Novocure Ltd (NVCR) 2016 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Novocure first-quarter 2016 earnings results conference call.

(Operator Instructions)

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

Thank you. Good afternoon, everyone, and thank you for joining us to review Novocure's first-quarter 2016 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. Slides supporting today's prepared marks can be viewed on our homepage, www.Novocure.com by clicking on the links for 2016 first-quarter financial results, located in the events and presentation section and the lower middle column of the investor's page.

Before we start, I'd 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 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 prepared remarks and then we will move to a question-and-answer session. With that, I'll now turn the call over to Bill Doyle.

Thank you, Ashley, and good afternoon, everyone. During my remarks today, I will are briefly recap highlights from the quarter related to our two strategic priorities, the launch of Optune for the treatment of newly diagnosed GBM and the development of Tumor Treating Fields therapy for the treatment of additional solid tumors.

Starting with the Optune launch, commercial adoption of Optune was strong in Q1 2016. We saw significant growth in prescriptions and active patients compared to both Q1 2015 and the prior quarter. Wilco will take you through the financials a bit later in the call, but first I'll spend a few minutes reviewing our non-financial metrics.

755 Optune prescriptions were received in the first quarter of 2016, representing 73% growth compared to the first quarter 2015 and 36% growth compared to Q4 2015. The first presentation of our EF-14 Phase 3 superiority data in newly diagnosed GBM occurred at the Society of Neuro-Oncology Annual Meeting in November 2014. Q1 2016 was the first quarter in which the year-over-year growth included trends from a base quarter occurring after the EF-14 superiority data was disclosed to the oncology community.

I believe we will continue to see year-over-year growth in prescriptions throughout 2016 as we've begin to promote Optune for the treatment of newly diagnosed GBM since our FDA approval in October 2015. The United States remains our largest commercial market. 684 prescriptions where recorded in the US in the first quarter of 2016, an increase of 273 prescriptions, or 66%, versus the same period in 2015.

We estimate that approximate 9,300 GBM patients per year are candidates for treatment with Optune in the US. Based on the incidents, the rate of disease progression and medical eligibility with a global trailing 12-month prescription fill rate of 75%, our 684 prescriptions in Q1 represent an estimated penetration rate for filled prescriptions of approximately 22% of the eligible US GBM patient population.

In addition, we recorded 71 prescriptions and EMEA markets during the first quarter of 2016, an increase of 45 prescriptions, or 173% growth, versus the same period in 2015. Germany remains our largest market outside the United States, with more than 80% of our EMEA prescription volume. Our commercial efforts in Japan have shifted from obtaining defined reimbursement of Optune for recurrent GBM to obtaining approval and defined reimbursement of Optune for newly diagnosed GBM and as such, we did not have any prescriptions during the first quarter in Japan.

While these are not metrics we plan to update on an ongoing basis, I want to take moment to provide some color on results of our efforts to expand our prescriber base. Globally, 340 unique prescribers, including more than 290 prescribers in the United States, wrote prescriptions for Optune therapy during the first quarter of 2016. This included 121 prescribers who wrote a prescription for Optune for the first time during the first quarter.

An increasing number of prescriptions are coming from medical oncologists and radiation oncologists, consistent with our expectations as we transition our patient base from recurrent to newly diagnosed GBM where treatment is often initiated in the community setting. More than 50% of Optune prescriptions recorded in the first quarter of 2016 where for patients with newly diagnosed GBM.

There where 797 active patients on Optune therapy as of March 31, 2016, an increase of 425 patients, or 114%, compared to March 31, 2015 and an increase of 192 patients, or 32%, compared to December 31, 2015. The increase in active patients was driven both by prescription growth and by an increase in the percentage of newly diagnosed GBM patients who started Optune in prior periods.

Before I turn the call over to Asaf and Wilco, I'd like to spend a few minutes on our second strategic priority, our clinical pipeline. Eilon is also on the call, as Ashley mentioned, and can take any detailed questions during the Q&A.

