Good day, and welcome to the NovoCure Q2 2022 Earnings Call. As a reminder, this call is being recorded. I would now like to turn the call over to Ingrid Goldberg.

Good morning, everyone, and thank you for joining us to review NovoCure's second quarter 2022 performance. I'm joined on the phone by our Executive Chairman, Bill Doyle; our CEO, Asaf Danziger; and our CFO, Ashley Cordova. Other members of our executive leadership team are also on the call and available for Q&A. For your reference, slides accompanying this earnings release can be found on our website, www.novocure.com, under quarterly report on our Investor Relations page. Before we start, I would like to remind you that discussions during this conference call will include forward-looking statements and actual results could differ materially from those projected in these statements. These statements involve a number of risks and uncertainties, some of which are beyond our control and are 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. Where appropriate, we will refer to non-GAAP financial measures to evaluate our business, specifically adjusted EBITDA, a measure of earnings before tax, interest, depreciation, amortization and share-based compensation. We believe adjusted EBITDA is an important metric as it removes the impact of earnings attributable to our capital structure, tax rate, and material noncash items and best reflects the financial value generated by our business. Reconciliations of non-GAAP to GAAP financial measures are included in our press release, earnings slides, and in our Form 8-K filed with the SEC today. These materials can also be accessed from our Investor Relations page of our website. Following our prepared remarks today, we will open the line for your questions. I will now turn the call over to our Executive Chairman, Bill Doyle.

