What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-10-29 compared with 2020-07-30 · 92 added, 89 removed, 185 unchanged (49% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist you in better understanding and evaluating our financial condition and results of operations.

We encourage you to read this MD&A in conjunction with our unaudited consolidated financial statements and the notes thereto for the period ended June 30, 2020 included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We encourage you to read this MD&A in conjunction with our unaudited consolidated financial statements and the notes thereto for the period ended September 30, 2020 included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

This discussion contains forward-looking statements that involve risks and uncertainties.

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With respect to the treatment of GBM, our sales and marketing efforts are principally focused on driving adoption with both neuro-oncologists and radiation oncologists.

With respect to the treatment of MPM, our commercial efforts are principally focused on generating awareness with radiation oncologists and on establishing a dialogue with third-party payers around access to Optune Lua.

With respect to the treatment of MPM, our commercial efforts are principally focused on generating awareness with radiation oncologists and medical oncologists who treat cancer indications of the torso and on establishing a dialogue with third-party payers around access to Optune Lua.

We are expanding our commercial operations into France with an initial focus on developing key opinion leader relationships in GBM and establishing a path to reimbursement for our Products.

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In March 2020, the German Federal Joint Committee (G-BA) updated its directive for Contracted Medical Care to include Tumor Treating Fields, establishing national reimbursement for Optune in newly diagnosed GBM in Germany.

As of June 30, 2020, the total number of contracted GBM lives was approximately 264 million in the U.S., approximately 111 million in our active EMEA markets and approximately 126 million in Japan.

The COVID-19 pandemic did not have a material adverse effect on our financial results in the first half of 2020.

There was no material impact to our commercial business or global supply chain from the COVID-19 pandemic, and we do not anticipate a material impact going forward based on what we know as of the date of this filing.

The anticipated timing of final data from our ongoing clinical trials is unchanged from what was disclosed in our Quarterly Report on Form 10-Q filed on April 30, 2020 (“First Quarter 2020 10-Q”).

We are following the guidance of the World Health Organization, the U.S.

Centers for Disease Control and Prevention, and local health authorities in all of our active markets and we have adjusted the way we conduct business to adapt to the evolving situation.

For example, our field-based patient support teams continue to conduct in-person patient visits when possible and leverage technology to virtually conduct new patient starts and provide ongoing patient support visits.

We are respecting any restrictions on external visitors at the cancer centers, hospitals and research institutions we serve and have implemented web-based technologies to engage healthcare professionals and enable information sharing.

Many of the medical conferences where we present have been moved to virtual formats, and we have been able to present our findings and speak with thought leaders remotely.

The extent to which the COVID-19 pandemic may impact our business and clinical trials in the future will depend on further developments, which are highly uncertain and cannot be predicted with confidence.

The COVID-19 pandemic may also have the effect of heightening many of the other risks described in our risk factors disclosed in our 2019 10-K and First Quarter 2020 10-Q.

We continue to have productive discussions with the Federal Office of Public Health in Switzerland to establish coverage for Optune and plan to submit a full reimbursement package to establish coverage for Optune to the French Ministry of Health in upcoming quarters.

As of September 30, 2020, the total number of contracted GBM lives was approximately 274 million in the U.S., approximately 111 million in our active EMEA markets and approximately 126 million in Japan.

We believe the mechanism of action behind Tumor Treating Fields therapy may be broadly applicable to solid tumor cancers.

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We are also conducting phase 2 pilot trials evaluating the use of Tumor Treating Fields in liver cancer and gastric cancer.

In July 2020, we enrolled the last patient in HEPANOVA, a phase 2 pilot trial testing Tumor Treating Fields in combination with sorafenib in advanced liver cancer with final data collection to occur in six months.

We plan to initiate additional randomized trials in GBM in order to further advance the scientific evidence supporting the use of Optune in GBM and to gather additional information about Optune's optimal use.

We anticipate expanding our clinical pipeline over time to study the safety and efficacy of Tumor Treating Fields for additional solid tumor indications.