We are currently enrolling patients in four Phase 2 pilot trials testing the safety and preliminary efficacy of TTFields in pancreatic cancer, ovarian cancer, mesothelioma and in brain metastases. Results from the first cohort of our PANOVA trial in patients with advanced pancreatic cancer were presented at ASCO GI in January, suggesting TTFields therapy plus chemotherapy may be safe as first-line treatment and improve survival of patients with this difficult-to-treat disease.

Progression free and overall survivals of patients treated with TTFields combined with gemcitabine were more than double those of gemcitabine-treated historical controls. Of the 19 of 20 evaluable tumors, 30% had partial responses and another 30% of the study patients had stable disease. Following the approval of nab-paclitaxel for the treatment of advanced pancreatic cancer, we expanded our PANOVA study to include 20 additional advanced pancreatic cancer patients treated with TTFields in combination with nab-paclitaxel and gemcitabine.

We expect to finish enrollment of the second cohort of the PANOVA trial in 2016. We also expect to finish enrollment of the INNOVATE trial studying TTFields in combination with weekly paclitaxel for patients with recurrent ovarian cancer in 2016. Within expected six-month follow-up for both trials, we anticipate Phase 2 pilot data for each of these trials will be available for presentation in 2017.

In December 2015, we submitted a pre-submission package to the FDA for discussion and feedback to open METIS, a Phase 3 pivotal trial for patients with brain metastases. An IDE application was submitted in April 2016 and we hope to open the trial in mid-2016, subject to final FDA approval of the IDE.

The open-label randomized study will test the effectiveness of TTFields following stereotactic radiosurgery compared to standard watchful waiting alone in patients with brain metastases stemming from non-small cell lung cancer. We also hope to open LUNAR, a Phase 3 pivotal trial in non-small cell lung cancer in 2016. Following the results of our pre-clinical search of TTFields in combination with PD-1 inhibitors, we are reviewing the LUNAR protocol design to ensure that we are able to capitalize on our potential synergies with taxane-based chemotherapies and our potential additivity with PD-1 inhibitors.

The year is off to a good start, with momentum in the commercial adoption of Optune and with the presentation of pancreatic clinical data in January. Our focus for the year will continue to be on increasing the adoption the of Optune for newly diagnosed GBM in the United States and Germany, expanding the reimbursement coverage for Optune globally and advancing the Tumor Treating Fields clinical pipeline in additional solid tumor cancers.

I'll now hand the call over to Asaf for a few more additional words on the quarter.

Thank you, Bill. While it's very early, I am pleased with the long performance of Optune for treatment of newly diagnosed GBM. We continue to put significant focus and resources behind Optune. At the end of the quarter, we had 38 sales reps in the field in the US, presenting Optune EF-14 superiority data to physicians.

We continue to hire and expand the sales team to increase reach and frequency to high-volume oncologists. We have also created a team of thought-leader liaisons focused on on-label support [indication].

The thought-leader liaisons are responsible for key opinion leader, an advocacy group engagement. They work to increase the support for TTFields within the scientific community as a superior treatment in combination with temozolomide for newly diagnosed GBM versus temozolomide alone. Support is growing. Our EF-14 results were recently recognized at the Clinical Cancer Advances by ASCO.

In the US we believe Clinical Practice Guidelines play a key role in the treatment decision, especially in the community setting. We believe that Optune will be added to the NCCN practice guidelines for the treatment of newly diagnosed GBM in 2016. If this occurs, we expect that this will be a catalyst for increased adoption of Optune.

The rollout in Neuro for our second-generation Optune system is complete. The devise is lighter, smaller and quieter than our original system. Patient feedback has been extremely positive.

We filed a PMA supplement application with the FDA for second-generation Optune in December 2015. In April, we responded to questions from the FDA. Assuming we do not receive additional questions or comments from the FDA, we hope to begin marketing our second-generation Optune system in the US in the third quarter of this year.

We continue to build our team. At the end of the quarter, we added more than 350 employees around the world. We are breeding a global business. In everything we do, we are patient forward.

I will now pass the call to Wilco to review our financial results.

