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Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-10-27 · 106 added, 132 removed, 169 unchanged (58% 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 September 30, 2022 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 March 31, 2023 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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We are a global oncology company with a proprietary platform technology called Tumor Treating Fields ("TTFields"), which are electric fields that exert physical forces to kill cancer cells via a variety of mechanisms.

Our key priorities are to drive commercial adoption of Optune and Optune Lua, our commercial TTFields devices, and to advance clinical and product development programs intended to extend overall survival in some of the most aggressive forms of cancer.

Our key priorities are to drive commercial adoption of Optune, our commercial TTFields device, and to advance clinical and product development programs intended to extend overall survival in some of the most aggressive forms of cancer.

Optune is approved by the U.S.

Food and Drug Administration ("FDA") under the Premarket Approval ("PMA") pathway for the treatment of adult patients with newly diagnosed glioblastoma ("GBM") together with temozolomide, a chemotherapy drug, and for adult patients with GBM following confirmed recurrence after chemotherapy as monotherapy treatment.

We also have a CE certificate to market Optune for the treatment of GBM in the European Union ("EU"), as well as approval or local registration in the United Kingdom ("UK"), Japan and certain other countries.

Optune Lua is approved by the FDA under the Humanitarian Device Exemption ("HDE") pathway for the treatment of adult patients with malignant pleural mesothelioma ("MPM") together with standard chemotherapies.

We also have a CE certificate to market Optune for the treatment of GBM in the European Union ("EU"), as well as approval or local registration in the United Kingdom ("UK"), Japan, Canada and certain other countries.

Optune Lua is approved by the FDA under the Humanitarian Device Exemption ("HDE") pathway to treatment malignant pleural mesothelioma ("MPM") together with standard chemotherapies.

We have also received CE certification in the EU and approval or local registration to market Optune Lua in certain other countries.

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We are actively evaluating opportunities to expand our international footprint.

As a highly versatile first-in-class modality, TTFields therapy has significant potential for broad applicability across solid tumor types and lines of therapy.

Currently, we are conducting phase 3 pivotal studies evaluating the use of TTFields in non-small cell lung cancer ("NSCLC"), ovarian cancer, brain metastases from NSCLC, and pancreatic cancer.

Additionally, we have multiple ongoing or recently completed phase 2 pilot studies evaluating the use of TTFields.

These studies are in gastric cancer and stage 3 NSCLC, as well as testing the potential incremental survival benefit of TTFields delivered using high-intensity arrays versus standard arrays.

We are also currently conducting a global phase 4 post-marketing study testing the potential survival benefit of initiating Optune concurrent with radiation therapy versus following radiation therapy in patients with newly diagnosed GBM.

In March 2023, we announced the reimbursement and availability of Optune together with temozolomide for the treatment of adult patients with newly diagnosed GBM in France.

The order registering Optune on the List of Reimbursable Product and Services became effective March 15, 2023 and we are now treating patients.

We believe the physical mechanisms of action behind TTFields therapy may be broadly applicable to solid tumor cancers.

In January 2023, we announced top line results from our pivotal LUNAR study evaluating the use of TTFields in the treatment of non-small cell lung cancer ("NSCLC") together with standard therapies.

Patients treated with TTFields and standard therapies demonstrated a statistically significant and clinically meaningful improvement in overall survival over standard therapies alone.

The LUNAR study also showed a statistically significant and clinically meaningful improvement in overall survival when patients were treated with TTFields and immune checkpoint inhibitors, as compared to those treated with immune checkpoint inhibitors alone, and a positive trend in overall survival when patients were treated with TTFields and docetaxel versus docetaxel alone.

Full results from the LUNAR study will be presented at the American Society of Clinical Oncology annual meeting in June.

In addition to the LUNAR study, we are conducting pivotal studies evaluating the use of TTFields in the treatment of ovarian cancer, brain metastases from NSCLC ("brain metastases") and pancreatic cancer.

We are also conducting a global pivotal study testing the potential survival benefit of initiating Optune concurrent with radiation therapy versus following radiation therapy in patients with newly diagnosed GBM.

In March 2023, we announced the final patient enrolled in the pivotal METIS study evaluating the efficacy of TTFields therapy following stereotactic radiosurgery for the treatment of patients with brain metastases from NSCLC.

Following the completion of enrollment, patients will be followed for a minimum of 12 months with final data anticipated in 2024.