In July 2020, we enrolled the last patient in HEPANOVA, a phase 2 pilot trial testing Tumor Treating Fields in combination with sorafenib in advanced liver cancer with final data expected in the first quarter of 2021.

We plan to initiate additional randomized trials in GBM in order to further advance the scientific evidence supporting the use of Optune in GBM

and to gather additional information about Optune's optimal use.

We also anticipate expanding our clinical pipeline over time to study the safety and efficacy of Tumor Treating Fields for additional solid tumor indications.

We have several product development programs underway intended to improve efficacy and usability for patients.

For example, this quarter, we completed initial development of MAXPOINT TM treatment planning software to optimize Tumor Treating Fields dosing with the potential to improve the efficacy of our therapy.

Additionally, we enrolled the first patient in our EF-33 pilot study to test the potential incremental survival benefit of delivering Tumor Treating Fields through high-intensity arrays.

In July 2020, we enrolled the first patient in our EF-33 pilot study to test the potential incremental survival benefit of delivering Tumor Treating Fields through high-intensity arrays.

Additionally, during the third quarter of 2020, we initiated a beta testing program with a select number of radiation oncology partners to test MAXPOINT TM treatment planning software, which we developed to optimize Tumor Treating Fields dosing with the potential to improve the efficacy of our therapy.

The table below presents the current status of the ongoing or completed clinical and product development programs in our pipeline and anticipated timing of final data.

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We plan to conduct a phase 2 pilot study of Tumor Treating Fields concomitant with KEYTRUDA for first-line treatment of intrathoracic advanced or metastatic, PD-L1 positive NSCLC.

The study is expected to begin in the second half of 2020.

The study is now expected to begin in the first half of 2021 due to a modification in the regulatory strategy.

In October 2020, we entered into a strategic alliance with the NYU Grossman School of Medicine’s Department of Radiation Oncology that provides a framework for preclinical and clinical development projects studying Tumor Treating Fields.

The research to be conducted is geared to further the understanding of the interaction between Tumor Treating Fields and radiation therapy, to study Tumor Treating Fields in combination with various pharmacological agents, and to identify new indications for use

In 2018, we entered into a License and Collaboration Agreement (the “Zai Agreement”) between us and Zai Lab (Shanghai) Co., Ltd.

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We view our operations and manage our business in one operating segment.

For the three and six months ended June 30, 2020, our net revenues were $115.9 million and $217.8 million, respectively.

Our net income for the three and six months ended June 30, 2020 was $1.7 million and $5.6 million, respectively.

As of June 30, 2020, we had an accumulated deficit of $645.3 million.

For the three and nine months ended September 30, 2020, our net revenues were $132.7 million and $350.4 million, respectively.

Our net income for the three and nine months ended September 30, 2020 was $9.3 million and $14.9 million, respectively.

As of September 30, 2020, we had an accumulated deficit of $636.0 million.

Our accumulated deficit primarily resulted from costs incurred in connection with our preclinical and clinical trial programs, costs incurred to commercialize our Products and general and administrative costs necessary to operate as a global oncology business.

Impact of COVID-19

The COVID-19 pandemic did not have a material impact on our financial results through the third quarter of 2020.

During the first three quarters of 2020, our commercial business or global supply chain was not materially affected by the COVID-19 pandemic, and we believe the anticipated timing of final data from our ongoing clinical trials has not been adversely impacted since our Quarterly Report on Form 10-Q filed on April 30, 2020 and amended on Form 10-Q/A filed on October 2, 2020 (“First Quarter 2020 10-Q”).

We believe the prolonged disruption caused by COVID-19 is resulting in increased volatility across global health care systems, such as fluctuations in patient volumes and changes in patterns of care in certain regions, which might materially impact our business and clinical trials in the future.

For example, we have seen some fluctuations in the timing of surgeries and radiation therapy in certain regions, which has had some influence on when patients are prescribed Optune.

Since the pandemic began, we have generally been following the guidance of the World Health Organization, the U.S.

Centers for Disease Control and Prevention, and local health authorities in all of our active markets and we have adjusted the way we conduct business to adapt to the evolving situation.