Thank you, Ingrid, and good morning. Our mission at NovoCure is to extend survival in aggressive forms of cancer through our innovative therapy, Tumor Treating Fields. The second quarter was marked by solid execution and progress, with revenues increasing by 6% compared to the same period in 2021. We released promising Phase II data in gastric cancer and formed a second partnership with Merck. As we near pivotal milestones in the upcoming quarters, there is excitement at NovoCure as our teams work on data readouts and launch plans. We concluded the quarter with 3,454 active patients using TTFields therapy worldwide. Steady patient volumes in the U.S. and rising adoption in Japan helped balance a decrease in active patients in Germany due to updated coverage criteria. We are pursuing various strategies to enhance the adoption of TTFields therapy and reach more patients who could benefit from it. In glioblastoma multiforme (GBM), we aim to increase adoption in academic institutions where a considerable share of GBM patients are treated. Our strategy involves engaging academic practitioners to ensure they comprehend and can communicate the extensive benefits of TTFields. Generating clinical data is one of the most effective means to drive adoption. So far this year, TTFields has garnered over 1,500 citations on PubMed, reflecting its growing significance in the scientific community. This quarter, we also presented two key clinical data sets. Research aimed at identifying genomic factors linked to improved response to Optune was published in the June edition of neuro-oncology. Retrospective data from 148 patients treated at six leading academic institutions confirmed the results of the EF-14 randomized Phase III trial, showing that Optune enhances progression-free and overall survival across all patient cohorts and indicates a clear dose response with increased usage. Additionally, specific genetic alterations were associated with greater benefits from Optune, validating the EF-14 trial's survival advantage for GBM patients and uncovering potential predictive biomarkers for even better responses, paving the way for ongoing research. At ASCO in June, the Charité University Hospital in Berlin presented a multi-country registry analysis of GBM patients from Austria, Germany, and Switzerland. This analysis indicated a median overall survival of 35 months for patients receiving Optune plus chemotherapy, compared to 15 months for those receiving only chemotherapy. These registry findings further support the benefits of Optune based on real-world evidence, consistent with results from more than 25,000 GBM patients treated with Optune so far. The growing interest and research on Optune and TTFields from key academic centers is very encouraging and shows increasing awareness and acceptance of Tumor Treating Fields therapy. While preparing to launch in new cancer indications, we remain dedicated to innovating GBM treatment. In May, we announced a second clinical collaboration with Merck to conduct a double-blind placebo-controlled pivotal study of TTFields combined with pembrolizumab and temozolomide for newly diagnosed GBM patients. This study builds on recent research published in the Journal of Clinical Investigation and aims to confirm promising data from Dr. David Tran's top Phase II study. This collaboration continues the exploration of TTFields alongside immunotherapies in a malignancy and area where checkpoint inhibitors have not shown benefit before. We are also investigating new GBM treatment protocols, including our pivotal TRIDENT study, which is assessing the benefits of initiating TTFields therapy concurrently with radiation therapy instead of waiting until after radiation therapy. Currently, 96 clinical sites are actively recruiting patients for TRIDENT. Besides clinical data and physician education, raising patient awareness is crucial for broader adoption. We are launching an "Opt For Optune" social media campaign in the second half of this year to engage patients, caregivers, and physicians in the digital ecosystem, designed to instill confidence and guide patients on their GBM treatment journey. Just as other treatment modalities evolved for optimal use, we are investing heavily in product development to enhance outcomes. Array layout planning is vital for Optune treatment as it allows prescribers to optimize therapy intensity. The NovoTAL system currently creates these individualized treatment plans, while MAXPOINT, our next-generation array layout planning system, aims to provide more precise targeting to boost TTFields intensity delivered to tumors. This quarter, we advanced MAXPOINT's development with the initiation of a program comparing dose volume metrics between MAXPOINT-guided and NovoTAL-guided array layouts, with data to be shared in upcoming quarters. Additionally, our next-generation arrays, known as FlexArray, are on track for a limited market release in Europe this year, believed to deliver a higher, more consistent intensity to the tumor bed without significantly increasing heat. Both FlexArray and MAXPOINT signify meaningful milestones in our product development journey, demonstrating our commitment to ongoing investment in product development initiatives. Beyond GBM, we are exploring TTFields' use in additional solid tumor indications in the torso and abdomen. In June, in collaboration with Zai Lab, we shared data from the EF-31 pilot study, which evaluated TTFields alongside chemotherapy for gastric cancer, a prevalent and deadly disease with a low five-year survival rate. The EF-31 study showed a 50% objective response rate and a 10.3-month duration of response, notable improvements over historical controls. We are excited by these signals and eager to explore the potential benefits of TTFields combined with standard therapies in a large randomized clinical trial. Looking ahead to our clinical pipeline, we are on the brink of potential transformation with four Phase III trials in new indications set to produce data soon. If successful, these trials could increase the number of patients eligible for TTFields by about 14-fold. Our next pivotal trial, LUNAR, is the first randomized study in our thoracic program, assessing the combined use of TTFields with docetaxel or a physician's choice PD-1 inhibitor for Stage IV second-line non-small cell lung cancer. Enrollment for LUNAR has been completed, and we began the final follow-up for patients in November 2021. Given feedback from involved parties, we understand that announcing pivotal trial data at the end of the year isn’t ideal for investigators or stakeholders, so we will be postponing the top-line data release to early Q1 2023. This does not impact our clinical operations or data collection efforts, which are on track. We made this adjustment for optimal visibility and convenience. Our pivotal study, INNOVATE-3, in recurrent ovarian cancer is on course for a 2023 data release following 18 months of follow-up from the last enrolled patient. We previously reported the completion of INNOVATE-3's enrollment during our Q3 2021 earnings call. The METIS and PANOVA-3 studies continue patient enrollment as expected. We are pleased with the progress made in the second quarter, representing intentional steps to strengthen our business fundamentals and prepare for upcoming data releases and potential expansions. We are excited about the prospect of treating many more patients soon. I will now turn the call over to Ashley to discuss our financial performance for the second quarter.