We have one ongoing pilot study evaluating the use of TTFields in the treatment of stage 3 NSCLC and are designing several additional pilot and pivotal studies in partnership with oncology leaders to further explore the capabilities of TTFields.

We anticipate expanding our clinical pipeline over time to study the safety and efficacy of TTFields for additional solid tumor indications and combinations with other cancer treatment modalities.

We completed enrollment of the phase 3 pivotal LUNAR trial in November 2021, which began the final patient’s 12-month follow-up period.

Our clinical operations and data collection efforts remain on track and, we expect to announce top-line results in early Q1 2023.

In March 2022, we announced that an independent data monitoring committee ("DMC") conducted a pre-specified interim analysis for the phase 3 pivotal INNOVATE-3 study for the treatment of platinum-resistant ovarian cancer.

As part of the interim analysis, the DMC reviewed the safety data for all enrolled patients and completed an analysis of overall survival on the first 540 patients randomized in the study.

The interim analysis did not indicate a need to increase the patient sample size and the DMC recommended that the study should continue to final analysis as planned.

The INNOVATE-3 study accrued 540 patients as of October 2021 and data will be reviewed in 2023, following an 18 month follow-up period.

In May 2022, we entered into a clinical trial collaboration agreement with MSD, a tradename of Merck & Co., Inc., ("MSD") to conduct a double-blind, placebo-controlled study of TTFields concomitant with pembrolizumab and maintenance temozolomide for the treatment of newly diagnosed GBM.

In June 2022, we announced results of the phase 2 pilot EF-31 study evaluating the use of TTFields together with standard-of-care (chemotherapy alone or in combination with trastuzumab for HER2-positive patients) as first-line treatment for gastric cancer.

Initial analysis was conducted with a median follow-up period of 8.6 months.

The primary endpoint, confirmed objective response rate, was 50%.

Median progression-free survival was 7.8 months.

Duration of response was 10.3 months.

Median overall survival had not yet been reached with a one-year survival rate of 72%.

We look forward to further exploration of these potential benefits as we look ahead to a randomized phase 3 clinical study.

In June 2022, we announced the first patient has been enrolled in the phase 2 pilot KEYNOTE B36 study, conducted in collaboration with MSD.

KEYNOTE B36 is designed to evaluate the safety and effectiveness of TTFields together with pembrolizumab for the treatment of locally advanced or metastatic intrathoracic NSCLC that expresses PD-L1.

Today, we announced data from the EF-33 pilot study evaluating the safety and preliminary efficacy of a higher intensity array design in 25 patients diagnosed with recurrent GBM.

Among those patients who used Optune as directed with higher intensity arrays for at least one month, median progression-free survival was 4.5 months.

This compares to 2.2 months from our pivotal EF-11 study in recurrent GBM.

Further, alongside the increased dosage, EF-33 patients reported no TTFields-related toxicity.

We now expect to complete enrollment in our phase 3 pivotal METIS study for the treatment of brain metastases from NSCLC in the first quarter of 2023.

This will begin the final patient's 12-month follow-up period and we anticipate top-line data in the first quarter of 2024.

The table below presents the current status of the ongoing clinical studies in our oncology pipeline and anticipated timing of data readout.

The table below presents the current status of the ongoing clinical studies in our pipeline and anticipated timing of data.

Our therapy is delivered through a medical device and we continue to advance our Products with the intention to extend survival and maintain quality of life for patients.

We have several product development programs underway that are designed to optimize TTFields delivery to the target tumor and enhance patient ease of use.

Our intellectual

property portfolio contains hundreds of issued patents and numerous patent applications pending worldwide.

One of these initiatives is the launch of new arrays, which are thinner, lighter and more flexible.

We plan to submit for regulatory approval in the U.S.

via PMA supplement in the second half of this year.

Our intellectual property portfolio contains hundreds of issued patents and numerous patent applications pending worldwide.

We believe we possess global commercialization rights to our Products in oncology and are well-positioned to extend those rights into the future as we continue to find innovative ways to improve our Products.

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

For the three and nine months ended September 30, 2022, our net revenues were $131.0 million and $409.4 million, respectively.

Our net loss for the three and nine months ended September 30, 2022 were $26.6 million and $55.2 million, respectively.

As of September 30, 2022, we had an accumulated deficit of $741.2 million.