Many of the medical conferences where we present have been moved to virtual formats, and we have been able to present our findings and speak with thought leaders remotely.

The COVID-19 pandemic may also have the effect of heightening many of the other risks described in our risk factors disclosed in our 2019 10-K and our First Quarter 2020 10-Q.

Critical Accounting Policies and Estimates

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Results of Operations

The following discussion provides an analysis of our results of operations and reasons for material changes therein for the three and six months ended June 30, 2020 as compared to the three and six months ended June 30, 2019.

The following discussion provides an analysis of our results of operations and reasons for material changes therein for the three and nine months ended September 30, 2020 as compared to the three and nine months ended September 30, 2019.

The tables contained in this section report U.S.

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The following table sets forth our consolidated statements of operations data:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

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The following table details the share-based compensation expense included in costs and expenses:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

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Key performance indicators

We believe certain commercial operating statistics are useful to investors in evaluating our commercial business as they help our management and investors evaluate and compare the adoption of our Products from period to period.

We believe certain commercial operating statistics are useful to investors in evaluating our commercial business as they help our management team and investors evaluate and compare the adoption of our Products from period to period.

The number of active patients on therapy is our principal revenue driver.

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The following table includes certain commercial operating statistics for and as of the end of the periods presented.

September 30,

Operating statistics 2020 2019

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Total 3,361 2,751

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

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Total 1,371 1,319 4,202 3,991

In the U.S., there were 11 active MPM patients on therapy as of June 30, 2020 and 15 MPM prescriptions were received in the three months ended June 30, 2020.

Three and six months ended June 30, 2020 compared to three and six months ended June 30, 2019

Three months ended June 30, Six months ended June 30,

In the U.S., there were 13 active MPM patients on therapy as of September 30, 2020 and 13 MPM prescriptions were received in the three months ended September 30, 2020.

Three and nine months ended September 30, 2020 compared to three and nine months ended September 30, 2019

Three months ended September 30, Nine months ended September 30,

2020 2019 % Change 2020 2019 % Change

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Net revenues.

Net revenues increased 34% to $115.9 million for the three month period ending June 30, 2020 from $86.7 million for the same period in 2019, and increased 36% to $217.8 million for the six month period ended June 30, 2020 from $160.0 million for the same period in 2019.

The increase in both the three and six month periods resulted primarily from an increase of 552 active patients in our currently active markets, representing 20% growth, and an improvement in the net revenues booked per active patient.

The increase in net revenues per active patient benefited from continued improvements in U.S.

reimbursement rates.

We recognized $10.8 million and $18.9 million in net revenues from Medicare fee-for-service beneficiaries billed under the coverage policy effective on September 1, 2019 for the three and six month periods ended June 30, 2020, respectively.

This was our third full quarter progressing through the administrative ramp-up with Medicare, and we have gained a good understanding of how to ensure timely processing of clean claims.

Approximately 60% of our Medicare active patients are currently eligible for coverage under the policy, as they started therapy after coverage

We continue to gain experience processing claims that require an appeal and expect we will gain sufficient experience over the next two quarters to recognize additional revenue from these Medicare beneficiaries.

Three months ended June 30, Six months ended June 30,

Net revenues increased 44% to $132.7 million for the three month period ending September 30, 2020 from $92.1 million for the same period in 2019, and increased 39% to $350.4 million for the nine month period ended September 30, 2020 from $252.1 million for the same period in 2019.

The increase in both the three and nine month periods resulted primarily from an increase of 610 active patients in our currently active markets, representing 22% growth, and a durable improvement in the net revenues booked per active patient, as well as an increase in collaboration revenues from our partnership with Zai Lab.

We recorded $10 million and $27 million in revenues from Medicare fee-for-service beneficiaries billed under the coverage policy effective on September 1, 2019 for the three and nine month periods ended September 30, 2020, respectively.

We have gained a good understanding of how to ensure timely processing of Medicare claims and have sufficient experience to recognize approximately two-thirds of the expected contribution from Medicare beneficiaries.

