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Novocure Reports Fourth Quarter and Full Year 2016 Financial Results and Provides Company Update

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Novocure (NASDAQ:NVCR) today reported financial results for the three
months and full year ended December 31, 2016, highlighting
year-over-year and sequential growth in active patients and net
revenues. Novocure is an oncology company developing a profoundly
different approach to cancer treatment centered on a proprietary therapy
called TTFields, the use of electric fields tuned to specific
frequencies to disrupt solid tumor cancer cell division.

Fourth quarter and full year 2016 highlights include:

Three months ended

December 31,

(unaudited)

  Twelve months ended

December 31,

(audited)

2016   2015  

%
Change

2016   2015  

%
Change

 
Non-financial
Prescriptions received in period(1) 706 557 27 % 2,808 1,777 58 %
Active patients at period end(2) 1,091 605 80 %
 
Financial, in millions
Net revenues $ 30.2 $ 12.4 144 % $ 82.9 $ 33.1 151 %
Net loss $ (22.2 ) $ (32.9 ) $ (131.8 ) $ (111.6 )
 
Cash and cash equivalents at the end of period $ 99.8 $ 119.4
Short-term investments at the end of period $ 119.9 $ 150.0
(1)   A "prescription received" is a commercial order for Optune that is
received from a physician certified to treat patients with Tumor
Treating Fields (TTFields) therapy for a patient not previously on
TTFields therapy. Orders to renew or extend treatment are not
included in this total.
(2) An "active patient" is a patient who is on TTFields therapy under a
commercial prescription order as of the measurement date, including
patients who may be on a temporary break from treatment and who plan
to resume treatment in less than 60 days.

"The fourth quarter of 2016 was the eighth consecutive quarter of active
patient and revenue growth for Novocure since the presentation of our
successful EF-14 data in newly diagnosed glioblastoma (GBM)," said Asaf
Danziger, Novocure's Chief Executive Officer. "We had nearly 1,100
active patients on treatment as of December 31, 2016, including 256
active patients in EMEA, reflecting the increasing importance of our
non-U.S. markets."

"I am also proud of the long-term analysis of our EF-14 phase 3 pivotal
trial data for newly diagnosed GBM, presented at the 21st Annual
Scientific Meeting of the Society for Neuro-Oncology in November, in
which Optune plus temozolomide demonstrated a 70 percent improvement in
survival for patients treated with Optune together with temozolomide
compared to patients treated with temozolomide alone," continued Mr.
Danziger. "Optune plus temozolomide is the first treatment in more than
a decade to significantly improve outcomes for patients with newly
diagnosed GBM. We are committed to bringing our profoundly different
approach to cancer treatment to as many patients as possible who may
benefit from it."

"We believe the mechanism of action of TTFields can have broad
applicability to a variety of solid tumors and the fourth quarter 2016
was marked by multiple clinical milestones," added William Doyle,
Novocure's Executive Chairman. "In October, we enrolled the first
patient in our phase 3 pivotal trial in brain metastases from non-small
cell lung cancer. During our R&D day in December, we also shared topline
results from phase 2 pilot studies in advanced pancreatic cancer,
recurrent ovarian cancer and mesothelioma, suggesting that TTFields,
when added to standard of care treatments, may improve patient outcomes
without appearing to increase the side effects of other cancer
treatments."

Fourth Quarter 2016 Operating Statistics and Financial Update

There were 1,091 active patients on Optune at December 31, 2016, an
increase of 486 active patients, or 80 percent, 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 and who typically have a
longer duration of therapy. The portion of Optune prescriptions for
newly diagnosed GBM was more than 55 percent in the fourth quarter 2016.

  • In the United States, there were 835 active patients on Optune at
    December 31, 2016, an increase of 306 active patients, or 58 percent,
    compared to December 31, 2015.
  • In Germany and other EMEA markets, there were 256 active patients on
    Optune at December 31, 2016, an increase of 182 active patients, or
    246 percent, compared to December 31, 2015.

Additionally, there were 706 prescriptions received in the quarter ended
December 31, 2016, an increase of 149 prescriptions, or 27 percent,
compared to the same period in 2015. The increase in prescriptions was
driven primarily by commercial activities in the United States after the
October 2015 U.S. Food and Drug Administration (FDA) approval of Optune
for the treatment of newly diagnosed GBM, increased commercial
activities in Germany, and enhanced awareness of Optune following the
December 2015 publication of EF-14 phase 3 pivotal trial results in JAMA™.