Our net loss resulted primarily from net revenue growth which was more than offset by increasing investments in research, development and clinical trial initiatives and sales and marketing initiatives that support our ongoing exploration of the benefits of TTFields across numerous cancer indications, as well as geographic expansion and pre-commercial activities associated with potential future indication launches.

For the three months ended March 31, 2023, our net revenues were $122.2 million.

Our net loss for the three months ended March 31, 2023 was $53.1 million.

As of March 31, 2023, we had an accumulated deficit of $831.5 million.

Our net loss resulted primarily from increasing investments designed to support our commercial business, geographic expansion and pre-commercial activities associated with potential future indication launches.

Impact of COVID-19

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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.

The COVID-19 pandemic did not have a material impact on our financial results through the third quarter of 2022.

The COVID-19 pandemic did not have a material impact on our financial results through the first quarter of 2023.

The pandemic has had and is having an impact on our day-to-day operations, which varies by region based on factors such as geographical spread, stage of containment and recurrence of the pandemic in each region.

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The COVID-19 pandemic may also have the effect of heightening many of the other risks described in our risk factors disclosed in our 2022 10-K.

Impact of Medical Device Regulation Implementation

As a result of the implementation of the Medical Device Regulation ("MDR"), our notified body (as well as many other notified bodies throughout the European Economic Area ("EEA") has suffered a significant backlog in issuing CE Certificate renewals.

That may affect our ability to obtain a renewal of our CE Certificate for Optune before the current CE Certificate expires in October 2022.

In the event of a gap between expiration of the current CE Certificate and issuance of the renewal, we are able to continue to sell and market CE marked Optune from current inventories in the EEA and Switzerland under the expired CE Certificate.

We have been assured in writing from the notified body that our renewal application has passed technical review and no issues are expected while the certification team completes the renewal.

We are proactively procuring an adequate supply of Optune to ensure the avoidance of any material disruption in the event that there is a gap between expiration of the current CE Certificate and issuance of the renewal.

Commentary on Results of Operations

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• depreciation expense for the field equipment, including the electric field generator used by patients;

• personnel and overhead costs such as facilities, freight and depreciation of property, plant and equipment associated with managing our inventory, warehousing and order fulfillment functions.

• patient support and other personnel costs;

• overhead costs, such as facilities, freight and depreciation of property, plant and equipment associated with managing our inventory, warehousing and order fulfillment functions.

Operating expenses.

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Personnel costs also include share-based compensation.

Financial expenses, net .

Financial expenses, net primarily consists of debt issuance costs, interest income from cash balances and short-term investments and gains (losses) from foreign currency transactions.

Financial income (expenses), net .

Financial income (expenses), net primarily consists of interest income from cash balances and short-term investments, credit facility interest expense and related debt issuance costs, and gains (losses) from foreign currency transactions.

Our reporting currency is the U.S.

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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 nine months ended September 30, 2022 as compared to the three and nine months ended September 30, 2021.

The following discussion provides an analysis of our results of operations and reasons for material changes therein for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

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 September 30, Nine months ended September 30,

2022 2021 2022 2021

Unaudited Unaudited

Three months ended March 31,

Net revenues $ 122,182 $ 137,547

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Operating income (loss) (60,249) (806)

Financial expenses (income), net (1,194) 1,981 2,743 5,567

Financial income (expenses), net 9,169 (1,709)

Income (loss) before income taxes (51,080) (2,515)

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

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

2022 2021 2022 2021

Unaudited Unaudited

Three months ended March 31,

Cost of revenues $ 2,006 $ 952

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An "active patient" is a patient who is receiving treatment 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.

Prescriptions

are a leading indicator of demand.

Prescriptions are a leading indicator of demand.

A "prescription received" is a commercial order for Optune or Optune Lua that is received from a physician certified to treat patients with our Products for a patient not previously on Optune or Optune Lua.

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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 2023 2022

Active patients at period end

North America (1) 2,181 2,223

United States (1) 2,168 2,257

Germany 477 529

Other EMEA 417 425

Japan 382 327

Others 440 436

Total 3,467 3,549

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

2022 2021 2022 2021

Three months ended March 31,

Prescriptions received in period

North America (1) 978 931 2,867 2,815

United States (1) 1,051 935

Germany 208 220

Other EMEA 118 119 363 391

Japan 79 110 276 321

Others 165 127

Total 1,496 1,384

(1) North America includes data for the United States and Canada for the second half of 2021 and all of 2022, and the United States only for the first half of 2021.