Thank you, Asaf, and good evening, everyone. Before I jump into the financial results, I'm going to spend a few minutes on our key operating statistics and reimbursement metrics.

Prescriptions are a leading indicator of demand. We receive each prescription directly from prescribers and, as such, have visibility into all prescriptions written, regardless of whether or not the patient ultimately starts Optune therapy. The confirmation of prescriptions to new patients is written by the prescription fill rate and the time to fill a prescription.

The increase or decrease in active patients in any given period reflects the number of new patients less the number of patients discontinuing therapy. The rate of patients discontinuing therapy is determined by the treatment duration for patients starting therapy in prior periods.

Active patients are a leading indicator of future collections. We bill a single, monthly fee per month of therapy for each active patient.

For the three months ended March 31, 2016, gross billings increased to $45.5 million compared to $20.8 million for the same period in 2015, representing 118% growth and aligning with our growth in active patients. Gross billings represent total charges that are established list prices for providing Optune to a patient before any deductions are applied. The monthly charge for Optune is $21,000 in the United States and EUR21,000 in the European Union.

For the 12 months ended March 31, 2016, the average cash payment received was more than $14,000 per charged month in the United States. The difference between billed and paid amounts consists of patient financial assistance, charitable care, discounts, disputed underpayments and indirect taxes. Novocure's average time to collect on billed charges ranges between four and five months in the United States.

Our time to collect reflects a wide distribution of payment times from payers. Contracted payers typically settle claims within 90 days. Payments from payers without defined payment rates typically settle after an extended process, which can be 180 days or more.

The payment amount and average time to collect metrics do not include our experience with patients covered by the Medicare fee-for-service program as we have not received material payments from that program. These invoices remain open as we appeal the coverage denials through the heavily backlogged administrative law judge-controlled proceeding.

The percentage of our US active patient population who are beneficiaries of the Medicare fee-for-service program range from 20% to 25% in recent quarters. This is consistent with the percentage we saw in the first quarter of 2016. The payment amount and average time to collect metrics also do not include our experience outside of the United States, as we do not yet have sufficient history with these payers to reliably report their payment patterns.

As we enter each new market, our commercial activities focus initially on establishing the required end-market infrastructure, certifying physicians to prescribe Optune and obtaining a defined reimbursement pathway. Once established, our commercial efforts turn to increasing adoption of Optune within that market.

We are currently pursuing defined coverage and pricing terms in Germany. At this time, we are able to bill healthcare providers in Germany for individual cases and each case is evaluated individually on its merits and under the payer's specific rules for such cases. The German market currently contributes a significant majority of our non-US cash collections.

In Switzerland, we recently filed our application to the Federal Office of Public Health to secure a defined reimbursement rate for Optune. We are not able to collect on claims in Switzerland prior to obtaining the [find] reimbursement.

In Japan Optune is approved for the treatment of recurring GBM and we have applied for approval of Optune to treat newly diagnosed GBM. We plan to apply for a government approved reimbursement rate upon receipt of the MHLW approval for newly diagnosed GBM. In the interim, patients may pay out of pocket for Optune.

We treated our first commercial patients in Japan in the fourth quarter of 2015 and the first quarter of 2016. However; no patients where receiving therapy as of March 31, 2016. Expanding reimbursement coverage of Optune in the United States remains a key focus. We continue to have a productive dialogue with commercial health plan administrators facilitated both by the December publication of EF-14 data in JAMA and by increasing prescription volume.

In the first quarter of 2016, an additional 63 million American lives gained coverage of Optune for the treatment of newly diagnosed and/or recurrent GBM through new policies with Anthem, Cigna, Humana and Regence Blue Cross Blue Shield, among others. Subsequent to the quarter end, positive coverage policies where issued by Group Health Cooperative Washington and Idaho and Blue Cross Blue Shield of Michigan. This brings the total number covered lives for Optune to more than 112 million in the United States as of May 1, 2016.

