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Novocure Reports Third Quarter 2017 Financial Results and Provides Company Update

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Third quarter 2017 net revenues of $50.1 million, reflecting 131
percent growth versus third quarter 2016 and 31 percent growth versus
second quarter 2017

1,683 active patients at September 30, 2017, an increase of 71
percent from September 30, 2016, and 15 percent from June 30, 2017

Third quarter 2017 cash flow from operations of $2.5 million, the
first quarter with positive cash flow from operations in Novocure's
history

Novocure (NASDAQ:NVCR) today reported financial results for the three
and nine months ended September 30, 2017, 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 utilizing a proprietary therapy called Tumor Treating Fields,
the use of electric fields tuned to specific frequencies to disrupt
solid tumor cancer cell division. Tumor Treating Fields is an approved
treatment for adults with glioblastoma. We believe Tumor Treating Fields
shows promise for a variety of solid tumors.

Third quarter 2017 highlights include:

     

Three months ended

September 30,

     

Nine months ended

September 30,

 
2017   2016  

% Change

2017   2016  

% Change

 
Non-financial
Active patients at period end(1) 1,683 985 71%
Prescriptions received in period(2) 1,076 690 56% 3,029 2,102 44%
 
Financial, in millions
Net revenues $ 50.1 $ 21.7 131% $ 123.4 $ 52.6 134%
Net loss $ (11.5 ) $ (33.6 ) 66% $ (50.7 ) $ (109.7 ) 54%
 

Cash and cash equivalents at the
end of period

$ 82.1 $ 115.8

Short-term investments at the end

of period

$ 104.5 $ 119.7
(1)   An "active patient" is a patient who is on Optune 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.
(2) A "prescription received" is a commercial order for Optune that is
received from a physician certified to treat patients with Optune
for a patient not previously on Optune. Orders to renew or extend
treatment are not included in this total.
 

"The third quarter of 2017 was another period marked by growth across
all key commercial metrics in all key markets," said Asaf Danziger,
Novocure's Chief Executive Officer. "Compared to the same quarter in
2016, we achieved 131% revenue growth – our ninth consecutive quarter of
triple-digit year-over-year growth – and 71% active patient growth. We
significantly improved net revenues as a percentage of gross billings
year-over-year and generated positive cash flow from operations for the
first time in the company's history. Optune is the first treatment in
more than 10 years to increase median overall survival in newly
diagnosed GBM, and we are focused on bringing Optune to as many patients
with glioblastoma who may benefit from it."

"Tumor Treating Fields shows promise for a variety of solid tumors and
we remain steadfast in our commitment to further investigate the
multiple pathways through which Tumor Treating Fields exert their effect
and complement other anti-cancer therapies," continued William Doyle,
Novocure's Executive Chairman." We are recruiting for two phase 3
pivotal trials in non-small cell lung cancer and brain metastases from
non-small cell lung cancer. We plan to open two additional phase 3
pivotal trials in pancreatic cancer and ovarian cancer. We are committed
to advancing our clinical pipeline and realizing the full value of our
technology across multiple solid tumor indications."

Third quarter 2017 operating statistics and financial update

There were 1,683 active patients on Optune at September 30, 2017, an
increase of 698 active patients, or 71 percent, compared to September
30, 2016. The increase in active patients was driven primarily by
prescription growth and by an increase in the percentage of newly
diagnosed GBM patients who typically have a longer duration of treatment
with Optune. The proportion of Optune prescriptions written for newly
diagnosed GBM was more than 60 percent in the third quarter 2017.

  • In the United States, there were 1,234 active patients on Optune at
    September 30, 2017, an increase of 451 active patients, or 58 percent,
    compared to September 30, 2016.
  • In Germany and other EMEA markets, there were 448 active patients on
    Optune at September 30, 2017, an increase of 246 active patients, or
    122 percent, compared to September 30, 2016.
  • In Japan, there was 1 active patient on Optune at September 30, 2017.
    There were no active patients on Optune in Japan during the same
    period in 2016.

Additionally, 1,076 prescriptions were received in the quarter ended
September 30, 2017, an increase of 386 prescriptions, or 56 percent,
compared to the same period in 2016. The increase in prescriptions was
driven primarily by commercial activities in our currently active
markets.

  • In the United States, 805 prescriptions were received in the quarter
    ended September 30, 2017, an increase of 236 prescriptions, or 41
    percent, compared to the same period in 2016.
  • In Germany and other EMEA markets, 270 prescriptions were received in
    the quarter ended September 30, 2017, an increase of 150
    prescriptions, or 125 percent, compared to the same period in 2016.
  • In Japan, there was 1 prescription received in the quarter ended
    September 30, 2017, flat compared to prescriptions received during the
    same period in 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.
As of September 30, 2017, payers administering plans for more than 210
million lives had issued positive coverage policies stating that Optune
is approved for the treatment of newly diagnosed and/or recurrent GBM,
an increase of approximately 5.3 million lives since June 30, 2017,
including new policies with Centene Corporation and Health Alliance Plan
of Michigan.