There were 12 active MPM patients on therapy as of September 30, 2022 and 8 MPM prescriptions were received in the three months ended September 30, 2022.

Three and nine months ended September 30, 2022 compared to three and nine months ended September 30, 2021

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

2022 2021 % Change 2022 2021 % Change

(1) United States includes data for Canada for the first quarter of 2022 and the United States only for all other periods.

For the first quarter of 2023, Canada is included in "Others".

There were 12 active MPM patients on therapy as of March 31, 2023 and 15 MPM prescriptions were received in the three months ended March 31, 2023.

Three months ended March 31, 2023 compared to three months ended March 31, 2022

Three months ended March 31,

2023 2022 % Change

Net revenues $ 122,182 $ 137,547 (11) %

Net revenues.

Net revenues decreased 2% to $131.0 million for the three month period ending September 30, 2022 from $133.6 million for the same period in 2021, and increased 2% to $409.4 million for the nine month period ended September 30, 2022 from $401.8 million for the same period in 2021.

For the three month period ending September 30, 2022, the decrease resulted primarily from a reduction in German approval rates as a result of updated coverage criteria and the impact of foreign exchange rate fluctuations.

For the nine month period ending September 30, 2022, the increase in net revenues resulted primarily from an increase in collections from previously denied and appealed claims in the U.S.

offset by a reduction in current period German net revenues and prior period accounts receivable to reflect updated coverage criteria.

We continue to actively appeal and pursue previously denied claims, but the cadence and size of these collections are impossible to predict.

We believe the claims which are most accessible will largely be exhausted this year and the remaining outstanding claims will take a greater level of time and effort to collect in the future.

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

2022 2021 % Change 2022 2021 % Change

Net revenues decreased 11% to $122.2 million for the three-month period ended March 31, 2023 from $137.5 million for the same period in 2022.

The decrease resulted primarily from $5.4 million in reduced collections from previously denied or appealed claims in the U.S., a $2.1 million negative impact in Germany following contract negotiations with several large German payers, and a decrease of 82 global active patients on therapy.

We believe the outstanding denied and appealed claims that were most accessible were largely exhausted in 2022 and the remaining outstanding claims will take time to collect.

As a result, we expect future net revenue to more closely reflect core drivers:

number of active patients on therapy, duration of therapy, and net realized price per month.

We continue to actively appeal and pursue the remaining previously denied claims, but the cadence and size of these collections are difficult to predict.

Three months ended March 31,

2023 2022 % Change

Cost of revenues $ 29,614 $ 27,727 7 %

Cost of revenues.

Our cost of revenues for the three month period ended September 30, 2022 decreased 2% to $29.7 million, from $30.2 million for the same period in 2021.

Cost of revenues for the nine months ended September 30, 2022 increased by 1% to $86.0 million from $85.2 million for the same period in 2021.

For the three month period ended September 30, 2022, the decrease in cost of revenues was primarily driven by decreased shipments to Zai.

For the nine month period ended September 30, 2022, the increase in cost of revenues was primarily a result of increased shipments to Zai.

We continue to focus on opportunities to increase efficiencies and scale within our supply chain.

This includes evaluating new materials, manufacturers, and processes that could lead to lower costs.

Gross margin was 77% for the three months ended September 30, 2022 compared to 77% for the three months ended September 30, 2021.

Gross margin was 79% for the nine months ended September 30, 2022 and 79% for the nine months ended September 30, 2021.

Excluding sales to Zai, cost of revenues per active patient per month was $2,543 for the three months ended September 30, 2022, an increase of 2% from $2,485 for the same period in 2021, due to increased investments intended to expand capacity in advance of future potential launches in new indications.

Our cost of revenues increased by 7% to $29.6 million for the three months ended March 31, 2023 from $27.7 million for the same period in 2022.

The increase in cost of revenues was primarily due to an increase in patient support capacity in anticipation of treating larger patient populations in new cancer indications and new geographic regions, as well as increased shipments of equipment to Zai Lab.

Gross margin was 76% for the three months ended March 31, 2023 and 80% for the three months ended March 31, 2022.

Excluding sales to Zai, cost of revenues per active patient per month was $2,608 for the three months ended March 31, 2023, an increase of 8% from $2,413 for the same period in 2022, primarily due to increased patient support capacity.