In the third quarter of 2020, we also recognized approximately $8 million in incremental net revenues

compared to the first two quarters of 2020 resulting from the successful appeal of previously denied claims for Medicare fee-for-service beneficiaries billed prior to established coverage.

Three months ended September 30, Nine months ended September 30,

2020 2019 % Change 2020 2019 % Change

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Cost of revenues.

Our cost of revenues increased by 21%, to $25.5 million for the three months ended June 30, 2020 from $21.1 million for the same period in 2019, and increased by 22% to $50.0 million for the six months ended June 30, 2020 from $40.9 million for the same period in 2019.

For both the three and six month periods, the increase in cost of revenues was primarily due to the cost of shipping transducer arrays to a higher volume of commercial patients, partially offset by benefits of ongoing efficiency initiatives and scale.

Gross margin was 78% for the three months ended June 30, 2020 and 76% for the three months ended June 30, 2019.

Gross margin was 77% for the six months ended June 30, 2020 and 74% for the six months ended June 30, 2019.

Our cost of revenues increased by 24%, to $28.4 million for the three months ended September 30, 2020 from $22.9 million for the same period in 2019, and increased by 23% to $78.4 million for the nine months ended September 30, 2020 from $63.8 million for the same period in 2019.

For both the three and nine month periods, the increase in cost of revenues was primarily due to the cost of shipping transducer arrays to a higher volume of commercial patients and increasing shipments of equipment to Zai Lab, partially offset by benefits of ongoing efficiency initiatives and scale.

Gross margin was 79% for the three months ended September 30, 2020 compared to 75% for the three months ended September 30, 2019.

Gross margin was 78% for the nine months ended September 30, 2020 compared to 75% for the nine months ended September 30, 2019.

Operating Expenses.

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2020 2019 % Change 2020 2019 % Change

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Research, development and clinical trials expenses.

Research, development and clinical trials expenses increased 54% to $29.9 million for the three month period ended June 30, 2020 from $19.5 million for the same period in 2019, and increased 51% to $55.2 million for the six month period ended June 30, 2020 from $36.5 million for the same period in 2019.

For both the three and six month periods, the change is primarily due to an increase in clinical trial and personnel expenses for our phase 3 pivotal and phase 4 post-marketing trials, an increase in development and personnel expenses to support our product development programs, increased investments in preclinical research and the expansion of our medical affairs activities.

Research, development and clinical trials expenses increased 75% to $32.8 million for the three month period ended September 30, 2020 from $18.8 million for the same period in 2019, and increased 59% to $88.0 million for the nine month period ended September 30, 2020 from $55.3 million for the same period in 2019.

For both the three and nine month periods, the change is primarily due to an increase in clinical trial and personnel expenses for our phase 3 pivotal and post-marketing trials, an increase in development and personnel expenses to support our product development programs, increased investments in preclinical research and the expansion of our medical affairs activities.

We continue to invest in the advancement of Tumor Treating Fields' science and technology as part of our long-term value creation strategy.

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Sales and marketing expenses.

Sales and marketing expenses increased 20% to $28.5 million for the three months ended June 30, 2020 from $23.7 million for the same period in 2019, and increased 24% to $57.3 million for the six months ended June 30, 2020 from $46.0 million for the same period in 2019.

For both the three and six month periods, the change was primarily due to an increase in personnel costs to support our growing commercial business and reimbursement efforts and an increase in marketing expenses related to the launch of Optune Lua for MPM.

Sales and marketing expenses increased 23% to $29.4 million for the three months ended September 30, 2020 from $23.8 million for the same period in 2019, and increased 24% to $86.7 million for the nine months ended September 30, 2020 from $69.9 million for the same period in 2019.

For both the three and nine month periods, the change was primarily due to an increase in personnel and professional services costs to support our growing commercial business and reimbursement efforts and an increase in marketing expenses related to the launch of Optune Lua for MPM.

General and administrative expenses.

General and administrative expenses increased 20% to $25.4 million for the three months ended June 30, 2020 from $21.2 million for the same period in 2019, and increased 25% to $52.0 million for the six months ended June 30, 2020 from $41.5 million for the same period in 2019.