In August 2017, we signed a contract with the Federation of Austrian
Social Insurance Institutions to grant reimbursement for Optune. All 18
Austrian insurance funds have agreed to participate in the contract,
marking our first national reimbursement decision.

For the three months ended September 30, 2017, net revenues increased to
$50.1 million compared to $21.7 million for the same period in 2016,
representing 131 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 September 30, 2017, net revenues as a percent
of gross billings increased to 49% from 38% for the three months ended
September 30, 2016. This was primarily due to improved collection rates
and the transition to accrual-based revenue recognition for certain U.S.
and German payers. In any period of transition from cash-based to
accrual-based revenue recognition, there is a one-time impact to net
revenues as net revenues in the current period may also include revenues
from gross billings from previous periods. In the fourth quarter of
2017, without the benefit from a transition to accrual-based revenue, we
estimate that net revenues as a percentage of gross billings will be
approximately 46%.

For the three months ended September 30, 2017, cost of revenues
increased to $15.2 million compared to $11.1 million for the same period
in 2016, representing an increase of 36 percent. The increase was
primarily driven by the cost of shipping transducer arrays to a higher
volume of commercial patients, as well as an increase in field equipment
depreciation.

Research, development and clinical trials expenses for the three months
ended September 30, 2017, were $9.3 million compared to $10.2 million
for the same period in 2016, representing a decrease of 9 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, a decrease in expenses related to the approval of our
second generation Optune and a decrease in medical grants, driven
principally by timing, partially offset by an increase in clinical trial
expenses for our LUNAR and METIS trials.

Sales and marketing expenses for the three months ended September 30,
2017, were $16.4 million compared to $15.9 million for the same period
in 2016, representing an increase of 3 percent. This was primarily due
to increased personnel and shipping costs, reflecting our expanding
commercial operations in the U.S. and Germany, partially offset by a
decrease in advertising and professional services related to the launch
of second generation Optune and the communication of Optune's inclusion
in the updated National Comprehensive Cancer (NCCN) Clinical Practice
Guidelines In Oncology (NCCN Guidelines®) for Central Nervous System
Cancer.

General and administrative expenses for the three months ended September
30, 2017, were $15.2 million compared to $12.7 million for the same
period in 2016, representing an increase of 20 percent. This was
primarily due to increased personnel costs.

Personnel costs for the three months ended September 30, 2017, included
$8.6 million in non-cash share-based compensation expenses, comprised of
$0.1 million in cost of revenues; $1.0 million in research, development
and clinical trials; $1.9 million in sales and marketing; and $5.7
million in general and administrative expenses. Total non-cash
share-based compensation expenses for the third quarter 2016 were $5.6
million.

Net losses for the three months ended September 30, 2017, were $11.5
million compared to net losses of $33.6 million for the same period in
2016.

Financial update for the nine months ended September 30, 2017

For the nine months ended September 30, 2017, net revenues increased to
$123.4 million compared to $52.6 million for the same period in 2016,
representing 134 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 nine months ended September 30, 2017, cost of revenues increased
to $40.0 million compared to $28.9 million for the same period in 2016,
representing an increase of 38 percent. The increase was primarily
driven by the cost of shipping transducer arrays to a higher volume of
commercial patients, as well as an increase in field equipment
depreciation.

Research, development and clinical trials expenses for the nine months
ended September 30, 2017, were $28.1 million compared to $33.0 million
for the same period in 2016, representing a decrease of 15 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, a decrease in expenses related to the approval of our
second generation Optune and a decrease in medical grants, driven
principally by timing, partially offset by an increase in clinical trial
expenses for our LUNAR and METIS trials.

Sales and marketing expenses for the nine months ended September 30,
2017, were $47.5 million compared to $43.8 million for the same period
in 2016, representing an increase of 9 percent. This was primarily due
to increased personnel and shipping costs, reflecting our expanding
commercial operations in the U.S. and Germany, partially offset by a
decrease in advertising and professional services related to the launch
of second generation Optune and the communication of Optune's inclusion
in the updated NCCN Guidelines.

General and administrative expenses for the nine months ended September
30, 2017, were $42.7 million compared to $38.0 million for the same
period in 2016, representing an increase of 12 percent compared to the
same period in 2016. This was primarily due to increased personnel costs
partially offset by a decrease in professional services and other
expenses.

Personnel costs for the nine months ended September 30, 2017, included
$20.8 million in non-cash share-based compensation expenses, comprised
of $0.4 million in cost of revenues; $2.6 million in research,
development and clinical trials; $4.3 million in sales and marketing;
and $13.5 million in general and administrative expenses. Total non-cash
share-based compensation expenses for the nine months ended September
30, 2016 were $16.7 million.

Net losses for the nine months ended September 30, 2017, were $50.7
million compared to net losses of $109.7 million for the same period in
2016.