Cost of revenues per active patient is calculated by dividing the cost of revenues for the quarter less equipment sales to Zai for the quarter by the average of the active patients at the end of the prior quarter and the ending active patients in the current quarter.

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Sales to Zai are deducted because they are sold at cost and in anticipation of future royalties from Zai, and Zai patient counts are not included in our active patient population.

Product sales to Zai totaled $3.5 million and $8.8 million for the three and nine months ended September 30, 2022 compared to $4.2 million and $8.0 million for the three and nine months ended September 30, 2021.

Product sales to Zai totaled $2.6 million for the three months ended March 31, 2023 compared to $1.9 million for the three months ended March 31, 2022.

Our gross margins are impacted by current and future product enhancements, such as the ongoing launch of next generation arrays.

We continue to focus on opportunities to increase efficiencies and scale within our supply chain.

This includes evaluating new materials, manufacturers, and processes that could lead to lower costs.

Operating Expenses.

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

2022 2021 % Change 2022 2021 % Change

Three months ended March 31,

2023 2022 % Change

Research, development and clinical studies $ 59,704 $ 42,234 41 %

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Research, development and clinical study expenses.

Research, development and clinical study expenses increased 8% to $52.0 million for the three month period ended September 30, 2022 from $48.1 million for the same period in 2021, and increased 5% to $151.3 million for the nine month period ended September 30, 2022 from $144.4 million in the same period in 2021.

For both the three and nine month periods, the change was primarily driven by an increase in direct clinical study costs, preclinical costs associated with the design of future trials, and costs associated with regulatory affairs.

Research, development and clinical study expenses increased 41% to $59.7 million for the three-month period ended March 31, 2023 from $42.2 million in the same period in 2022, primarily driven by a $8.7 million increase in clinical trial and personnel costs primarily from PANOVA-3 and METIS, an increase of $3.3 million in engineering and regulatory affairs costs and an increase of $5.0 million in other personnel expenses.

Total research and development expenses can fluctuate quarter-to-quarter dependent upon the amount of clinical research organization services delivered, clinical materials procured and the number of trials actively underway within a given quarter.

Sales and marketing expenses.

Sales and marketing expenses increased 27% to $41.4 million for the three months ended September 30, 2022 from $32.6 million for the same period in 2021, and increased 26% to $124.0 million for the nine month period ended September 30, 2022 from $98.1 million for the same period in 2021.

For the three and nine month period ended September 30, 2022, the change was primarily due to an increase in market research and strategic planning activities intended to enhance our commercial capabilities in anticipation of potential future approvals in new indications, including NSCLC and ovarian cancer.

Sales and marketing expenses increased 35% to $51.2 million for the three-month period ended March 31, 2023 from $37.9 million for the same period in 2022.

This change was primarily due to an increase of $5.0 million in costs associated with geographic expansion and pre-launch activities intended to increase awareness in TTFields in anticipation of future approvals in new indications and $5.0 million in other personnel expenses.

Additionally, we are investing in market access capabilities in order to evaluate opportunities, identify optimal access pathways, and successfully gain reimbursement in new geographies.

General and administrative expenses.

General and administrative expenses increased 4% to $32.5 million for the three months ended September 30, 2022 from $31.2 million for the same period in 2021, and totaled $94.7 million for the nine month period ended September 30, 2022, virtually unchanged from $95.1 million for the same period in 2021.

For the three month period, the change was primarily due to an increase in information technology and

supply chain investments to enhance operational capabilities in advance of potential future launches in new indications.

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

2022 2021 % Change 2022 2021 % Change

Financial expenses (income), net $ (1,194) $ 1,981 (160) % $ 2,743 $ 5,567 (51) %

Financial expenses, net.

Financial expenses decreased 160% to financial income of $1.2 million for the three months ended September 30, 2022 from $2.0 million for the same period in 2021, and decreased 51% to $2.7 for the nine months ended September 30, 2022 from $5.6 for the same period in 2021.

For the three and nine month periods, the decrease was primarily due to increased interest income partially offset by increased foreign exchange rate fluctuations.

Foreign exchange rate expenses increased to $2.5 million for the three months ended September 30, 2022 from $0.9 million expenses for the same period in 2021, and increased 272% to $7.7 million for the nine months ended September 30, 2022 from $2.8 million for the same period in 2021.

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

2022 2021 % Change 2022 2021 % Change

General and administrative expenses increased 37% to $41.9 million for the three months ended March 31, 2023 from $30.5 million for the same period in 2022.