Thank you, Bill. The second quarter was another period of strong financial performance with gross profits from the core GBM business funding investments in clinical and product development as we advance the Tumor Treating Fields platform. I know you have seen our press release and 10-Q this morning, so let me provide a few brief highlights regarding the financials. Revenue was strong, up 6% with 3,454 global active patients on therapy as of June 30. Bill spoke to the broader adoption trends earlier on this call, so I will focus now on revenue, and in particular, the dynamics in Germany. As a reminder, in Q4 of last year, we announced that we reached agreement with the largest public German payers on a price for Optune. This year, we formalized the terms with payers that represent approximately 70% of the covered lives in Germany. These contracts will enable price stability and provide a strong pricing foundation as we pursue reimbursement in additional European markets. The negotiations impacted our net revenue as some payers withheld approval for new patients and began to deny approval for many active patients under the coverage criteria established in the DME listing. We expect revenue to grow over time as more patients are treated under the updated contract term. In the U.S., the exceptional execution of collections processes provided a material tailwind to revenue in the second quarter. Revenue operations is a core competency at NovoCure, and the U.S. benefit business is benefiting both from collections on previously denied and appealed claims and from an increase in the average price realized for current active patient volumes. Strength in the U.S. price was more than sufficient to offset the headwinds from Germany and foreign exchange. Gross margin for the second quarter was 80%. Excluding purchases made by Zai Lab, our cost of revenues per active patient per month was down 5% year-over-year as any impact from broader economic challenges was more than offset by continued proactive work to optimize our supply chain, alongside other cost reduction initiatives. We did not experience a material impact to our cost of revenues from inflation in the second quarter. SG&A expenses for the second quarter totaled $76 million, an increase of 14% year-over-year. G&A expenses decreased year-over-year due to lower spending on corporate-enabling functions, while sales and marketing expenses increased to support geographical expansion and early commercial marketing activities as we approach multiple pivotal data readouts. We invested $57 million in research and development in the second quarter, an increase of 13% from the same period in 2021. R&D dollars are one of our best uses of capital, and we are investing aggressively in projects across our preclinical research, clinical and product development verticals. Our net loss for the second quarter was $0.23 per share or $24 million. Adjusted EBITDA was $7 million, and we finished the period with $949 million in cash and short-term investments on the balance sheet. We believe our cash position ensures we can pursue growth opportunities across the business with maximum flexibility. NovoCure's financial foundation is strong and our commercial execution is secure and stable. We will continue investing aggressively in the Tumor Treating Fields platform so that we are prepared to fully leverage the outcome of multiple pivotal trials and potential subsequent launches in the coming quarters. With that, I will pass the call to Asaf.

Thank you, Ashley. This quarter, we continued to advance our mission of extending survival in some of the most aggressive forms of cancer. Our commercial team is focused on driving adoption of TTFields. We see mounting clinical support for our therapy, both from internal and external researchers. As we approach readouts from several pivotal studies over the next year, we are motivated by the prospect of treating many thousands more patients in the near future. I would like to thank my NovoCure colleagues for their passion and determination in advancing the science and adoption of TTFields. We have made immense strides in recent years but we have only just begun our journey. I know as we move forward, you will all keep our patient-forward mission in your hearts and minds. To close, I would like to share a patient's story. In 2019, DJ Stewart was an average skateboarder who spent his free time surrounded by family and friends. DJ, who set to start a new job, had just become engaged and bought a house in Kansas City. In May of 2019, DJ had a seizure and was rushed to University of Kansas Medical Center, where he was diagnosed with GBM and prescribed Optune. DJ's GBM journey is the focus of the documentary RARE ENOUGH. I encourage all of you to watch this short film. RARE ENOUGH takes you through DJ's diagnosis and treatment and includes candid reflections on his GBM journey, which are both heartbreaking and inspirational. DJ recently joined Head for the Cure, a charity focused on inspiring hope in the brain cancer community. It is patients like DJ that drive our company forward every day. With that, I will now turn the call over to the operator for Q&A.

Our first question comes from Cory Kasimov with JPMorgan.

I had 2 for you. First, on the commercial side, I believe you previously guided to 2% to 5% active patient growth for fiscal year '22. Are you still confident in that number? And if so, what do you expect to be the primary driver of re-acceleration in the second half? And then secondly, on the clinical side, just in terms of next steps for gastric cancer, any comments yet on what a pivotal trial might look like and the breadth of it? Would you be looking to target just HER2-positive patients? Or do you have a broader strategy for this indication in mind?