For both the three and six month periods, the change was primarily due to an increase in personnel costs, insurance premiums and professional services.

Three months ended June 30, Six months ended June 30,

General and administrative expenses increased 19% to $27.1 million for the three months ended September 30, 2020 from $22.7 million for the same period in 2019, and increased 23% to $79.1 million for the nine months ended September 30, 2020 from $64.2 million for the same period in 2019.

For both the three and nine month periods, the change was primarily due to an increase in personnel costs, insurance premiums and professional services.

Three months ended September 30, Nine months ended September 30,

2020 2019 % Change 2020 2019 % Change

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Financial expenses, net.

Financial expenses increased 111% to $2.6 million for the three months ended June 30, 2020 from $1.2 million for the same period in 2019, and increased 40% to $5.1 million for the six months ended June 30, 2020 from $3.6 million for the same period in 2019.

For both the three and six month periods, the change was primarily due to declining interest income from cash balances and short-term investments.

Three months ended June 30, Six months ended June 30,

Financial expenses increased 56% to $4.0 million for the three months ended September 30, 2020 from $2.6 million for the same period in 2019, and increased 47% to $9.0 million for the nine months ended September 30, 2020 from $6.2 million for the same period in 2019.

For both the three and nine month periods, the change was primarily due to a prepayment premium related to the 2018 credit facility.

Three months ended September 30, Nine months ended September 30,

2020 2019 % Change 2020 2019 % Change

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Income taxes.

Income taxes increased 95% to $2.4 million for the three months ended June 30, 2020 from $1.2 million for the same period in 2019, and decreased 251% to a benefit of $7.4 million for the six months ended June 30, 2020 from $4.9 million for the same period in 2019.

For the three months ended June 30, 2020, the increase reflects a change in the mix of applicable statutory tax rates in certain active jurisdictions.

For the six months ended June 30, 2020, the Company recorded a net tax benefit of $11.3 million in the first quarter of 2020 in accordance with the changes to the U.S.

Income taxes increased 378% to $1.8 million for the three months ended September 30, 2020 from $(0.6) million for the same period in 2019, and decreased 232% to a benefit of $5.6 million for the nine months ended September 30, 2020 from $4.3 million for the same period in 2019.

For the three months ended September 30, 2020, the increase is primarily due to a change in amortization of intellectual property rights and a change in the mix of applicable statutory tax rates in certain active jurisdictions.

For the nine months ended September 30, 2020 the decrease is primarily due to net operating loss carry-backs and a change in the mix of applicable statutory tax rates in certain active jurisdictions The Company recorded a net tax benefit of $11.3 million in the first quarter of 2020 resulting from net operating loss carry-backs in the U.S.

in accordance with the changes to the U.S.

tax code enacted in response to the economic impacts of COVID-19 signed into legislation on March 27, 2020.

The benefit results from net operating loss carry-backs in the U.S.

The change also reflects a change in the mix of applicable statutory tax rates in certain active jurisdictions.

Non-GAAP financial measures

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The following table reconciles net income (loss), which is the most directly comparable GAAP operating performance measure, to Adjusted EBITDA.

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2020 2019 % Change 2020 2019 % Change

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Adjusted EBITDA $ 37,331 $ 20,125 85 % $ 80,434 $ 42,645 89 %

Adjusted EBITDA increased by 64% to $28.0 million for the three months ended June 30, 2020 from $17.1 million for the same period in 2019, and increased by 91% to $43.1 million for the six months ended June 30, 2020 from $22.5 million for the same period in 2019.

This improvement in fundamental financial performance in both the three and six month periods was driven by net revenue growth coupled with an ongoing commitment to disciplined management of expenses.

Three months ended June 30, Six months ended June 30,

Adjusted EBITDA increased by 85% to $37.3 million for the three months ended September 30, 2020 from $20.1 million for the same period in 2019, and increased by 89% to $80.4 million for the nine months ended September 30, 2020 from $42.6 million for the same period in 2019.

This improvement in fundamental financial performance in both the three and nine month periods was driven by net revenue growth coupled with an ongoing commitment to disciplined management of expenses.