This change was primarily due to increased personnel to support potential new indication launches, new geographic launches, supply chain expansion and information technology enhancements.

Three months ended March 31,

2023 2022 % Change

Financial income (expenses), net $ 9,169 $ (1,709) (636) %

Financial income (expenses), net.

Financial expenses decreased 636% to $9.2 million in income for the three months ended March 31, 2023 from $1.7 million in expenses for the same period in 2022.

The change was primarily due to $9.2 million in increased interest income and $1.5 million in foreign exchange rate fluctuations.

Three months ended March 31,

2023 2022 % Change

Income taxes $ 1,981 $ 2,132 (7) %

Income taxes.

Income taxes increased 22% to $3.2 million for the three months ended September 30, 2022 from $2.6 million for the same period in 2021, and was increased by 10% to $5.9 million from $5.4 million for the nine months ended September 30, 2022 compared to the same period in 2021.

For the three and nine months ended September 30, 2022 the increase reflects a change in the mix of applicable statutory tax rates in active jurisdictions.

Income taxes decreased $0.2 million, or 7% to $2.0 million for the three months ended March 31, 2023 compared to a tax expense of $2.1 million for the same period in 2022.

The change reflects a change in the mix of applicable statutory tax rates in 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 September 30, Nine months ended September 30,

2022 2021 % Change 2022 2021 % Change

Three months ended March 31,

2023 2022 % Change

Net income (loss) $ (53,061) $ (4,647) 1,042 %

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Adjusted EBITDA $ (18,443) $ 26,849 (169) %

Adjusted EBITDA decreased by 78% to $4.4 million for the three months ended September 30, 2022 from $19.9 million for the same period in 2021, and decreased by 35% to $38.6 million for the nine months ended September 30, 2022 from $59.2 million for the same period in 2021.

The changes in both periods were primarily due to a decrease in net income driven by increased investment in research, development and clinical studies and sales and marketing intended to maximize future growth opportunities.

Adjusted EBITDA decreased by $45.3 million, or 169%, to a loss of $18.4 million for the three month period ended March 31, 2023 from income of $26.8 million for the same period in 2022.

This decrease was primarily attributable to increased growth investments intended to expand our capacity to treat larger patient populations, to enhance commercial capabilities and to increase awareness of TTFields in anticipation of potential future approvals in new indications, and a reduction in revenue as described above.

Liquidity and Capital Resources

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

As of September 30, 2022, we had an accumulated deficit of $741.2 million.

As of March 31, 2023, we had an accumulated deficit of $831.5 million.

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

At September 30, 2022, we had $970.3 million in cash, cash equivalents and short-term investments, an increase of $32.6 million compared to $937.7 million at December 31, 2021.

We believe our cash, cash equivalents and short-term investments as of September 30, 2022 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 study 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.

At March 31, 2023, we had $958.0 million in cash, cash equivalents and short-term investments, a decrease of $11.4 million compared to $969.4 million at December 31, 2022.

We believe our cash, cash equivalents and short-term investments as of March 31, 2023 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 operating expenses will continue to increase over the next several years and may outpace our gross profit as we

prepare to expand into additional indications beyond GBM.

As a result, we may need to raise additional capital to fund our operations.

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:

Nine months ended September 30,

Three months ended March 31,

2023 2022 Change % Change

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Operating cash flows are also impacted by changes in working capital.

Net cash provided by operating activities decreased by $33.9 million from $68.4 million net cash provided by operating activities for the nine months ended September 30, 2021 to $34.5 million net cash provided by operating activities for the nine months ended September 30, 2022.

This decrease was a result of net income decreasing by $23.3 million compared to the same period in 2021 and a $12.2 million decrease in net cash provided by working capital, including a $14.3 million decrease in accounts payables and accrued expenses, a $6.2 million increase in inventories and a $4.2 million decrease in accounts receivables, partially offset by a $1.6 million change in the mix from cash to non-cash based expenses.

Net cash used in operating activities increased by $13.0 million million from $3.7 million net cash used in operating activities for the three months ended March 31, 2022 to $16.7 million net cash used in operating activities for the three months ended March 31, 2023.

This increase was a result of net income decreasing $48.4 million, offset by a $27.2 million decrease in working capital and a further offset of $8.1 million in cash to non-cash based expenses, primarily consisting of shared-based compensation.

