What changed in this filing

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Item 1. Financial Statements

2022-04-28 compared with 2021-10-28 · 79 added, 132 removed, 280 unchanged (43% of the section changed)

3 unchanged sentences

dollars in thousands (except share data)

September 30,

2022 December 31, 2021

19 unchanged sentences

dollars in thousands (except share data)

September 30,

2022 December 31, 2021

9 unchanged sentences

Long-term leases 14,813 12,997

Employee benefits 2,031 5,171

Employee benefit liabilities 3,024 4,543

Other long-term liabilities 156 166

6 unchanged sentences

issued and outstanding:

103,817,566 shares and 102,334,276 shares at September 30, 2021 (unaudited) and December 31, 2020, respectively

104,559,088 shares and 103,971,263 shares at March 31, 2022 (unaudited) and December 31, 2021, respectively

Additional paid-in capital 1,127,782 1,099,589

7 unchanged sentences

dollars in thousands (except share and per share data)

Three months ended September 30, Nine months ended September 30, Year ended December 31,

Three months ended March 31, Year ended December 31,

2022 2021 2021

Unaudited Unaudited Audited

Unaudited Audited

Net revenues $ 137,547 $ 134,695 $ 535,031

2 unchanged sentences

Operating costs and expenses:

Research, development and clinical trials 48,141 32,818 144,372 88,008 132,010

Research, development and clinical studies 42,234 45,916 201,303

Sales and marketing 37,884 31,357 137,057

13 unchanged sentences

dollars in thousands

Three months ended September 30, Nine months ended September 30, Year ended December 31,

Three months ended March 31, Year ended December 31,

2022 2021 2021

Unaudited Unaudited Audited

Unaudited Audited

Net income (loss) $ ( 4,647 ) $ ( 4,128 ) $ ( 58,351 )

14 unchanged sentences

Exercise of options and vested RSUs 587,825 3,148 — — 3,148

Cumulative effect adjustment resulting from ASU 2020-06 early adoption (see Note 5) — ( 132,474 ) — 3,502 ( 128,972 )

Other comprehensive income (loss), net of tax benefit of $ 0

2 unchanged sentences

Balance as of March 31, 2022 (Unaudited) 104,559,088 $ 1,127,782 $ ( 1,328 ) $ ( 690,573 ) $ 435,881

Share-based compensation to employees — 27,881 — — 27,881

Proceeds from issuance of shares 17,291 2,371 — — 2,371

Exercise of options and vested RSUs 436,487 8,695 — — 8,695

Other comprehensive income (loss), net of tax benefit of $ 0

— — 829 — 829

Net income (loss) — — — ( 14,641 ) ( 14,641 )

Balance as of June 30, 2021 (Unaudited) 103,641,238 $ 1,044,732 $ ( 1,119 ) $ ( 646,344 ) $ 397,269

Share-based compensation to employees — 25,758 — — 25,758

Exercise of options and vested RSUs 176,328 3,042 — — 3,042

Other comprehensive income (loss), net of tax benefit of $ 0

— — 219 — 219

Net income (loss) — — — ( 13,124 ) ( 13,124 )

Balance as of September 30, 2021 (Unaudited) 103,817,566 $ 1,073,532 $ ( 900 ) $ ( 659,468 ) $ 413,164

NOVOCURE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

dollars in thousands (except share data)

Ordinary shares Additional

6 unchanged sentences

Exercise of options and vested RSUs 853,184 7,961 — — 7,961

Cumulative effect adjustment resulting from ASU 2020-06 early adoption — ( 132,474 ) — 3,502 ( 128,972 )

Other comprehensive income (loss), net of tax benefit of $ 0

2 unchanged sentences

Balance as of March 31, 2021 (Unaudited) 103,187,460 $ 1,005,785 $ ( 1,948 ) $ ( 631,703 ) $ 372,134

Share-based compensation to employees — 18,770 — — 18,770

Proceeds from issuance of shares 33,075 1,667 — — 1,667

Exercise of options and vested RSUs 624,673 3,685 — — 3,685

Other comprehensive income (loss), net of tax benefit of $ 0

Net income (loss) — — — 1,655 1,655

Balance as of June 30, 2020 (Unaudited) 101,020,721 $ 916,632 $ ( 3,532 ) $ ( 645,278 ) $ 267,822

Share-based compensation to employees — 20,121 — — 20,121

Exercise of options and vested RSUs 707,606 9,514 — — 9,514

Other comprehensive income (loss), net of tax benefit of $ 0

— — 296 — 296

Net income (loss) — — — 9,284 9,284

Balance as of September 30, 2020 (Unaudited) 101,728,327 $ 946,267 $ ( 3,236 ) $ ( 635,994 ) $ 307,037