Three months ended September 30, Nine months ended September 30,

2019 2018 % Change 2019 2018 % Change

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We have incurred significant losses and cumulative negative cash flows from operations since our founding in 2000.

As of June 30, 2020, we had an accumulated deficit of $645.3 million.

As of September 30, 2020, we had an accumulated deficit of $636.0 million.

To date, we have primarily financed our operations through the issuance and sale of equity and the proceeds from long-term loans.

At June 30, 2020, we had $346.7 million in cash, cash equivalents and short-term investments, an increase of $20.6 million compared to $326.1 million at December 31, 2019.

The increase in our cash, cash equivalents and short-term investments was primarily due to cash flow from operations and the exercise of options and proceeds from the issuance of shares, partially offset by the purchase of field equipment.

We believe our cash, cash equivalents and short-term investments as of June 30, 2020 are sufficient for our operations for at least the next 12 months based on our existing business plan and our ability to control the timing of significant expense commitments.

At September 30, 2020, we had $234.5 million in cash, cash equivalents and short-term investments, a decrease of $91.6 million compared to $326.1 million at December 31, 2019.

The decrease in our cash, cash equivalents and short-term investments was primarily due to the prepayment of the 2018 credit facility in the amount of $150 million, partially offset by the cash flow from operations and the exercise of options and proceeds from the issuance of shares.

We believe our cash, cash equivalents and short-term investments as of September 30, 2020 are sufficient for our operations for at least the next 12 months based on our existing business plan and our ability to control the timing of significant expense commitments.

We expect that our research, development and clinical trials expenses, sales and marketing expenses and general and administrative expenses will continue to increase over the next several years and may outpace our gross profit.

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The following summary of our cash flows for the periods indicated has been derived from our unaudited consolidated financial statements, which are included elsewhere in this Quarterly Report:

Six months ended June 30,

Nine months ended September 30,

2020 2019 Change % Change

Net cash provided by (used in) operating activities $ 14,698 $ 4,751 $ 9,947 209 %

Net cash provided by operating activities $ 45,667 $ 19,658 $ 26,009 132 %

Net cash provided by (used in) investing activities 140,791 (4,911) 145,702 (2967) %

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Operating activities.

Net cash provided by (used in) operating activities primarily represents our net income (loss) for the periods presented.

Net cash provided by operating activities primarily represents our net income (loss) for the periods presented.

Adjustments to net income (loss) for non-cash items include share-based compensation, depreciation and amortization, and asset write-downs and impairment of field equipment.

Operating cash flows are also impacted by changes in working capital, principally trade receivables, trade payables and accrued expenses, inventories, and other long-term assets.

Net cash provided by operating activities was $14.7 million for the six months ended June 30, 2020, as compared to $4.8 million used in operating activities for the six months ended June 30, 2019.

Gross profit increased by $48.7 million for the six months ended June 30, 2020 versus the six months ended June 30, 2019, fully funding incremental investments of $18.7 million in research and development and $21.8 million in sales, marketing, general and administrative expenses.

The transition to positive cash flow from operations was primarily driven by a decrease in net loss and an increase in the amount of non-cash share-based compensation included in the reported net income (loss), offset by an increase in working capital.

Net cash provided by operating activities was $45.7 million for the nine months ended September 30, 2020, as compared to $19.7 million used in operating activities for the nine months ended September 30, 2019.

Gross profit increased by $83.8 million for the nine months ended September 30, 2020 versus the nine months ended September 30, 2019, fully funding incremental investments of $32.7 million in research and development and $31.7 million in sales, marketing, general and administrative expenses.

The increase in positive cash flow from operations

was primarily driven by an increase in net profit and an increase in the amount of non-cash share-based compensation included in the reported net income (loss) partially offset by an increase in working capital.

Investing activities.

Our investing activities consist primarily of capital expenditures to purchase property and equipment and field equipment, as well as investments in and redemptions of our short-term investments.

Net cash used in investing activities was $6.4 million for the six months ended June 30, 2020, compared to $2.7 million for the six months ended June 30, 2019.