Now moving onto the financials, given that Optune represents a new treatment modality and the unique business model without historical comparison, US GAAP requires that we recognize revenue on a cash basis until we are able to build up sufficient history with each individual third-party payer to reliably estimate the individual payment patterns. As a result, revenue in the reported periods is a mixture of amounts collected for patients on Optune in the period and amounts collected for patients on Optune in prior periods.

First-quarter 2016 revenues increased to $13.1 million compared to $5.2 million for the same period in 2015, representing 151% growth. This growth was primarily driven by increased demand and adoption for Optune therapy at after FDA approval of Optune for the treatment of newly diagnosed GBM in October 2015. Revenues outside of United States exceeded $1 million for the second quarter in a row, reflecting the increasing scale of our global operations.

First-quarter 2016 cost of revenues increased to $8 million compared to $3.9 million for the same period in 2015, representing 105% growth. This was primarily driven by increased transducer array shipment costs resulting from more active Optune patients as well as increased personnel cost to establish infrastructure necessary to support an increasing volume of shipments to patients.

Cost of revenues reflected costs incurred for patients on Optune therapy in the period. Gross margin as a percentage of revenues 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.

Research, development and clinical trial expenses for the first quarter 2016 were $11.4 million compared to $9.9 million for the same period in 2015, representing growth of 15%. This growth was primarily due to increased personnel costs and increased expenses related to clinical education and investigator sponsored trials, partially offset by reduced expenses related to the development of our second-generation Optune system. Over time, we expect our R&D expenses to increase, driven primarily by the number of Phase 3 pivotal trials ongoing in any one quarter.

Sales and marketing expenses for the first quarter 2016 were $13.3 million compared to $6.4 million for the same period in 2015, representing growth of 109%. This growth was primarily due to increased personnel costs as well as increased marketing expenses to expand commercial operations in the United States and Germany and to establish commercial operations in Switzerland and Japan. We expect we will continue to invest in sales and marketing activities throughout 2016 to support the newly diagnosed GBM indications.

General and administrative expenses for the first period -- for the first quarter 2016 was $12.3 million compared to $7 million for the same period in 2015, representing growth of 76%. This growth was primarily due to increased personnel costs as well as increased expenses related to professional services and activities associated with being a public Company. We believe there is significant operating leverage within G&A expenses as the business grows.

Personnel costs for the first quarter 2016 included $5.5 million in non-cash share-based competition expenses compared to $1.8 million for the same period in 2015. Other non-cash expenses included $1.1 million for the depreciation of $600,000 of accrued interest related to our existing credit facility. Net losses for the first quarter 2016 were $35.4 million compared to $23.3 million for the same period in 2015.

Our balance sheet remains strong. As of March 31, 2016, we had $115.9 million in cash and cash equivalents and $119.8 million in short-term investments for a total balance of $235.8 million in cash, cash equivalents and short-term investments.

Our first-quarter net cash used in operating activities was $31 million. In addition, invested $2.8 million in PP&E and field equipment to support our commercial business. We believe our current cash and investment balances, along with the $75 million currently available under our credit facility, are sufficient to fund our operations for at least the next 12 months.

We remain committed to advancing TTFields in its approved indications as well as running a broad clinical development pipeline for additional indications. Depending on the ultimate pace of commercial adoption and the timing of our Phase 3 pivotal trials across multiple indications, we believe our current sources of liquidity should be sufficient to fund our operations through profitability.

With that, I would like to thank everyone for their time this evening and for the interest in Novocure. Operator, can we please poll for questions?

(Operator Instructions)

Tao Levy, Wedbush.

Great, thank you. Good afternoon. Maybe we could start with -- you give us some nice metrics there around the prescribers in the quarter. I was wondering if I could assess any description around repeat prescribers?

Can you state the question one more time? We're having a little trouble hearing you on our end of the phone, Tao.

Sorry about that. Is this better?

Yes, much better.

I was looking to see if you had a number of repeat prescribers?

We grow -- we basically certified over 100 (inaudible) this quarter and we are right now still in the process to grow the business and increase our footprint in the US. In general we do have a significant amount of prescribers which they are repeat prescribers.