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2 unchanged sentences

dollars in thousands

Three months ended September 30, Nine months ended September 30, Year ended December 31,

Three months ended March 31, Year ended December 31,

2022 2021 2021

Unaudited Unaudited Audited

Unaudited Audited

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization 2,610 2,370 10,251

Accrued Interest ( 221 ) — ( 94 )

Asset write-downs and impairment of field equipment 135 176 649

15 unchanged sentences

Proceeds from issuance of shares, net $ — $ — $ 4,546

Proceeds from long term debt, net — — — — 558,439

Repayment of long-term loan ( 6 ) ( 150,007 ) ( 19 ) ( 150,022 ) ( 150,028 )

Exercise of options and warrants 3,042 9,514 19,698 17,710 28,428

Repayment of long-term debt ( 7 ) ( 6 ) ( 26 )

Exercise of options 3,148 7,961 21,182

Net cash provided by (used in) financing activities $ 3,141 $ 7,955 $ 25,702

3 unchanged sentences

Cash, cash equivalents and restricted cash at the end of the period $ 191,628 $ 325,977 $ 209,609

NOVOCURE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

dollars in thousands

Three months ended September 30, Nine months ended September 30, Year ended December 31,

2021 2020 2021 2020 2020

Unaudited Unaudited Audited

Supplemental cash flow activities:

10 unchanged sentences

Organization .

NovoCure Limited (including its consolidated subsidiaries, the "Company") was incorporated in the Bailiwick of Jersey and is principally engaged in the development, manufacture and commercialization of Tumor Treating Fields ("TTFields") delivery systems, including Optune and Optune Lua (collectively, our "Products"), for the treatment of solid tumor cancers.

The Company currently markets Optune in the United States ("U.S."), Austria, Germany, Israel, Japan, Sweden and Switzerland.

NovoCure Limited (including its consolidated subsidiaries, the "Company") was incorporated in the Bailiwick of Jersey and is principally engaged in the development, manufacture and commercialization of Tumor Treating Fields ("TTFields") devices, including Optune and Optune Lua (collectively, our "Products"), for the treatment of solid tumor cancers.

The Company currently markets Optune in the United States ("U.S."), Germany, Japan and certain other countries.

The Company currently markets Optune Lua in the U.S.

and European Union.

The Company also has a License and Collaboration Agreement (the "Zai Agreement") with Zai Lab (Shanghai) Co., Ltd.

("Zai") to market Optune in China, Hong Kong, Macau and Taiwan ("Greater China").

See Note 12 to the Consolidated Financial Statements in the 2021 10-K.

During the year ended December 31, 2019, the Company implemented changes to its corporate entity operating structure, including transferring certain intellectual property to its Swiss subsidiary, primarily to align corporate entities with the Company’s evolving operations and business model.

As of January 1, 2022, the effective place of daily management and control of the Company moved to Switzerland and the Company has become a Swiss tax resident.

Financial statement preparation .

6 unchanged sentences

The significant accounting policies applied in the audited annual consolidated financial statements of the Company as disclosed in the 2021 10-K are applied consistently in these unaudited interim consolidated financial statements, except as noted below:

Recently Adopted Accounting Pronouncements.

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt.

Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument.

Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under Accounting Standards Codification ("ASC Topic 815"), Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium.

Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS), which is consistent with the Company’s accounting treatment under the current standard.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis.

The Company early adopted ASU 2020-06, effective January 1, 2021 on a modified retrospective basis.

The impact of the Company’s adoption of ASU 2020-06 on the balance sheet as of January 1, 2021 was an increase in long term debt, net of $ 128,972 , a decrease in additional paid-in capital of $ 132,474 , and a decrease in accumulated deficit of $ 3,502 .

Interest expense recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost.

For additional information see Note 5 of these unaudited consolidated financial statements.

In December 2019, the FASB issued Accounting Standard Update No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance.

ASU 2019-12 is effective for the Company as of January 1, 2021 and the adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Short-term investments

The Company accounts for investments in debt securities in accordance with ASC 320, "Investments—Debt and Equity Securities."

Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date.

The Company classifies part of its debt securities as available-for-sale and the rest of the balance as held-to-maturity since the Company has the intent and ability to hold the securities to maturity.

Available-for-sale debt securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in shareholders’ equity.

Realized gains and losses on sale of investments are included in financial income, net and are derived using the specific identification method for determining the cost of securities sold.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity.