This is Bill. I was going to just start by saying our team has gathered virtually today from points all over the world. So I'm going to be a little bit of the MC, and I'm going to turn it over to Ashley to take your first question, and then Uri will talk about the gastric trial.

Perfect. Thanks, Cory. So just to keep ex Germany, our active patient growth year-over-year was 3%. Asian and other European markets remain strong. And we're focused, as we've talked about, on a variety of commercial drivers in the U.S. But given the abrupt fluctuation in German active patient volumes, we are not providing forward-looking cover. It's just we don't have a clear enough line of sight as to the pace of recovery in Germany to reiterate that 2% and 5%.

On the gastric side, so yes, 31 was our first study in gastric cancer, which has a high incidence, especially in Asia, of course. But each incident is anticipated to rise also in the U.S. And the study was designed for patients with unresectable disease who received their first-line therapy concomitantly with TTFields to the abdominal region. And beyond the very strong signal of efficacy, which the study provided, we're always encouraged by the fact that we have another evidence supporting the broad applicability of TTFields in yet another malignancy. So we certainly anticipate the Phase III study in the coming time. And we are considering the design of the study, given the fact that nivolumab has demonstrated efficacy in this malignancy through the CheckMate-649 study, and we are seriously considering having another study incorporating immune checkpoint inhibitors in another malignancy going to be the sixth or seventh study to involve immune checkpoint inhibitors with Tumor Treating Fields.

Our next question comes from Jason Bednar with Piper Sandler.

I wanted to start with the LUNAR update. It really sounds like just entirely wanting to make sure that top line data gets as much attention as possible and isn't it all related to data issues or data collection. But if I can push you a little bit and just to be a little blunt, if this is just top line data, not the full data set comparing all the different arms of the study? Does the timing of the headline data really matter? And maybe you can talk about what changed in your view to drive the shift in timing that's been in place now for several months?

Yes. So thanks for the question. I want to underline what I said in the prepared remarks that this slight shift has nothing to do with any trial issues or operational issues. We heard loud and clear from essentially all of our constituents that any data announcement between Christmas and New Year just was not desirable. And so this is purely for the convenience of our stakeholders to push this into early Q1.

Okay. All right. Understood. I guess I'll squeeze 2 in here and a follow-up. First is just an easy, quick housekeeping item. Ashley, on the revenue side, can you size the previously denied Medicare claims that you referenced? What impact was that in the second quarter? And then maybe a bigger picture on Germany. Maybe expand on what's changed more specifically with respect to the reimbursement dynamics in that market and the coverage dynamics. Is it just newly diagnosed patients that are being treated and covered and it's the recurrent GBM patients that are no longer covered by some payers? Just what shifted in those coverage dynamics that you alluded to? And then for the active patients that are now being denied therapy in care, can those come back into the fold, these treated patients? It doesn't sound like they can just from the way you answered Cory's question. But I guess, really just what's the best way to think of the current active patient figure in Germany with respect to the run rate here going forward?