Maybe average length of duration. Any numbers around that? If you look at -- again, I know it is a tough metric, but second quarter of last year for example, percent of patients that are still on therapy? Any sort of metric like that, that can give us a better understanding of how long patients are averaging on the therapy?

Yes, we see -- this is Wilco. We nothing that's inconsistent with what we shared with you before. The recurrent GBM patients are in line with what historically has been the trend in treatment duration. Newly diagnosed are in line with what we saw coming out of the EF-14 study. As we mentioned during the script, more than 50% of our scripts are now in the newly diagnosed indication. We think after the FDA approval and the JAMA publication, we are making great strides in shifting towards this newly diagnosed and helping patients earlier in their disease stage and hopefully with an NCCN upgrade, all three catalysts have been met and will drive for growth.

Just one last question. On the financial side, on the accounting side, at what point can you start accruing your revenues from some of the US-based insurance payers?

We can start accruing for revenue at the point in time where within a very narrow bandwidth with we can project with the actual collection is going to be on an almost per-claim basis. As I said during the script, we have a broad, we have a new treatment paradigm, we have a new business approach. It's relatively low volume business so it is very difficult to predict payment behavior with any statistical significance. That's basically the hurdle that we are taking. We believe we're now coverage significantly expanded with shifting focus over to contracting that will enable us to project it with significantly more accuracy and that should enable us to shift to accrual-based revenue recognition.

When does that take place? Is at the end of this year or next couple of quarters, next year?

It is difficult to project. We hope we can make the first step this year but whether that's going to be one of the immediate quarters or a later quarter, I'm not ready to go there yet. I think a few more things need to fall into the right place for us to be able to make that move.

Okay, great, thanks a lot.

Gregg Gilbert, Deutsche Bank.

Thanks. I have a few. First, have you be getting similar terms from payers as you have been adding payers to coverage? Do you have any updates on how the chats with the CMS for Medicare are going?

Those are two separate topics. Private payers, we basically see consistent behavior from what we saw in the past that shared with you were very high percentage of claims successfully honored after a long along appeal process. The appeal process is not the coverage universe expanding into this 112 million lives that I mentioned. We see some very positive development of there. I think the EF-14 data, the efficacy resulting from that is broadly accepted. The approval, the JAMA publication so we see very strong development there and overall claim history don't see a substantial shift either way.

We still think $14,000 in the United States is the right number to assume with respect to anticipated collection. With respect to Medicare making positive developments there also based, again, on the EF-14 data, the approval, the JAMA publication. It's less about efficacy. It is more about terms of coverage. We think NCCN guidelines will help with there as well, so a constructive dialogue. Unfortunately, it is still a dialogue and not conclusions yet and hopefully that will come soon.

Do you have the visibility on the timing for a NCCN guideline update?

I'm not sure we can talk on behalf of NCCN guidelines but I think one of their new guidelines is coming out relatively soon.

Then just two quick pipeline questions and I will get back in line. For LUNAR, does including taxanes make sense given where standard of care appears to be going? On pancreatic, when is the soonest you can envision getting Phase 3 going there, given your optimism in that?

Eilon, why don't you take both of those questions?

Sure, I would be happy to. Regarding LUNAR, first of all, with our new data about -- which suggests additivity of TTFields together with PD-1 inhibitors in pre-clinical models, we are looking to reassess the trial design. We do want to try to capitalize on both the taxane synergy which we are very, very hopeful of making a true clinical difference to patients and also, of course, take into consideration the issue of the shifting landscape in non-small cell lung cancer with the recent approvals PD-1 inhibitors in second-line setting. We are working right now to try to capitalize on both of these aspects in the trial design for LUNAR. Regarding PANOVA, if you could repeat the question, one second?

When is the soonest you can envision being in Phase 3 trials for pancreatic given your bullishness on what you've seen so far in pancreatic?

We're in very advanced stages of the discussions with key opinion leaders in pancreatic cancer to define the best trial design for Tumor Treating Fields in pancreatic cancer. We are not going to give an exact timing on this, but we are definitely expediting our efforts to move forward on the Phase 3 program.

Thank you.

Cory Kasimov with JPMorgan.

Good afternoon. This is Morgan on for Cory. I had a quick question as far as the new coverage wins you have the past several weeks and months, when should we expect those to come on live? And then I have a follow-up.

Sorry, Cory, I could hear most of it but not the last sentence. Would you mind repeating that?

Sure, sorry. This is Morgan on for Cory, by the way. I was just wondering with the number of commercial payers that you've been adding over the course of the last couple weeks and months when we should expect those to come online as far as fully working with them and how long will it take for them to get up and running?

I think these are -- sorry, Morgan, I thought that everyone announced as Cory, so I hope Cory or you don't mind that I'm mixing up the names. I think first of all, we're very pleased with these. Shortly following the approval and broad acceptance of newly diagnosed is an indication that needs to be covered, basically, when these coverage decisions are announced, the coverage is in place, with immediate effect, I should say.

Okay, great. Thank you. Are you planning to give out guidance at some point this year on the revenue?

No. I can give you a long answer but no, we don't think it makes a whole lot of sense. We think within this situation of recognizing revenue on a cash basis, we try to provide you with information that we think helps you in understand your long-term value proposition. We don't think it helps you a lot in anticipating what our collection within a quarter timeframe might or might not be.

Keep in mind, too, we are the earliest stages of a launch of a new cancer treatment paradigm. We are educating the community and the absorption of these paradigm-changing therapies tends to, over time, become standard of care. It tends to be very difficult to predict on a short-term basis exactly the trajectory that it will take.

Okay, great. Thanks.

Mark Schoenebaum, Evercore.

Hi, guys, thank you for taking my questions. It's actually [Vivad Nikovenka] on behalf of Mark Schoenebaum. I actual want to discuss the operating metrics has been reported and specifically how far back we need to go and look at the patient numbers on therapy reported versus revenue recognised in a specific quarter. Just want to be crystal clear about this four to five months delay between billings and revenue recognized in a quarter. Is it a fair statement to say that basically currently reported revenues are coming primarily from patients that where on recurrent (inaudible) and has been reported as new prescription back in July, August, September or we need to go even further back or maybe closer to the current period?

Yes, as I said -- this is Wilco, as I said during the introductory remarks, the average, as you said, is four to five months. There's a broad distribution around it. It's in fact more of a bimodal type of a distribution so the claims that we ultimately prevail in but we have to go through a long appeal process, take longer than 180 days for contracted lives which is still a smaller proportion of our active patient population. It is shorter than the 90 days. When you look at the four to five months, a very substantial portion of collection in the first quarter, which we report as revenue, as you know, comes from active patients from the third quarter.

Okay, so it is primarily third quarter. Thank you. Thank you so much. You also reported previously in the previous slide deck from March that as of end of Q4 over the last year, 35% of patients where first-life patients. I'm wondering if you have an updated figure for this quarter and if it is continued to grow from the 35%?

This is Wilco again. We mentioned in the script earlier that is slightly above 50% now so (multiple speakers) we made tremendous progress there and the first quarter in the adoption towards newly diagnosed.

The last question about the fill rate. The 75% fill rate reported over the last question is the number of the scripts filled? Doesn't also include maybe fee-for-service patients in the US so should we also took another 20% haircut from the 75% when are trying calculate (inaudible) 25%? What are the trends the fill rate? Is it going to go up?

The answer is yes, no, and none. Yes, Medicare is included in the 75% but the 75% is over the overall patient population, so don't get a 20% cut on the 75%. Every patient that is prescribed Optune therapy by their physician counts as part of this calculation, whether it is Medicare or not, so 75% of scripts received will be filled historically and we don't see substantial shift in that trend. It has been around 75% for a while.

But from those that have been filled, as of now we should exclude Medicare populations. Only 80% will be collected?

We do think Medicare eventually should pay us once they process (inaudible) sells. We would expect to see those claims collected. From a projection overall patient population, 20% to 25% is fee-for-service and overall population, 75% gets filled

And will be a current trend? Is the 75% you think it is going to be a larger next quarter, it's going saturate its growth?