  • In the United States, 544 prescriptions were received in the quarter
    ended December 31, 2016, an increase of 45 prescriptions, or 9
    percent, compared to the same period in 2015.
  • In Germany and other EMEA markets, 162 prescriptions were received in
    the quarter ended December 31, 2016, an increase of 106 prescriptions,
    or 189 percent, compared to the same period in 2015.
  • In Japan, there were no prescriptions received in the quarter ended
    December 31, 2016.

We continued to work with payers in the United States to expand coverage
of Optune for the treatment of both newly diagnosed and recurrent GBM in
the fourth quarter of 2016. As of January 1, 2017, payers administering
plans for more than 180 million lives had issued positive coverage
policies stating that Optune is approved for the treatment of newly
diagnosed or recurrent GBM, an increase of more than 50 million from the
September 30, 2016, including new policies with United Healthcare, Blue
Cross Blue Shield of Tennessee and Tufts Health Plan.

For the three months ended December 31, 2016, net revenues increased to
$30.2 million compared to $12.4 million for the same period in 2015,
representing 144 percent growth. This growth was primarily driven by
increased Optune adoption and the transition to accrual-based revenue
recognition for a portion of our billings.

For the three months ended December 31, 2016, net revenues include $8.5
million in accrual-based net revenues, including $4.0 million in net
revenues for which cash had not yet been collected at quarter-end. For
the three months ended December 31, 2016, gross billings totaled $63.8
million. 19% of fourth quarter 2016 gross billings qualified for
accrual-based net revenue recognition. We continue to recognize revenue
on a cash basis for payers with whom we do not have contractual
arrangements or sufficient history to reliably estimate their individual
payment patterns and for whom we cannot reliably estimate the amount
that would ultimately be collected. We believe there will be an extended
period of time when our revenue is a mix of cash-based and accrual-based
revenue.

For the three months ended December 31, 2016, cost of revenues increased
to $11.0 million compared to $6.3 million for the same period in 2015,
representing 74 percent growth. This was primarily driven by an increase
in active Optune patients, resulting in increased transducer array
shipment costs and increased field equipment depreciation expenses, as
well as increased personnel costs to establish infrastructure necessary
to support an increasing volume of shipments to patients.

Research, development and clinical trials expenses for the three months
ended December 31, 2016, were $8.5 million compared to $10.8 million for
the same period in 2015, representing a decline of 22 percent. This was
primarily due to a decrease in clinical trial expenses resulting from
the conclusion of our EF-14 phase 3 pivotal trial in newly diagnosed GBM
as well as a reduction in expenses related to the development of our
second generation Optune System.

Sales and marketing expenses for the three months ended December 31,
2016, were $15.7 million compared to $14.7 million for the same period
in 2015, representing growth of 6 percent. This growth was primarily due
to increased personnel costs partially offset by a decrease in
advertising and professional services related to the launch of Optune
for newly diagnosed GBM.

General and administrative expenses for the three months ended December
31, 2016, were $13.0 million compared to $11.1 million for the same
period in 2015, representing an increase of 17 percent. This growth was
primarily due to increased headcount, increased expenses related to
professional services and the net effect of certain one-time items.

Personnel costs for the three months ended December 31, 2016, included
$4.7 million in non-cash share-based compensation expenses, comprised of
$0.2 million in cost of revenues; $0.8 million in research, development
and clinical trials; $1.2 million in sales and marketing; and $ 2.5
million in general and administrative expenses. Total non-cash
share-based compensation expenses for fourth quarter 2015 were $4.5
million.

Net losses for the three months ended December 31, 2016, were $22.2
million compared to net losses of $32.9 million for the same period in
2015.

As of December 31, 2016, we had $99.8 million in cash and cash
equivalents and $119.9 million in short-term investments, for a total
balance of $219.6 million in cash, cash equivalents and short-term
investments. As of December 31, 2016, we had $100.0 million of principal
indebtedness outstanding under our Loan and Security Agreement with
Biopharma Secured Investments III Holdings Cayman LP.

Full Year 2016 Financial Update

For the twelve months ended December 31, 2016, net revenues increased to
$82.9 million compared to $33.1 million for the same period in 2015,
representing 151 percent growth. This growth was primarily driven by
increased Optune adoption and the fourth quarter transition to
accrual-based revenue recognition for a portion of our billings.

For the twelve months ended December 31, 2016, cost of revenues,
excluding an impairment loss, increased to $39.9 million compared to
$20.6 million for the same period in 2015, representing 94 percent
growth. This was primarily driven by an increase in active Optune
patients, resulting in increased transducer array shipment costs and
increased field equipment depreciation expenses, as well as increased
personnel costs to establish infrastructure necessary to support an
increasing volume of shipments to patients. Additionally, we recorded a
$6.4 million impairment loss with respect to the write-off of our first
generation Optune System field equipment.

Research, development and clinical trials expenses for the twelve months
ended December 31, 2016, were $41.5 million compared to $43.7 million
for the same period in 2015, representing a decline of 5 percent. This
was primarily due to a decrease in clinical trial expenses resulting
from the conclusion of our EF-14 phase 3 pivotal trial in newly
diagnosed GBM and other GBM trial activities as well as a reduction in
expenses related to the development of our second generation Optune
System, partially offset by an increase in personnel costs.

Sales and marketing expenses for the twelve months ended December 31,
2016, were $59.4 million compared to $38.9 million for the same period
in 2015, representing growth of 53 percent. This growth was primarily
due to increased personnel costs and increased marketing expenses to
expand commercial operations in the United States and Germany and to
establish commercial operations in Switzerland and Japan.

General and administrative expenses for the twelve months ended December
31, 2016, were $51.0 million compared to $33.9 million for the same
period in 2015, representing growth of 51 percent. This growth was
primarily due to increased personnel costs, increased expenses related
to professional services and activities associated with being a public
company and the net effect of certain one-time items.

Personnel costs for the twelve months ended December 31, 2016, included
$21.4 million in non-cash share-based compensation expenses, comprised
of $0.6 million in cost of revenues; $3.1 million in research,
development and clinical trials; $5.1 million in sales and marketing;
and $12.6 million in general and administrative expenses. Total non-cash
share-based compensation expenses for the same period in 2015 were $11.9
million.

Net losses for the twelve months ended December 31, 2016, were $131.8
million compared to net losses of $111.6 million for the same period in
2015.

Conference call details

Novocure will host a conference call and webcast
to discuss fourth quarter 2016 financial results today, Thursday,
February 23, at 8 a.m. EDT. Analysts and investors can participate in
the conference call by dialing (877) 726-5929 for domestic callers and
(530) 379-4648 for international callers, using the conference ID
47566930. The webcast can be accessed live from the Investor Relations
page of Novocure's website, https://www.novocure.com/investor-relations/,
and will available for replay for at least 14 days following the call.

The earnings slides presented during the webcast and the corporate
presentation can also be accessed from the Investor Relations page of
Novocure's website, https://www.novocure.com/investor-relations/.

About Novocure

Novocure is an oncology company developing a profoundly different cancer
treatment centered on a proprietary therapy called TTFields, the use of
electric fields tuned to specific frequencies to disrupt solid tumor
cancer cell division. Novocure's commercialized product, Optune, is
approved for the treatment of adult patients with glioblastoma. Novocure
has ongoing or completed clinical trials investigating TTFields in brain
metastases, non-small cell lung cancer, pancreatic cancer, ovarian
cancer and mesothelioma.

Headquartered in Jersey, Novocure has U.S. operations in Portsmouth, New
Hampshire, Malvern, Pennsylvania, and New York City. Additionally, the
company has offices in Germany, Switzerland and Japan, and a research
center in Haifa, Israel. For additional information about the company,
please visit www.novocure.com
or follow us at www.twitter.com/novocure.

Approved Indications

In the United States, Optune is intended as a treatment for adult
patients (22 years of age or older) with histologically-confirmed
glioblastoma multiforme (GBM).

In the United States, Optune with temozolomide is indicated for the
treatment of adult patients with newly diagnosed, supratentorial
glioblastoma following maximal debulking surgery and completion of
radiation therapy together with concomitant standard of care
chemotherapy.

In the United States, for the treatment of recurrent GBM, Optune is
indicated following histologically-or radiologically-confirmed
recurrence in the supratentorial region of the brain after receiving
chemotherapy. The device is intended to be used as a monotherapy, and is
intended as an alternative to standard medical therapy for GBM after
surgical and radiation options have been exhausted.

Forward-Looking Statements

In addition to historical facts or statements of current condition, this
press release may contain forward-looking statements. Forward-looking
statements provide Novocure's current expectations or forecasts of
future events. These may include statements regarding anticipated
scientific progress on its research programs, development of potential
products, interpretation of clinical results, prospects for regulatory
approval, manufacturing development and capabilities, market prospects
for its products, and other statements regarding matters that are not
historical facts. You may identify some of these forward-looking
statements by the use of words in the statements such as "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe" or other
words and terms of similar meaning. Novocure's performance and financial
results could differ materially from those reflected in these
forward-looking statements due to general financial, economic,
regulatory and political conditions as well as more specific risks and
uncertainties facing Novocure such as those set forth in its Annual
Report on Form 10-K filed on February 23, 2017, with the U.S. Securities
and Exchange Commission. Given these risks and uncertainties, any or all
of these forward-looking statements may prove to be incorrect.
Therefore, you should not rely on any such factors or forward-looking
statements. Furthermore, Novocure does not intend to update publicly any
forward-looking statement, except as required by law. Any
forward-looking statements herein speak only as of the date hereof. The
Private Securities Litigation Reform Act of 1995 permits this discussion.

   

Condensed Interim Consolidated Statements of Operations

USD in thousands (except share and per share data)

 
Three months ended

December 31,

Twelve months ended

December 31,

2016   2015 2016   2015
Unaudited Audited
Net revenues $ 30,242 $ 12,383 $ 82,888 $ 33,087
Cost of revenues 10,973 6,304 39,870 20,610
Impairment of field equipment   -   -   6,412   -
 
Gross profit   19,268   6,079   36,606   12,477
 
Operating costs and expenses:
Research, development and clinical trials 8,471 10,845 41,467 43,748
Sales and marketing 15,678 14,724 59,449 38,861
General and administrative   12,997   11,116   51,007   33,864
 
Total operating costs and expenses   37,146   36,685   151,923   116,473
 
Operating loss (17,877 ) (30,606 ) (115,317 ) (103,996 )
Financial expenses, net   2,854   875   6,147   3,151
 
Loss before income tax expense (20,731 ) (31,481 ) (121,464 ) (107,147 )
Income tax expense   1,437   1,447   10,381   4,434
 
Net loss $ (22,168 ) $ (32,928 ) $ (131,845 ) $ (111,581 )
 
Basic and diluted net loss per ordinary share $ (0.26 ) $ (0.39 ) $ (1.54 ) $ (3.67 )
 
Weighted average number of ordinary shares used in computing basic
and diluted net loss per share
  86,760,316   83,607,037   85,558,448   30,401,603
 

 

Condensed Interim Consolidated Balance Sheets

USD in thousands (except share data)

 
December 31,
U.S. dollars in thousands 2016     2015
Assets
Current Assets:
Cash and cash equivalents $ 99,780 $ 119,423
Short-term investments 119,854 150,001
Restricted cash 267 87
Trade receivables 6,339 -
Receivables and prepaid expenses 10,084 10,799
Inventories   25,549   13,594
Total current assets   261,873   293,904
Long-term Assets:
Property and equipment, net 9,812 6,552
Field equipment, net 8,808 6,029
Severance pay fund 88 79
Other long-term assets   1,500   772
Total long-term assets   20,208   13,432
Total Assets $ 282,081 $ 307,336
  December 31,
U.S. dollars in thousands, except share and per share data 2016   2015
Liabilities And Shareholders' Equity
Current Liabilities:
Trade payables $ 18,356 $ 16,755
Other payables and accrued expenses   18,526   11,872
Total current liabilities   36,882   28,627
Long-term Liabilities:
Long-term loan, net of discount and issuance costs 96,231 23,097
Employee benefit liabilities 2,590 2,057
Other long-term liabilities   4,033   2,735
Total long-term liabilities   102,854   27,889
Total Liabilities 139,736 56,516
Commitments and Contingencies
Shareholders' Equity:
Share capital -
Ordinary shares - No par value, Unlimited shares authorized; Issued
and outstanding: 87,066,446 shares and 83,778,581 shares at December
31, 2016 and December 31, 2015 respectively;
- -
Additional paid-in capital 664,154 640,406
Accumulated other comprehensive loss (1,883 ) (1,505 )
Accumulated deficit   (519,926 )   (388,081 )
Total shareholders' equity   142,345   250,820
Total Liabilities and Shareholders' Equity $ 282,081 $ 307,336

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