Such amortization together with interest on securities is included in financial income, net.

Each reporting period, the Company evaluates whether declines in fair value below amortized cost are due to expected credit losses, as well as the Company’s ability and intent to hold the investment until a forecasted recovery occurs.

Allowance for credit losses on available-for-sale debt securities are recognized in the Company’s consolidated statements of income, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in stockholders’ equity.

Held-to-maturity debt securities are stated at amortized cost of which is adjusted for amortization of premiums and accretion of discounts to maturity and any credit losses.

Such amortization and interest are included in the consolidated statement of operations as financial income or expenses, as appropriate.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents include items almost as liquid as cash, with maturity periods of three months or less when purchased.

As of September 30, 2021 and December 31, 2020, the Company’s cash and cash equivalents were composed of:

September 30,

As of March 31, 2022 and December 31, 2021, the Company’s cash and cash equivalents were composed of:

2022 December 31,

2 unchanged sentences

Money market funds 92,071 64,668

Treasury bills 239,987 —

Corporate debt securities 2,580 —

Certificate of deposits, notes and term deposits 87,712 140,995

Total cash and cash equivalents $ 190,739 $ 208,802

As of September 30, 2021 and December 31, 2020, the Company’s short-term investments were:

September 30,

Short-term investments include items with maturity dates between three months and one year when purchased.

As of March 31, 2022 and December 31, 2021, the Company’s short-term investments were:

2022 December 31,

1 unchanged sentence

Treasury bills $ 24,857 $ 199,981

Term deposits 44,000 —

Short-term investments $ 243,948 607,902

Other government and governmental agency notes 34,786 —

Corporate debt securities 196,274 104,823

Certificate of deposits, notes and term deposits 485,645 424,094

Total short-term investments $ 741,562 $ 728,898

The Company invests in marketable U.S.

Treasury Bills (“T-bills”) that are classified as held-to-maturity securities.

The amortized cost and recorded basis of the T-bills are presented as cash and cash equivalents and short-term investments according their maturity periods.

Quoted market prices were applied to determine the fair value of cash equivalents and short-term investments, therefore they were categorized as Level 1 in accordance with ASC 820, “Fair Value Measurements and Disclosures.” The estimated fair value of the Company’s short-term investments as of September 30, 2021 and December 31, 2020 was $ 243,964 and $ 607,905 , respectively.

Treasury Bills (“T-bills”), other government and governmental agency notes, term deposits, notes, certificate of deposits, money market funds and corporate debt securities that are classified as "held-to-maturity" or "available for sale" securities.

These investments are presented as cash and cash equivalents or short-term investments, according their maturity periods.

The estimated fair value of the Company’s short-term investments as of March 31, 2022 and December 31, 2021 was $ 741,562 and $ 728,906 , respectively.

As of March 31, 2022 and December 31, 2021, amounts of $ 24,857 and $ 199,988 , respectively were categorized as Level 1 and the remaining balance as level 2 in accordance with ASC 820, “Fair Value Measurements and Disclosures”.

Inventories are stated at the lower of cost or net realizable value.

The weighted average methodology is applied to determine cost.

As of September 30, 2021 and December 31, 2020, the Company’s inventories were composed of:

September 30,

As of March 31, 2022 and December 31, 2021, the Company’s inventories were composed of:

2022 December 31,

9 unchanged sentences

Pledged deposits and bank guarantees.

As of September 30, 2021 and December 31, 2020, the Company pledged bank deposits of $ 1,408 and $ 1,438 , respectively, to cover bank guarantees in respect of its leases of operating

facilities and obtained bank guarantees for the fulfillment of the Company’s lease and other contractual commitments of $ 1,747 and $ 1,687 , respectively .

As of March 31, 2022 and December 31, 2021, the Company pledged bank deposits of $ 2,344 and $ 2,350 , respectively, to cover bank guarantees in respect of its leases of operating facilities and obtained bank guarantees for the fulfillment of the Company’s lease and other contractual commitments of $ 2,692 and $ 2,698 , respectively .

Senior secured revolving credit facility.

On November 6, 2020, the Company entered into a new three-year $ 150,000 senior secured revolving credit facility with a syndicate of relationship banks.

On November 6, 2020, the Company entered into a three-year $ 150,000 senior secured revolving credit facility with a syndicate of relationship banks.

For additional information, see Note 12(c) to the Consolidated Financial Statements in the 2021 10-K.

As of September 30, 2021, the Company had no outstanding balance borrowed under the facility.

As of March 31, 2022, the Company had no outstanding balance borrowed under the facility.

CONVERTIBLE NOTE

On November 5, 2020, the Company issued $ 575,000 aggregate principal amount of 0 % Convertible Senior Notes due 2025 (the “Notes”).

The Notes are senior unsecured obligations of the Company.

The Notes do not bear regular interest, and the principal amount of the Notes will not accrete.

Special interest, if any, payable in accordance with the terms of the Notes will be payable in cash semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2021.

The Notes mature on November 1, 2025, unless earlier repurchased, redeemed or converted.

The Notes mature on November 1, 2025, unless earlier repurchased, redeemed or converted as set forth in the Notes.

As of March 31, 2022, the conditions allowing holders of the Notes to convert were not met.

The Notes are therefore not convertible as of March 31, 2022 and are classified as long-term liability.

For additional information, see Note 10(a) to the Consolidated Financial Statements in the 2021 10-K.

In January 2021, the Company irrevocably elected to settle all conversions of Notes by a combination of cash and the Company's ordinary shares and that the cash portion per $ 1,000 principal amount of Notes for all conversion settlements shall be $ 1,000 .

Accordingly, from and after the date of the election, upon conversion of any Notes, holders of Notes will receive, with respect to each $ 1,000 principal amount of Notes converted, cash in an amount up to $ 1,000 and the balance of the conversion value, if any, in ordinary shares (the "Conversion Shares").

The net carrying amount of the liability and equity components of the Notes as of September 30, 2021 and December 31, 2020 are as follows:

September 30,

The net carrying amount of the liability of the Notes as of March 31, 2022 and December 31, 2021 are as follows:

2022 December 31,

2 unchanged sentences

Principal amount $ 575,000 $ 575,000

Unamortized discount — ( 132,797 )

Unamortized issuance costs ( 11,974 ) ( 12,784 )

Net carrying amount of liability component (1) $ 563,026 $ 562,216

Equity component, net:

Conversion feature $ — $ 136,402

Issuance costs

Net carrying amount of equity component $ — $ 132,474

(1) An effective interest rate determines the fair value of the Notes, therefore they are categorized as Level 3 in accordance with ASC 820, "Fair Value Measurements and Disclosures." The estimated fair value of the Net carrying amount of liability component of the Notes as of September 30, 2021 and December 31, 2020 were $ 476,789 and $ 450,437 , respectively.

(1) An effective interest rate determines the fair value of the Notes, therefore they are categorized as Level 3 in accordance with ASC 820, "Fair Value Measurements and Disclosures." The estimated fair value of the net carrying amount of liability component of the Notes as of March 31, 2022 and December 31, 2021 were $ 454,285 and $ 467,469 , respectively.

Finance expense related to the Notes was as follows:

Three months ended September 30, Nine months ended September 30, Year ended December 31,

2021 2020 2021 2020

Unaudited Unaudited Audited

Amortization of debt discount

$ — $ — $ — $ — $ 3,605

Three months ended March 31, Year ended December 31,

Unaudited Audited

Amortization of debt issuance costs

2 unchanged sentences

$ 810 $ 709 $ 3,339

Effective January 1, 2021, the Company early adopted ASU 2020-06 using the modified retrospective approach .

SHARE OPTION PLANS AND ESPP

1 unchanged sentence

Under the 2015 Plan, the Company can issue various types of equity compensation awards such as share options, restricted shares, performance shares, restricted share units (“RSUs”), performance-based share units (“PSUs”), long-term cash awards and other share-based awards.

Options granted under the 2015 Plan generally have a four-year vesting period and expire ten years after the date of grant.

Options granted under the 2015 Plan that are canceled or forfeited before expiration become available for future grants.

Options granted under the 2015 Plan generally have a two-year or four-year vesting period and expire ten years after the date of grant.

Options granted under the 2015 Plan that are canceled or forfeited before expiration become

available for future grants.

RSUs granted under the 2015 Plan generally vest over a three year period.

1 unchanged sentence

RSUs and PSUs granted under the 2015 Plan that are canceled before expiration become available for future grants.

As of September 30, 2021, 14,467,854 ordinary shares were available for grant under the 2015 Plan.

A summary of the status of the Company’s option plans as of September 30, 2021 and changes during the period then ended is presented below:

Nine months ended September 30, 2021

As of March 31, 2022, 17,070,368 ordinary shares were available for grant under the 2015 Plan.