The decrease in working capital includes a $22.0 million decrease in accounts receivable, an increase of $4.3 million in accounts payable and accrued expenses and a $2.1 million decrease in inventories.

Investing activities.

Our investing activities consist primarily of investments in and redemptions of our short-term investments as well as investments in property and equipment.

Net cash used in investing activities was $11.9 million for the nine months ended September 30, 2022, compared to $354.3 million provided by investing activities for the nine months ended September 30, 2021.

The net cash used in investing activities for the nine months ended September 30, 2022 was primarily attributable to $3.0 million of net proceeds from maturity of short-term investments, offset by the purchase of $14.9 million of property and equipment.

The net cash provided by investing activities for the nine months ended September 30, 2021 was primarily attributable to $364.2 million of net proceeds from maturity of short-term investments, partially offset by the purchase of $9.9 million of property and equipment.

Net cash provided by investing activities was $82.3 million for the three months ended March 31, 2023, compared to $17.4 million used in investing activities for the three months ended March 31, 2022.

The $82.3 million net cash provided by investing activities for the three months ended March 31, 2023 was primarily attributable to $88.4 million of net proceeds from the maturity of short-term investments and the purchase of $6.1 million of property and equipment.

The $17.4 million net cash used in investing activities for the three months ended March 31, 2022 was primarily attributable to $12.3 million of net purchase in short-term investments and by the purchase of $5.1 million of property and equipment.

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 $12.1 million for the nine months ended September 30, 2022, as compared to $22.1 million provided by financing activities for the nine months ended September 30, 2021.

The net cash provided by financing activities for the nine months ended September 30, 2022 and September 30, 2021 included proceeds from the issuance of shares as well as proceeds from the exercise of options under the Company's employee stock purchase plan and stock option plan.

Net cash provided by financing activities was $5.2 million for the three months ended March 31, 2023, as compared to $3.1 million provided by financing activities for the three months ended March 31, 2022.

The net cash provided by financing activities for the three months ended March 31, 2023 and March 31, 2022 included proceeds from the exercise of options under the Company's stock option plan.

Convertible Notes

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On November 6, 2020, we entered into a new three-year $150.0 million senior secured revolving credit facility with a syndicate of relationship banks (the "2020 Credit Facility").

We may, subject to certain conditions and limitations, increase the revolving credit commitments outstanding under the 2020 Credit Facility or incur new incremental term loans in an aggregate principal amount not to exceed an additional $100.0 million.

The commitments under the 2020 Credit Facility are guaranteed by certain of our subsidiaries and secured by a first lien on our and certain of our subsidiaries’ assets.

Outstanding loans bear interest per annum at a sliding scale based on the our secured leverage ratio from 2.75% to 3.25% above the applicable interbank borrowing reference rate for the currency in which the loan is denominated.

Additionally, the 2020 Credit Facility contains a fee for the unused revolving credit commitments at a sliding scale based on our secured leverage ratio from 0.35% to 0.45%.

The 2020 Credit Facility contains financial covenants requiring maintenance of a minimum fixed charge coverage ratio and specifying a maximum senior secured net leverage ratio, as well as customary events of default which include a change of control.

As of September 30, 2022, we were in compliance with such covenants.

As of September 30, 2022, we had no outstanding balance borrowed under the 2020 Credit Facility.

On February 17, 2023, we gave irrevocable notice to the administrative agent under the 2020 Credit Facility that we terminated all commitments, effective February 22, 2023.

This effectively terminated the 2020 Credit Facility, as our ability to borrow and our obligations to comply with all covenants ended on such date.

The liens and guaranties in favor of the lenders are released.

There was no early termination fee payable.

The commitments under the 2020 Credit Facility were guaranteed by certain of our subsidiaries and secured by a first lien on our and certain of our subsidiaries’ assets.

Outstanding loans bore interest per annum at a sliding scale based on the our secured leverage ratio from 2.75% to 3.25% above the applicable interbank borrowing reference rate for the currency in which the loan is denominated.

Additionally, the 2020 Credit Facility contained a fee for the unused revolving credit commitments at a sliding scale based on our secured leverage ratio from 0.35% to 0.45%.

The 2020 Credit Facility contained financial covenants requiring maintenance of a minimum fixed charge coverage ratio and specifying a maximum senior secured net leverage ratio, as well as customary events of default which include a change of control, which are no longer applicable.

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