The increase in net cash used in investing activities was primarily attributable to the purchase of property and equipment to support our growing commercial business and net proceeds generated from the sale of investments for cash needs in the same period in 2019.

Net cash provided by investing activities was $140.8 million for the nine months ended September 30, 2020, compared to $4.9 million used in investing activities for the nine months ended September 30, 2019.

The increase in net cash provided by investing activities was primarily attributable to the net proceeds generated from the sale of investments for cash needs to prepay the 2018 credit facility.

Financing activities.

To date, our primary financing activities have been the sale of equity and the proceeds from long-term loans.

Net cash provided by financing activities was $9.8 million for the six months ended June 30, 2020, as compared to $37.6 million for the six months ended June 30, 2019.

The year-over-year decrease in cash provided by financing activities was primarily related to a decrease in proceeds from the exercise of options.

As of June 30, 2020, our material outstanding indebtedness consisted of $150.0 million of principal outstanding under our term loan credit facility (the “2018 Credit Facility”).

Interest on the outstanding loan is 9% annually, payable quarterly in arrears.

The 2018 Credit Facility will mature on February 7, 2023, at which time any unpaid principal and accrued unpaid interest in respect of the loan will be due and payable.

We may prepay amounts outstanding under the 2018 Credit Facility in full at any time.

Any prepayment (whether permitted or mandatory) is subject to a prepayment premium and/or make-whole payment.

The prepayment fee if we prepay outstanding loan amounts prior to February 7, 2021 is 2.0%, and is 1.0% if made after the February 7, 2021 but prior to February 7, 2022.

If we prepay outstanding loan amounts prior to August 7, 2020, we must pay a make-whole amount equal to the amount of interest that would have accrued on the amount of all principal we prepaid from the date of such prepayment through February 7, 2021.

We must prepay the 2018 Credit Facility (i) in full or in part upon the entry into certain licensing arrangements and (ii) in full in the event of a change of control.

All obligations under the 2018 Credit Facility are guaranteed by certain of our domestic direct and indirect subsidiaries.

In addition, the obligations under the 2018 Credit Facility are secured by a first-priority security interest in substantially all of the property and assets of, as well as the equity interests owned by, us and the other guarantors.

The 2018 Credit Facility contains other customary covenants.

As of June 30, 2020, we were in compliance with such covenants.

Net cash used in financing activities was $130.6 million for the nine months ended September 30, 2020, as compared to $53.1 million provided by financing activities for the nine months ended September 30, 2019.

The year-over-year decrease in cash provided by financing activities was primarily related to the prepayment of the 2018 credit facility and a decrease in proceeds from the exercise of options.

On August 18, 2020, we terminated our 2018 term loan credit facility (the “2018 Credit Facility”) by repaying in full the term loan issued thereunder.

The repayment included $150.0 million in principal repayment and $3.0 million in prepayment premium, plus accrued and unpaid interest and expenses payable through the payoff date.

The un-amortized issuance costs in the amount of $478 that were fully amortized upon the repayment and the prepayment premium were included in our third quarter finance expenses.

The 2018 Credit Facility consisted of the term loan, originally maturing on February 7, 2023, with interest on the outstanding loan of 9% annually, payable quarterly in arrears.

Obligations under the 2018 Credit Facility were guaranteed by certain of our domestic direct and indirect subsidiaries and were secured by a first-priority security interest in substantially all of the property and assets of, as well as the equity interests owned by, us and the other guarantors, all of which have been released.

We are in the process of negotiating a new $150.0 million senior secured revolving credit facility with a syndicate of relationship banks.

If completed, the facility would provide, subject to certain conditions and limitations, for an increase in the revolving credit commitments to an aggregate principal amount not to exceed $250.0 million.

The indicative interest rate for the loans is a sliding scale between LIBOR plus 2.75% and LIBOR plus 3.25% per annum.

The commitments under the revolving credit facility would be guaranteed by certain of our subsidiaries and secured by a first-lien of our and certain subsidiary assets.

While we expect to enter into this facility, there can be no assurances that closing will occur or will close on these terms.

Contractual Obligations and Commitments

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis