA publication and the anticipated NCCN guidelines update will provide us with the tools needed to increase the number of commercially insured lives with positive coverage of Optune. And we plan to announce significant updates in coverage as they occur.

On the clinical front, we anticipate we will enroll the first patient for both our METIS trial in brain metastases stemming from non-small cell lung cancer and our LUNAR trial in lung cancer. We anticipate last patient enrollment in the second cohort of the PANOVA trial in pancreatic cancer, and with a minimum of six months follow up, expect data to follow in 2017. We do not anticipate waiting for the second cohort data to finalize our plans for a phase 3 pivotal trial in pancreatic cancer.

On the regulatory front, we believe the FDA will approve our second-generation Optune system this year, and pending FDA approval, plan to launch the smaller, lighter second-generation Optune in the US in the third quarter. We also believe we will receive Japanese approval for Optune for the treatment of newly diagnosed GBM by the end of the year.

We remain explicitly focused on delivering Optune to patients with newly diagnosed GBM, and on developing tumor treating fields therapy to treat patients with a variety of other solid tumors. This is our promise both to patients, to the medical community, and to you.

With that, I would like to thank everyone for their time this evening and for their interest in NovoCure. Now I will turn it back to Ashley for the Q&A.

Thank you, Bill, Asaf, and Wilco for the commentary. Operator, can we please poll for questions?

(Operator Instructions)

Mark Schoenebaum with Evercore ISI.

Thanks a lot for taking my questions, I really appreciate it. I have seven, but I promise that they're simple. And I will ask them one at a time, so I don't want to stress Ashley out too much. So number one, will you release a fourth-quarter P&L in your 10-Q?

Mark, hello. This is Wilco, with the 10-K, of course, we plan to file this shortly. It's not our intent to file a specific fourth-quarter P&L. I think most of the important metrics have been included in our press release, and are also discussed earlier today. So it is our intent to file a full-year P&L for the all three years soon.

Okay. Then could you please tell us what gross billings were in the 4Q, what SG&A was in the 4Q and what R&D was in the 4Q?

I'll be happy to do that. Gross billings for the full year, as I mentioned, was --

No, in the 4Q. In the 4Q please.

I know, I'm just bridging into the 4Q numbers. Because we mentioned it in the earnings call, the gross billings for the full year was $110.8 million. Fourth-quarter gross billings were approximately $34.5 million.

SG&A and R&D for the quarter?

Hang on one second.

So I didn't mean to ask tough ones.

Why don't you go to question number two and I will find you (multiple speakers).

Okay, sure. No problem at all. What was your cash burn in the 4Q?

We don't guide on the cash burn in the 4Q.

I'm not asking for guidance, I'm asking for just --

Full-year cash burn was $110 million, Mark.

Okay. The SG&A in the quarter was higher than we had in our model, and that would put you at an annualized rate of about $100 million. I think we are at about $100 million for all of 2016, are you generally comfortable with that?

Yes, we're generally comfortable with that. The SG&A was higher in the fourth quarter. There were essentially two components contributing to that, one was the sales and marketing activities, as you know, we launched a campaign, post the -- in the newly diagnosed GBM approval, so we saw some increase to our marketing and sales expenses.

I will answer your question number one shortly. The second component was, this was before the Biotech market pressure we saw on -- pressure is a big word but decrease. So we saw our stock-based non-cash equity comp go up a bit in the second half, predominantly in the fourth quarter.

Okay. But you're comfortable with the $100 million as a rough guesstimate for 2016?

We are, and our cash burn in the fourth quarter from top of my head was approximately $19 million.

Okay. Could you give us the first-line filled TRxs in the quarter? I'm getting to about 150, if I take your total reported TRxs times 35% to 40% front line times 73% fill rate, I get to around 150. Is that roughly speaking correct for the 4Q, 150 first-line filled TRxs, or am I totally missing something? I don't really do math much, Vlad does most of my math.

I'm trying to follow it very quickly. So it's very difficult to say. (Inaudible), but it sounds about right, Mark.

Okay. And then finally, some of the prepared remarks were hard to understand. You gave some penetration numbers, I was just wondering if you could repeat those and what those numbers were, what they represented? Then I have one more question and I will end the pain.

So we ended the year with about 15% share, that is basically (inaudible) as a percentage of the eligible patient population. Which as you recall in the States is about 9,300, off of 12,500 incidents, we deduct from that patients that are not eligible for treatment.

So we believe about 9,300 patients are eligible for treatment leading to -- with the script and fill rate to a market share of about 15% at the end of the year. We showed continued growth in scripts in January, so at the beginning of the year, at the end of January, we believe our market share as calculated that way is about 20%.

Sorry, that is --?

(Inaudible) as a percentage of the 9,300.

Okay. So it's front-line share?

Well, we see the 9,300 as the overall GBM market, so it is not necessarily exclusively front-line, although we've seen a pickup in front line, as you can imagine, after the approval and the start of the brand --

You said that you had surpassed 700 active patients. I assume that is as of today or yesterday or recently?

Recently. (Multiple speakers) we ended the year with 605, recently we broke 700. We think it's, of course, and important subsequent milestone.

Okay. So you added -- so since the end of the year, you've added around 100, like 100, 120 TRx it sounds like?

Well, no. Of course we have the ad spare treatments starts, we also have the discontinuation. So it's always the number of scripts, there's the time to fill, there's the fill rate, there's the drop offs, overall in terms of run rate, of revenue, right now 700 is the number to base it off of.

Okay. Thank you so much for all the transparency, guys, I really appreciate you taking all my questions. Sorry, I didn't mean to be annoying. Thank you very much.

It's fine, Mark. And again, I just want to underline the last point that, that is active patients on therapy.

Thank you very much.

Larry Biegelsen with Wells Fargo.

Good afternoon, thanks for taking the questions. So let me start with a couple. So the US year-to-date cash payments per month, it looks like it declined to about $14,000, from $14,500 last quarter, which suggests that the payment rate in the Q4 was relatively low, by our math, maybe $12,500.

Wilco, are we doing -- are we close? And if so, why the drop off, and how should we think about that in 2016?

We think the 14 handle is still the appropriate handle to use. There are some mix effects, there are some timing effects. So from time to time it may be a little bit more, a little bit less, but overall -- and perhaps we go a little bit too far in our disclosure, and we can't take that back. We think it's appropriate to give this on a quarterly basis, but we do believe that our history shows overall about $14,000, and that is where we expect to be going forward as well.

So we don't see this as a downward trend, we see this as the standard, plus or minus variability, around $14,000.

Okay. And the treatment duration looked like it went down to 4.5 months from 5.6 months or so last quarter. Is that just a function of a lot of new patients coming on, or is something else going on? And how should we think about 2016 on that metric as well?

I think it's difficult to calculate with the newly diagnosed promotion starting, and those patients coming on in the fourth quarter. And of course it hasn't matured through a treatment duration for that particular patient, the patient population. So I think it is more an arithmetic consequence of the way it is calculated than an indication that the treatment duration is reused, and it's, in fact, picking up with a higher proportion of newly diagnosed.

We believe the treatment duration will be higher.

So 2016 you think will be higher than 2017 -- 2015? I'm sorry.

We believe so.

And how much visibility do you guys have on the NCCN guidelines? I know there is a CNS panel for November 2016. I understand it could come before then. I'm just curious what is your visibility on the process? And I just had one more follow up.

So our main visibility is from our prescribers and from the field, and we -- the feedback that we get from the field with some of our prescribers are NCCN numbers as well. (Inaudible) believe that it's doing, the next meeting or the meeting after, we will get there. (Inaudible).

Larry, we cannot predict with certainty during which meeting because we obviously don't control the agenda of the meeting.

Okay, that's helpful. Lastly for me, so a bit of a long-winded question so please bear with me. But obviously Celldex has their second interim analysis for RINTEGA in March, and their product addresses about 25% to 30% of GBM patients.

And some docs we've spoken with have indicated they might not use Optune on top of RINTEGA because of added cost, the burden to the patient, and some uncertainty around whether Optune is additive. So how do you plan to ensure that a positive outcome for RINTEGA does not negatively impact adoption of Optune? Thanks for taking all my questions, guys.

I'm going to turn this one over to Eilon Kirson, but clearly, immunotherapy is a topic of interest, with respect to the specifics of Celldex, but also more broadly. We've demonstrated, over time, how well Optune works with chemotherapy, anti-angiogenic therapies, and of course we are focused on immunotherapy as well. Eilon, why don't you provide a little bit of an update with respect to our work in this area?

Sure, I'd be happy to. Thanks, Bill.

So this is actually a little bit of new information which we haven't shared before. As we've promised in previous meetings and have committed to looking at the effect of Tumor Treating Fields together with immune therapies, we have actually started a large project in pre-clinical research looking at combination of Tumor Treating Fields with immune therapies, and specifically we looked at PD1 inhibitors.

And we have some very interesting initial findings, showing first of all that Tumor Treating Fields do not adversely affect the immune cell infiltration into the tumor. So this potentially allows for a full immune response to be mounted against tumor cells using immune therapy in the presence of Tumor Treating Fields.

In addition to that, there is work that was presented from Tel Aviv Medical Center, where they applied Tumor Treating Fields to immune cells, to specifically CD4 cells, and looked at the functionality of these cells. And they found that there was no decrease in several of the major immune activity parameters, including secretion of anti-tumeral molecules, increased PD1 expression and exhaustion on the immune cells, and active degranulation. So all of these immune parameters are maintained in the presence of Tumor Treating Fields.

Finally, we looked at combination of Tumor Treating Fields together with specifically PD1 inhibitors in animal models. And so that tumor volumes were lower for the combination treatments of TTFields with PD1 inhibitors, significantly lower than either treatment alone.

So we feel a lot more comfortable today saying that what we've said before without the data just as a belief. But today, I think we have data to support the fact that Tumor Treating Fields will be able to used together with immune therapy, and that should actually I think make it much easier for prescribers when this data is published and presented. It will make it much easier for users to use TTFields together with immune therapies if they're approved.

Thanks for taking the questions, guys.

Cory Kasimov with JPMorgan.

Good afternoon. This is Morgan on for Cory. Thanks for taking the questions.

I just had a couple. So you have had about as much time with the publication of the EF-14 data since approval as you did before without it. Can you compare and contrast the conversations you have had with both doctors and with payers since you have had that? What have you seen that's changed the most so far?

I think that before the publication we had (inaudible) that they were a true believer that prescribed Optune and was always behind it. I think after the publication, we start to see the physician that was skeptical about the treatment got the publication, and they realized and even told us that actually they truly believe in this type of support, the therapy. And we actually start to see -- those physicians start to prescribe. With payers, maybe I will ask Wilco to answer how we interact on payers.

I think we see the early signs of adoption -- of early signs, continued signs of adoption there as well. We just mentioned that a significant large payers in total cover about 97 million lives.

We see increased support for the efficacy of Optune, and we see increased interest in moving towards contracting as well. It's early stage, but hopefully it will continue and -- but we see very positive signs there.

In short, with anything new, peer review publication of clinical data is an important milestone. We identified it as such.

We were absolutely pleased with the JAMA publication. We are pleased with the conclusion, and we are extremely pleased with the response, both in the clinical community and in the payer community.

Okay, great. Thank you very much. And then just as a follow up to the last speaker's questions, those pre-clinical data with the combination of PD1 inhibitors, when should we expect to see presentation and/or publication of those?

So we can talk about it. We've included some of the preliminary data in the 10-K, which you'll see very shortly. And then we are looking for the appropriate venue for a presentation and publication. Eilon, maybe you can give a little more color on that.

Sure, I'd be happy to, Bill. First of all, some of the data has already been presented, as I mentioned previously, albeit not in a very central conference yet. This is the data out of the Tel Aviv Medical Center looking at the activity of the immune health under the effects under the effects of TTFields strength that there's no effect in their immune activation. The additional internal data has been submitted in abstract form to upcoming immune and oncology and immune oncology conferences, and we are waiting to see when the first venue will be available.

We're going to continue this effort. There will be a lot of data, no doubt, on Tumor Treating Fields and immunotherapies. And you will see the first presentations and publications this year.

Okay, great. Thanks.

David Nierengarten with Wedbush Securities.

Hello, this is [Deleve] sitting in for David. Just a few questions for you guys. Can you give a little color on what we should expect in terms of the growth in operating expenses for this year? And not sure if you mentioned this, but any update on the start time for the phase 3 studies in lung cancer and brain metastases?

I'll have Wilco give you the description of the OpEx, and then we'll talk about the phase 3.

Thanks. It is difficult give guidance. I don't think we're in a position to give guidance on operating expenses. We mentioned that the marketing efforts supporting the newly diagnosed launch will continue in 2016, so you would expect some higher expenses there in 2016, when you compare it to 2015, when we talk about the clinical trials which would affect the R&D expenses also. But those would be the two components that I think will influence or potentially influence operating expenses.

With respect to the phase 3 trials, I think we have not changed our stance that we expect the first patient in this year, for both the brain metastases and the non-small cell lung cancer phase 3 trials. I think what's new, it's based on the enthusiasm over the pancreatic phase 2 data that we are accelerating our phase 3 plans in that disease. And we would expect later this year to provide much more detail with respect to both the specific trial plans and the timing. But we are going to do that in a subsequent call this year.

Okay. And in terms of sales campaign, can you talk a little about any differences you are seeing between physicians in the community setting versus academic setting? Especially in terms of feedback or level of resistance?

Thank you for the question. So I think that we are very pleased with the doctrine in the community centers. Community centers, really focused on treating the patient and let's focus on treating the patient and also running clinical trials.

Fortunately, most of the newly diagnosed GBM patients come from the community. So all in all, I can see the massive shift between the academic center and 50% of the centers that we open out in the community, and we've put a lot of effort right now on the community. But all in all, the experience is very positive.

That's generally something I've said in many conversations with all of you over the last number of years, that Tumor Treating Fields is a brand new way to treat cancer. It was unexpected a decade ago, and we started in a position where no one knew what TTFields were and everyone had to learn about what we're doing.

Over that decade, we started with a cohort of enthusiasts, but most of the community was waiting for clinical data and peer review publication. I think in Q4, both in the academic setting and in the community setting we hit that tipping point.

With the FDA approval, with the JAMA publications, and ow with our ability to call on clinicians, both in the community and academic setting and discuss our results. Because again, prior to FDA approval, the enthusiasm was based on a 10-minute presentation at Snell in 2014. We are really able to go out and talk about what we can do for patients, and it is making all the difference, really in both settings.

Okay. Finally, any unique takeaways you are seeing from your marketing efforts in Europe? Are you finding doctors there are more or less receptive to Optune, and if there is any difference (inaudible) diagnosed versus recurrent setting use? Thanks.

I was talking with the end of your question, yes, there's a difference between newly diagnosed and recurrent. I think that the main focus is in Germany, that German's position mainly impressed from newly diagnosed data, and most of our patients to date in Europe are newly diagnosed patients. And with the JAMA publication and with the data, we see that the community in Germany and also in other countries in Europe, like Switzerland, when we put most of our effort right now in Germany and Switzerland, after the JAMA publication and the FDA approval, actually put -- I don't have the right number, but the majority of the patients in Europe, they are newly diagnosed patients and the expectancy is extremely good.

Gregg Gilbert with Deutsche Bank.

Thank you, I have a few. First, Bill, how are your discussions going with the government on Medicare reimbursement?

So the same factors that are allowing us to grow so quickly in the community are at play with the government. They specifically interested in the FDA approval for newly diagnosed GBM with the superiority claim, peer-review publications is very important for our discussions there.

We are in a completely different place, I would say than today, with the FDA approval for newly diagnosed and the JAMA publication, than we were previously with the approval for recurrent GBM with an equivalent indication. We now have significant claim on standard of care, and the best data in over a decade, and of course that makes a difference.

Any guess on when you will have an answer from the government?

Unfortunately, there are lot of things that we can provide an educated guess regarding. But predicting the government is not one of them. I can say that we are fully engaged, and that the discussions are constructive and positive, but I cannot predict the timing of the results.

Okay. Are we going to get any updates this year or in 2017 on the EF-14 population?

Eilon?

Sorry, I was coming off mute. Yes, we are expecting to have more follow-up data towards the end of this year or beginning of next year.

What I'll mention there is, of course, the clinical trial achieved its endpoint at the interim analysis. This is something that we always need to emphasize. This was pre-specified and the whole point of a pre-specified interim analysis has been when you hit those data with this high level of significance, and this is why it's so difficult to win at the interim, that your endpoints are hit, and of course that's why the FDA approved us.

For scientific interest, we will continue to follow the patient population and we'll continue to publish, as is the case with most oncology trials, as time goes on. But I just want to make sure that we are all clear that the endpoints have been hit on NV with this.

Okay. Clearly some physicians want to see the final data, but I guess we'll see that in --

That's my point. They have the final data already, this will be ongoing monitoring of the population.

Okay. Lastly, Bill, the author of the recent neuro oncology editorial suggested that in light of skepticism in the field that he sees that a confirmatory trial in an academic center possibly with a sham device might be helpful. I suspect that you will say that is not practical or that you don't plan to do it. Maybe you could offer some thoughts on that, and anything else you care to say about the editorial, which I thought was reasonably balanced but not overwhelmingly positive?

I'm going to turn this over to Eilon to talk specifically about the issue that you raised. I would say that before I do that these editorials are often written in an elliptical academic way, and this one was no different.

The key conclusions, however, that the author reached, again, you have to go look for them, include the fact that our primary endpoint was progression-free survival that was evaluated radiographically by a blinded third party. And there is no theory or hypothesis or data that suggests that any placebo affects the progression of brain tumors.

With that, I'm going to let Eilon go through the answer to your question in a little more detail.

But even before that, I just would like to mention that it is interesting to note that the physician that wrote that material, the German physician, yesterday put newly diagnosed patients he prescribed it to one of the patients.

Thank you.

I would be happy to give a little more color regarding this review article. First of all, all of the statements that were made there were basically the repetitions of things we have seen before. There is no new statement. It's this man's opinion. He is a respectable key opinion leader in Germany, and does have some influence, and so it is important to look at it and to treat this seriously, and we do.

The basic premise he uses in his review is the fact that there could be a confounding factor for the lack of a sham device. And I think we've answered this before quite clearly, it is very well accepted that objective endpoints like a blinded radiology review and overall survival are not affected by placebo effects in oncology, and there's a lot of literature about this.

The question of whether enhanced supportive care on the treatment arm can affect survival is one which comes out of fields of oncology where supportive care leads to symptom relief. Like in lung cancer, where you can give extreme supportive care, if it is oxygen, if it is extreme -- even to the level of incubation even, and physical therapy for breathing. So these are aspects where intense therapy can improve patient outcomes.

In GBM, that's not the case. We don't know how to massage the brain to live longer, and so I don't believe that there truly can be a supportive care issue which increases survival in GBM patients. So I think that is the main point which keeps coming back by people who don't want to accept the results.

The second point is the fact that this does not represent the entire GBM population, and I don't think there is any question about that. Patients who are rapidly progresses through surgery and radiation therapy are not eligible for Optune and we discount them from our eligible population up front.

That being said, it does not mean that the therapy should not fully available to all patients who did not progress rapidly through radiation therapy. That being said, it is really -- the review, itself, I think raises some interesting points. But at the end of the day, the real important thing is the outcome of the patients and that fact that patients who receive Optune live longer, and I think physicians, regardless of geography, are beginning to see this over time.

I think going back to some of the thoughts on the -- in the community and even in the academic centers, the community is moving past this completely.

Mike King with JMP Securities.

Thanks for squeezing me in, I know this has been a long call. Can you hear me okay?

Yes.

So most of my questions are follow ups on prior topics, but I just wanted to start with a clinical question and then maybe move to some commercial metrics. On pancreatic, I know you want to update us at a later point in time, I just wonder if you could perhaps give us some sense of whether you have opened discussions about phase 3 protocol with the agency in pancreatic, and if you could give us any sense of whether you would pursue an SPA route for pancreatic?

Again, I appreciate the question, but this is a topic that we are going to postpone for later in the year. I always hate to not answer something, but you are going to learn a lot about this a little later on.

Fair enough. And then to discuss the physician audience and the patient population. I'm just wondering, do you guys have a longer-term mix in mind as far as where you approach your ideal mix between tertiary care centers versus the community?

And I think that most people know it is 80/20 community to tertiary care. But is that realistic in -- especially in the GBM setting, or it's something approximating that be a good outcome for you?

I think in GBM, our understanding and data suggests that it is about 40% academic, 60% community. So it's skewed a little bit more to academic centers in GBM. Our early focus in recurrent is closer to 100% in the academic center, so that's where we were focused prior to October.

We continue to focus there, and we continue to get great reception. But we are dramatically expanding now to cover that other 60%. We've said we expect to be the standard of care in the US and ultimately reach high shares of this population, and we would expect to have proportional representation in both settings.

Okay, fair enough. And do you believe your sales force is at the current optimal size for that, or would you have to continue grow the sales force to reach that metric?

As we mentioned in the last couple [fronts], we are planning to increase our sales force, but it's going to be part of our planned budget for 2016.

Okay, fair enough. And then, finally on duration of -- well I'm curious about what your expectations would be for duration of therapy for front line versus recurrent? And over time, I wonder if the EF-14 data will have any information about patients that are treated through progression and what their outcomes would look like? Thank you very much.

So I'll answer the first question, and then maybe Eilon can talk about treatment through progression. But we've published previously that in the recurrent setting, our duration of therapy is between four and five months, and that's based on significant real-world experience. That's where that number comes from.

In the case of newly diagnosed, again, because we just received the approval, we do not have a real-world community number yet. So we are relying on the clinical trials data in order to provide an estimate. And then the EF-14 clinical trials, the mean duration of therapy was about 9 months.

So we see it as about doubling, and as we get the real-world experience, of course we will report that out. With respect now to your next question, Eilon, maybe you can provide a little bit of color.

Actually results of overall survival in patients who progressed on EF-14 and received Tumor Treating Fields with second-line chemotherapy compared to chemotherapy alone, were recently published in November 2015 at the Society of Neuro Oncology meeting. There was a presentation there by [Kate Suree Ibel], and they showed a significant extension in overall survival in patients who continued Tumor Treating Fields past progression, together with second-line chemo, compared to chemo alone.

And in a subset of those patients, which looked at bevacizumab alone, which was the majority of second-line therapies mainly in the US. The addition of Tumor Treating Fields to bevacizumab actually also significantly increased overall survival compared to bevacizumab alone. And these data are available publicly already.

Thanks a lot.

Jon Eckard with Barclays.

This is Brian on for Jon. Thanks for taking the question. Most of my questions have been asked already, I just had one on reimbursement. With the recent reimbursement coming in limited to the newly diagnosed setting, how should we think of future onboarding with respect to reimbursement in regards to the newly diagnosed and recurrent setting?

Sure, so thanks for that question because I appreciate the opportunity to clear this up. Let me take one step back, which is to say that, first of all, my comments now are focused on the 75% to 80% of the GBM patients in the US who are covered by private insurance. I will just remind everyone where we are with Medicare fee for service at end. But for the private insurance patients, over the years that we have been commercial in recurrent, and it has not changed of course with newly diagnosed, we have the vast majority of these patients have been covered by private insurance.

On day one with any new therapy, there is of course no coverage policies, and so the patients are approved based on medical necessity on a named basis. Basically patient by patient, and that is where we had this great track record over time. What then happens is it's this experience. The health plans realize that these patients are going to be covered under their plans, and so they realize that it is not worth their time, it's not worth our time, and they moved towards positive coverage decisions and then negotiated payments.

That is, of course, bolstered by more data, peer-reviewed publication goal, the sorts of things that we have brought to the marketplace in Q4. So what we are seeing now is really a movement from all of these patients being covered on a named-patient basis for those patients being covered under defined coverage plans. What we are not seeing and what you should not interpret from the specific wording of these plans that somehow patients are going to be yanked off therapy at some point when they go off chemotherapy, that has never been the case, and you should not anticipate that being the case going forward.

Sure, understood. Thank you very much.

I think that's the queue, the line of questions. I want to thank, again, everybody very much for your time today. This is a great time for NovoCure, and we appreciate your focus on our activities.

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