Thank you for the question, Jason. It's crucial for everyone to grasp the various factors at play. Let's begin with the strength in the U.S., which is a clearer situation. We established Q4 2021 pricing as a stable reference point. In the second quarter, I would attribute about two-thirds of our improvements in the U.S. to aged and previously denied claims and about one-third to the solid fundamentals of the business. This gives us a good baseline. Now, regarding Germany, I want to elaborate because it’s a new and significant development this quarter. We've been diligently working towards securing coverage and pricing in Germany for several years, establishing a reimbursement pathway. This is vital as having agreements with major payers in Germany will help us maintain price stability and offer a solid pricing structure while we seek reimbursement in other European markets and for other indications. Like Medicare, achieving a DME listing is a significant milestone since we are the first life-extending oncologic therapy to pursue this in Germany. To recap the key milestones: in March 2020, the GBA issued a directive mandating coverage for Optune aligned with the EF-14 protocol. In Q4 of last year, we finalized a price agreement for Optune with the largest German payers, and earlier this year, we obtained our official DME listing. By the end of the quarter, we formalized contracts with payers that cover 70% of lives in Germany. However, during the quarter, prior to the DME listing, many payers were approving Optune on a case-by-case basis, without confirming coverage alignment with the EF-14 protocol. With the new DME listing, several payers began withholding approval for new patients and denying existing patients if their cases did not strictly match the EF-14 criteria, impacting a significant portion of our active patients. While we did not remove any of those patients from therapy, we revised our process in Germany during the second quarter to ensure compliance with the DME criteria before starting any new patients. Given our steady revenue stream and the lengthy therapy duration, which can extend over a year, our current patient mix is challenging, with fewer than 15% of our active patients starting under the new review process. Consequently, we have an updated price combined with a lower proportion of active patients covered under these new terms. Looking ahead, we have a clear view of which patients will be approved, along with established DME policies and payer terms. We’ve adjusted our processes accordingly. I anticipate that patient starts and the mix will improve each quarter moving forward, and revenue will gradually return. However, this improvement will take several quarters due to the length of the therapy. That was quite a detailed response, Jason, but I felt it was important to cover. I am open to any questions if further clarification is needed.

Our next question comes from Greg Fraser with Truist.

Ashley, can you talk about what's driving the higher prices in the U.S.? And how should we think about net revenue per month in the U.S. going forward? I think your comments that you made were on a global basis, but if you could provide some color on the U.S., that would be helpful?

Thank you for the question, Greg. The increase in prices in the U.S. comes from two main areas. One area, which accounts for about two-thirds of this increase, is our success with previously denied and non-performing loans. The remaining one-third is due to fundamental enhancements in expanding coverage policies and price negotiations with additional contract partners over time. I would say that one-third of this increase is sustainable and linked to our ongoing efforts to access the market, while two-thirds relate to the performance of our U.S. revenue operations teams as we pursue those outstanding claims in our pipeline. However, it's important to note that the predictability of those outstanding claims is limited. Therefore, as we look ahead, I would focus on the lasting improvements rather than the outstanding claims.

Go ahead, Pritesh.

Thank you, Bill. Greg, thanks for the question. So the short answer is we're not seeing any new headwinds. I would say that's just the cyclical nature of how we see within a rare disease like GBM prescriptions flow through. So we would expect just based on the historical performance in Japan, the strength of our data and our ongoing efforts there, the business will continue to be stable in Japan.

Our next question comes from Emily Bodnar with H.C. Wainwright.

I just have one on your next-generation arrays that you plan to launch later this year in Europe. I guess, what are you looking to see with the initial launch to kind of determine if you want to take that out more broadly? And what would you want to see in order to potentially implement that into the label for Optune?

Yes. Again, taking a step back with device delivery therapies, the first incarnation of the device is almost never the final incarnation. Improvements can be made through engineering to optimize the usability and the therapeutic benefit. You can think of almost any medical technology, and we can see the progression. We believe we're in the earlier innings in terms of the form factor and the ability of our device to help patients. And the next major step forward is with the new arrays that we anticipate to launch in Europe later this year. What we're looking for really is to test all of our systems. This is a major change in form factor. So we have to update all of our manufacturing capability so that we can serve all of our markets. We are going to look to patient user factors to make sure that we have the right instructions for use and that our people are well trained to bring this new therapy to patients. And we always look for surprises. We don't anticipate any, but that's the nature of the word surprise. They're not anticipated. And if we do see something that's surprising, we can take whatever steps are needed in instructions for use or in manufacturing to overcome whatever the surprise may be. So I can't overstate how excited I am about this development. And as soon as we get the experience from the initial launch, we'll incorporate that into our regulatory plans throughout the world.

Our next question comes from Jason Wittes with Loop Capital.

Maybe just first a clarification on the U.S. strength and the denied claims. Was that all Medicare? Was that a mix of Medicare and private? Or could you give some indication of where those denied claims that were permitted came from?

It's a mix, but it's largely Medicare. That's where our largest opportunity is, in the backlog.

Great. That's fair. And on the Merck trial for GBM with checkpoint inhibitors, as you mentioned, checkpoint inhibitors have not been effective for GBM. I take it there's evidence that they do pass the blood-brain barrier and they are present around the tumor. Is that the right assumption?

Uri, do you want to just give a little background on our work with checkpoint inhibitors in the brain?

Yes, of course. So as you remember, there is a growing level of evidence demonstrating that concomitant use of tumor treating fields and immune checkpoint inhibitors actually leads to greater inflammatory antitumor reaction against the tumor. And this has been demonstrated throughout the work of our own in-house lab, but also through the work of other external collaborators, one of which is Dr. David Tran from the University of Florida and this publication that JCI really showed how you could potentially achieve to make an immune response with later adaptive immune response with the generation of memory response against the cancer. So that's on the scientific preclinical side. But at the same time, there is more and more evidence that on the clinical side, we see that effect and one such preliminary evidence is coming from the 2-THE-TOP study where the concomitant use of KEYTRUDA, pembrolizumab with TTFields led to a significant increase in median overall survival. This was a single-arm study, but concomitant matched control comparison already showed that while the 2-THE-TOP study population achieved a median overall survival of 25.2 months, on EF-14 matched controls, it was about 10 months less so than incorporation of new checkpoint inhibitors to Optune in the intended use or a good indication led to a significant improvement. So it's true that immune checkpoint inhibitors have unfortunately failed to demonstrate the efficacy in newly diagnosed and recurrent GBM, but it seems that there are potential penetration across the blood-brain barrier, be it lower or decreased, still results in a very significant immune response and leads to a clear clinical benefit coming from this study. And that is the basis for the planned KEYNOTE D58, our second clinical collaboration with Merck with MSD. The first was in non-small cell lung cancer. And we are looking forward to conducting this Phase III pivotal study.

Great. That was very helpful. And also, I think I heard correctly that you mentioned for the gastric trial that you did look at genetic differences. Is that something that may lead to future screening for potential patients for TTF? Or could you expand upon kind of what the indications were when you looked at that criteria?

The EF-31 gastric study was a small single-arm study involving about 25 patients. We did not explore genetic variations within this patient group due to the preliminary nature of the study design and the limited number of patients. However, we know that TTFields has been effective in a broad patient population, particularly in GBM. In the EF-14 study, we assessed various subpopulations, including those with MGMT promoter methylation and different age groups. We continuously seek to identify subpopulations that might benefit more from TTFields, focusing on immune responses and collecting additional data to characterize them. We are also examining genetic variations and alterations present in tumors. Notably, a recent project published in Advances in Neuro-oncology revealed that specific genetic alterations correlate strongly with improved outcomes in newly diagnosed GBM, as shown by independent investigators across various U.S. centers. While the treatment is effective for the wider population, we are committed to identifying biomarkers and findings that might help pinpoint patient groups that could achieve even better outcomes with TTFields.

Our next question comes from Vijay Kumar with Evercore.

Vijay, I don't think we can hear you. Operator, perhaps we go back to the queue. All right. Michelle, we can go back to the queue.

There are no further questions. I'd like to turn the call back over to Bill Doyle for any further remarks.

Thanks, Michelle. I'd like to thank everyone on the line for joining us this morning. I'd also like to join Asaf and extend my thanks to the NovoCure employees who have dialed in. I know I speak for myself, Asaf, and for the entire management team when I say we appreciate the hard work and dedication. We're very pleased with the progress this quarter. We continue to take deliberate action to strengthen the fundamentals of our business and prepare for the future. The science behind Tumor Treating Fields continues to grow. And in the coming quarters, we will have pivotal data from a number of our late-stage trials. This is an exciting time at NovoCure, and we look forward to updating you on progress in the coming months. Thanks again.

This concludes the program. You may now disconnect. Everyone, have a great day.