No, it is fairly stable.

Okay. Thank you so much. Thank you for taking all my questions.

You're welcome.

Larry Biegelsen, Wells Fargo.

Hi, yes, it's Leah calling in for Larry. Thanks for taking my questions. I'll start with a couple on the pipeline, then I have a few more on the financials. In terms of pipeline, you mentioned that the second-generation Optune devise, you responded to some FDA questions on your application. Can you characterize those questions at all? What type of questions and the nature of those questions?

This was a standard question that we don't believe we will change the timeline of the second-generation launch.

Okay. You didn't have to do additional work to generate the answers?

No, actually we already --

Okay. Great. Then on the brain mets Phase 3 trial, you said the IDE went in, in April of this year, so just two questions on that. One, once the IDE is approved, what needs to be done before you can start enrolling patients? Number two, can you provide any color on physician interest in the trials this far and the type of training that might be needed to enroll those physicians in the trial?

Eilon?

I would be happy to take that. Yes, I can hear you very well. The steps that need to be taken after FDA approval, and FDA basically have a 30-day window to answer an IDE, and so we are expecting very soon to hear from FDA. Assuming they approve the IDE, the next step, of course, is IRB submissions and site initiation visits, which is standard operational clinical ops process. It is relatively quick and we are starting it in parallel while waiting for the FDA approval. We are expecting we will be able to start accruing patients very soon after the FDA approval.

Regarding physician interest, this is actually -- there is extreme interest, mainly in the radiation oncology field and with our commercial outreach to radiation oncologist now, I think most of them are very interested in joining the trial as well. I think we have a lot of traction in the radiation oncology field to perform this trial successfully.

Great. Thanks. Then just on the financial side, Wilco did I hear you correctly that you expect to move to accrual accounting some time this year?

I think I'd said I hoped. Without being specific on what quarter, I think largely depends on contracting. We want to make some further inroads into contracting and this will enable us to meet the requirements under GAAP.

Okay. Then as far as the gross billing number you talked, about the $45.5 million, is that based on the $21,000 device price? Or is that based on the $14,000?

It is, yes.

It's the $21,000. Okay.

Basically billed months in the quarter.

Okay. So if you look four to five months down the road, we should expect 75% to 80% of that collected, but for $14,000 rate in stead of the $21,000 rate?

Correct. $14,000 rate. (Multiple speakers) That is exactly the way at least we think about it, yes.

Okay. Thank you.

Again, I'd like to stipulate the $14,000 and I think I said -- I know I said it during the introductory remarks, the $14,000 reflects the commercial payment behavior in the States. It doesn't include Medicare.

Jon Eckert, Barclays.

Good afternoon. Thanks for taking the question. My first question was think I might have misheard something when you were talking about your cash and equivalents position and your runway for the cash. I think you said that together with short-term investments, I think it was $236 million in cash and equivalents then there was a comment about that supporting operation for the next 12 months. That seems quite conservative, so I'm not sure if I mixed up some numbers there. Could you just clarify that part of it for me?

Yes, this is Wilco. Thanks for asking me to clarify that. What we did not try to say is that we're going to burn through the $235 million in the next 12 months. What we wanted to indicate is that we believe our liquidity will get us at least through this next 12 months with -- actually I added to that, that with the clinical program that we expect to execute and developing commercial adoption for TTFields, we actually would anticipate it unless something very unforeseen happens, our current liquidity should get us through break even.

Okay. When I look at the -- you guys are saying the average time for collection is around between four to five months. The contract payers, it's about 90 days and the non-contract payers it can be long as180 days. Right now it seems the mix between those two is about 50/50-ish, so as you get more covered lives, I guess, should we start thinking that, that time window should contract as more get towards the shorter time frame? I have one short follow-up after that.

It is not exactly a 50/50 distribution but yes, with more contracted lives here overall, the four to five months average we will come down. It certainly one of our bigger objectives.

I might've asked you guys this offline but I forget the answer. When you get a new coverage approval from a healthcare provider, does -- do any of the payment or negotiations going on for past bills that have not been paid, do those get expedited the quick -- at the same pace as a new one? Do we see a little catch up once to start getting more covered lives?

Coverage decision helps within any conversation we have with payers. It doesn't necessarily mean there's an agreement on fee or an automatic process towards paying. It helps in a conversation. It shortens the dialogue. It reduces the paperwork required to get paid, but it is not an automatic agreement on the fee. That comes with further discussions and that's what we want to embark upon now where we move from coverage into contracting.

Very helpful. Thank you very much.

(Operator Instructions)

Mike King, JMP Securities.

Good afternoon, guys. Thanks for taking the question and congrats on the growth in the quarter. Speaking of which, and I apologize if you answered this. I got on the call a little bit late. I noticed, and this may be coincidence, but the average number of scripts per sales reps was about the same in the quarter, in this quarter versus the fourth quarter 2015. Again, it may just be coincidence, but it also suggests you're getting some very good productivity out of you new reps. I just wonder going forward, is that the correct ratio? I think it is about 18 per rep. Is that right way to think about or should we think about it some other way?

I would be happy to tell you this is actually (inaudible). The reps responsible for different regions and so I will not do this kind of calculation. As we mentioned, we have -- we are continuing to hiring and we believe that we will finish hiring the first wave, which will be around 50 reps, and then we will see if we need more and this will happen in the next quarter or so. It is coincidental right now.

You are saying you're going to max out at 50 and that will be in this quarter?

Then we will evaluate if we need more or not. But we believe this will be enough for now.

Okay and then just a couple related questions on your sales metrics. In terms of the active number of patients, can you talk about -- I'm particularly interested in the primary reason why scripts don't get filled, number one. Number two, just on the discontinuation rate, if you could give us some trends on that, recent trends on that. Finally, and again related, is the question about do you have duration numbers for us, either in the relapse setting or that newly diagnosed setting? Thank you.

I will start with discontinuation. Remember we move from recurrent to newly diagnosed which in recurrent the real-life scenario which we published, it's 4.5 months in treatment. In newly diagnosed, it is more than double. I cannot give you a matrix discontinuation, unfortunately. Our main goal is to make sure that the majority of our patient will be newly diagnosed patients. The reason why not all of the scripts convert, there's a few reasons for that but the fundamental difference between the recurrent and the newly diagnosed is that in the newly diagnosed, we receive the scripts a little bit earlier that the patient is still under radiation and there's some windows that we expect will need more time to be on treatment and this by definition creates some another windows for conversion. Besides that, we don't -- the 75% conversion rate is a reasonable rate (technical difficulty). Anything that you would like to add?

Maybe I can add to that. As you know, it's primary brain cancer, very aggressive. Some patients, some scripts get lost because of disease progression. Patient very quickly deteriorates from with the script was written or the script was written very late in the disease stage so there's some lost there. Also certain patients, certainly in the academic setting opt into clinical trials. There's a variety of reasons why not all scripts are filled and as we stated earlier, about 75% consistently are filled. In terms of treatment duration, I think we at had an earlier question in the call. We see nothing that would cause us to think that for recurrent treatment duration differs from what we shared with you in the past and also for newly diagnosed, it appears to be consistent, at least from what we can see now with the EF-14 data.

Thanks for taking the questions.

Gregg Gilbert, Deutsche Bank.

Thanks, Wilco. I believe you said in the past that the $14,000 per patient would be a good number to use going forward, including the assumption that you would eventually get Medicare reimbursement. Can you clarify that I have that right? Thanks.

Yes, Gregg, you have that right, but the $14,000 is based on actual payment behavior in a commercial setting in the United States. We believe once the discussion that we also referred to with Medicare are resolved, that hopefully that will not affect the $14,000 to much. From a modeling perspective, we think the $14,000 is at least a best indicator available right now, since it is based on actual collection patterns in the United States.

Thank you.

At this time, I'm showing no further questions from the audience.

Okay. Thank you, everyone. We appreciate where interest in Novocure and we will conclude the call.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Good day.