A summary of the status of the Company’s option plans as of March 31, 2022 and changes during the period then ended is presented below:

Three months ended March 31, 2022

of options Weighted

3 unchanged sentences

Forfeited and canceled ( 13,467 ) 77.31

Outstanding as of September 30, 2021 8,625,486 $ 32.61

Outstanding as of March 31, 2022 8,935,451 $ 36.38

Exercisable options 5,787,733 $ 24.15

For the nine months ended September 30, 2021, options to purchase 918,859 ordinary shares were exercised, resulting in the issuance of 918,859 ordinary shares.

A summary of the status of the Company’s RSUs and PSUs as of September 30, 2021 and changes during the period then ended is presented below.

Nine months ended September 30, 2021

For the three months ended March 31, 2022, options to purchase 175,650 ordinary shares were exercised, resulting in the issuance of 175,650 ordinary shares.

A summary of the status of the Company’s RSUs and PSUs as of March 31, 2022 and changes during the period then ended is presented below.

Three months ended March 31, 2022

of RSU/PSUs Weighted

4 unchanged sentences

Forfeited and cancelled ( 15,928 ) 99.97

Unvested as of September 30, 2021 (1) 4,458,832 65.44

(1) Includes PSUs that have a mix of service, market and other milestone performance vesting conditions which are vested upon achievements of performance milestones which are not probable, as of September 30, 2021, in accordance with ASC 718 as follows:

September 30, 2021

Unvested as of March 31, 2022 (1) 4,995,559 66.83

(1) Includes PSUs that have a mix of service, market and other milestone performance vesting conditions which are vested upon achievements of performance milestones which are not probable, as of March 31, 2022, in accordance with ASC 718 as follows:

March 31, 2022

PSUs Fair value at grant date per PSU Total fair value at grant date

5 unchanged sentences

189,626 $ 114.26 21,667

3,154,536 $ 171,935

These PSUs will be expensed over the performance period when the vesting conditions become probable in accordance with ASC 718.

1 unchanged sentence

In the United States, the ESPP is intended to be an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code and the provisions of the ESPP are construed in a manner consistent with the requirements of such section.

As of September 30, 2021, 4,989,076 ordinary shares were available to be purchased by eligible employees under the ESPP.

As of March 31, 2022, 4,954,997 ordinary shares were available to be purchased by eligible employees under the ESPP.

The fair value of share-based awards was estimated using the Black-Scholes model for all equity grants.

1 unchanged sentence

We assessed fair value using the following underlying assumptions:

Nine months ended September 30, Year ended December 31,

Three months ended March 31, Year ended December 31,

Unaudited Audited

9 unchanged sentences

Risk-free interest rate 0.19 % 0.09 % 0.05 %- 0.09 %

0.17 %- 1.57 %

Dividend yield 0.00 % 0.00 % 0.00 %

The total non-cash share-based compensation expense related to all of the Company’s equity-based awards recognized for the three and nine months ended September 30, 2021 and 2020 and the year ended December 31, 2020 was:

Three months ended September 30, Nine months ended September 30, Year ended December 31,

2021 2020 2021 2020

Unaudited Unaudited Audited

The total non-cash share-based compensation expense related to all of the Company’s equity-based awards recognized for the three months ended March 31, 2022 and 2021 and the year ended December 31, 2021 was:

Three months ended March 31, Year ended December 31,

Unaudited Audited

Cost of revenues $ 952 $ 733 $ 3,471

Research, development and clinical trials 7,761 5,101 21,390 12,275 18,125

Research, development and clinical studies 6,801 5,124 27,597

Sales and marketing 6,655 4,471 22,673

5 unchanged sentences

The following table sets forth the computation of the Company’s basic and diluted net income (loss) per ordinary share:

Three months ended September 30, Nine months ended September 30, Year ended December 31,

2021 2020 2021 2020

Unaudited Unaudited Audited

Three months ended March 31, Year ended December 31,

Unaudited Audited

Net income (loss) attributable to ordinary shares as reported used in computing basic and diluted net income (loss) per share $ ( 4,647 ) $ ( 4,128 ) $ ( 58,351 )

3 unchanged sentences

Restricted share units — — —

ESPP — 14,613 — 14,613 33,616

Weighted average number of ordinary shares used in computing diluted net income (loss) per share 104,186,120 102,633,545 103,433,274

5 unchanged sentences

The following table presents long-lived assets by location:

September 30,

2022 December 31,

8 unchanged sentences

The Company’s revenues by geographic region, based on the customer’s location, are summarized as follows:

Three months ended September 30, Nine months ended September 30, Year ended December 31,

2021 2020 2021 2020

Unaudited Unaudited Audited

Three months ended March 31, Year ended December 31,

Unaudited Audited

United States $ 97,416 $ 85,908 $ 353,110

6 unchanged sentences

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 1. Financial Statements