At September 30, 2017, we had $82.1 million in cash and cash equivalents
and $104.5 million in short-term investments, for a total balance of
$186.6 million in cash, cash equivalents and short-term investments. At
September 30, 2017, we had $100.0 million of principal indebtedness
outstanding under our Loan and Security Agreement with Biopharma Secured
Investments III Holdings Cayman LP.

Anticipated clinical milestones

Trial initiations:

  • Phase 3 pivotal trial in locally advanced pancreatic cancer (Q4 2017)
  • Phase 3 pivotal trial in recurrent ovarian cancer (2018)

Expected data collections:

  • Phase 2 pilot STELLAR trial in mesothelioma (2018)
  • Phase 3 pivotal METIS trial in brain metastases (2020)
  • Phase 3 pivotal LUNAR trial in non-small cell lung cancer (2021)

Conference call details

Novocure will host a conference call and webcast
to discuss third quarter 2017 financial results today, Thursday, October
26, at 8 a.m. EDT. Analysts and investors can participate in the
conference call by dialing (855) 442-6895 for domestic callers and (509)
960-9037 for international callers, using the conference ID 75156706.
The webcast can be accessed live from the Investor Relations page of
Novocure's website, 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, www.novocure.com/investor-relations/.

About Novocure

Novocure is an oncology company developing a profoundly different cancer
treatment utilizing 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, Japan and Israel. For
additional information about the company, please visit www.novocure.com
or follow us at www.twitter.com/novocure.

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.

Consolidated Statements of Operations
USD in thousands
(except share and per share data)

     

Three months ended
September 30,

   

Nine months ended
September 30,

   

Year ended

December 31,

2017   2016 2017   2016 2016
Unaudited Unaudited Audited
Net revenues $ 50,109 $ 21,674 $ 123,365 $ 52,646 $ 82,888
Cost of revenues 15,153 11,118 39,969 28,897 39,870
Impairment of field equipment   -   -   -   6,412   6,412
 
Gross profit   34,956   10,556   83,396   17,337   36,606
 
Operating costs and expenses:

Research, development and
clinical trials

9,273 10,233 28,055 32,996 41,467
Sales and marketing 16,387 15,865 47,503 43,771 59,449
General and administrative   15,215   12,723   42,660   38,010   51,007
 
Total operating costs and expenses   40,875   38,821   118,218   114,777   151,923
 
Operating loss (5,919 ) (28,265 ) (34,822 ) (97,440 ) (115,317 )
Financial expenses, net   2,156   2,189   6,785   3,293   6,147
 
Loss before income tax expense (8,075 ) (30,454 ) (41,607 ) (100,733 ) (121,464 )
Income tax expense   3,423   3,174   9,110   8,944   10,381
 
Net loss $ (11,498 ) $ (33,628 ) $ (50,717 ) $ (109,677 ) $ (131,845 )
 
Basic and diluted net loss per ordinary share $ (0.13 ) $ (0.39 ) $ (0.57 ) $ (1.29 ) $ (1.54 )
 

Weighted average number of ordinary
shares used in computing
basic and
diluted net loss per share

  89,125,646   85,774,874   88,265,835   85,153,644   85,558,448
 

Consolidated Balance Sheets
USD in thousands (except share
data)

      September 30,       December 31,
2017 2016
Unaudited Audited
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents $ 82,104 $ 99,780
Short-term investments 104,453 119,854
Restricted cash 2,129 267
Trade receivables 23,000 6,339
Receivables and prepaid expenses 5,559 10,084
Inventories   24,642   25,549
Total current assets   241,887   261,873
 
LONG-TERM ASSETS:
Property and equipment, net 9,361 9,812
Field equipment, net 8,948 8,808
Severance pay fund 104 88
Other long-term assets   1,978   1,500
Total long-term assets   20,391   20,208
 
TOTAL ASSETS $ 262,278 $ 282,081
 

Consolidated Balance Sheets
USD in thousands (except share
data)

      September 30,     December 31,
2017 2016
Unaudited Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Trade payables $ 14,143 $ 18,356
Other payables and accrued expenses   26,842   18,526
Total current liabilities   40,985   36,882
 
LONG-TERM LIABILITIES:
Long-term loan, net of discount and issuance costs 97,049 96,231
Employee benefit liabilities 2,489 2,590
Other long-term liabilities   5,070   4,033
Total long-term liabilities   104,608   102,854
 
TOTAL LIABILITIES   145,593   139,736
 
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS' EQUITY:
Share capital - - -

Ordinary shares no par value, unlimited shares authorized; issued
and
outstanding: 89,355,679 shares and 87,066,446 shares at
September
30, 2017 (unaudited) and December 31, 2016,
respectively

Additional paid-in capital 689,460 664,154
Accumulated other comprehensive loss (1,462 ) (1,883 )
Accumulated deficit   (571,313 )   (519,926 )
Total shareholders' equity   116,685   142,345
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 262,278 $ 282,081

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