NovoCure Ltd 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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, 2024 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. Please refer to the information under the heading “Cautionary Note Regarding Forward-Looking Statements” elsewhere in this report. References to the words “we,” “our,” “us,” and the “Company” in this report refer to NovoCure Limited, including its consolidated subsidiaries. Critical Accounting Policies and Estimates In accordance with U.S. generally accepted accounting principles (“GAAP”), in preparing our financial statements, we must make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of net revenues and expenses during the reporting period. We develop and periodically change these estimates and assumptions based on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates. The critical accounting policies requiring estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the "2023 10-K"). For additional information, see Note 1 to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report. There were no other material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our 2023 10-K. Overview 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 Gio ® and Optune Lua ® , our commercial TTFields therapy devices, and to advance clinical and product development programs intended to extend overall survival in some of the most aggressive forms of cancer. Optune Gio 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 Gio 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 PMA pathway for the treatment of adult patients with metastatic non-small cell lung cancer ("NSCLC") concurrent with PD-1/PD-L1 inhibitors or docetaxel following progression on or after a platinum-based regimen and under the Humanitarian Device Exemption ("HDE") pathway to treat malignant pleural mesothelioma and pleural mesothelioma (together, "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 for the treatment of MPM. We market Optune Gio and Optune Lua in multiple countries around the globe with the majority of our revenues coming from the use of Optune Gio in the U.S., Germany, France and Japan. We are actively evaluating opportunities to expand our international footprint. We believe the physical mechanisms of action behind TTFields therapy may be broadly applicable to solid tumor cancers. We are focusing our research and development activities in areas of greatest anticipated value creation. This includes NSCLC, brain cancers, and pancreatic cancer. In October 2024, the U.S. FDA approved our PMA application for Optune Lua use concurrent use with PD-1/PD-L1 inhibitors or docetaxel for the treatment of adult patients with metastatic NSCLC who have progressed on or after a platinum-based regimen. This application was based on the results from the phase 3 LUNAR trial, which showed patients treated with TTFields therapy concomitant with PD-1/PD-L1 inhibitors or docetaxel exhibited a statistically significant and clinically meaningful improvement in median overall survival (OS) compared to patients treated with PD-1/PD-L1 inhibitors or docetaxel alone. The LUNAR trial included two pre-specified powered secondary endpoints. The first secondary endpoint, which met statistical significance, assessed median OS in patients treated with Optune Lua concurrently with a PD-1/PD-L1 inhibitor versus a PD-1/PD-L1 inhibitor alone. The second secondary endpoint, which showed a positive trend but did not meet statistical significance, assessed Optune Lua 20 Table of Contents concurrently with docetaxel versus docetaxel alone. We have also filed applications for use to the necessary regulatory bodies in Europe and Japan. In June 2024, we presented positive results from the phase 3 METIS trial, evaluating the use of TTFields therapy and supportive care for the treatment of patients with 1-10 brain metastases from NSCLC following stereotactic radiosurgery (“METIS”) at the 2024 American Society of Clinical Oncology (ASCO) annual meeting. The METIS trial met its primary endpoint, demonstrating a statistically significant improvement in time to intracranial progression for adult patients treated with TTFields therapy and supportive care compared to patients treated with supportive care alone. Patients treated with TTFields therapy and supportive care exhibited a median time to intracranial progression of 21.9 months compared to 11.3 months in patients treated with supportive care alone for brain metastasis (n=298; hazard ratio=0.67; P=0.016). These data are expected to serve as the basis for regulatory submissions. In October 2024, the FDA granted Breakthrough Device designation for the use of our NovoTTF-200M device and supportive care for the treatment brain metastases from NSCLC as used in the METIS protocol. The designation offers us an opportunity to interact with FDA experts throughout the premarket review phase and allows for prioritized review of regulatory submissions. In June 2024, we presented top-line results from the prospective, non-interventional TIGER study at the 2024 ASCO annual meeting. The TIGER study investigated the use of TTFields therapy in routine clinical use in the treatment of newly diagnosed GBM in Germany. Of the 710 patients enrolled in the study between August 2017 to November 2019, 429 patients received TTFields therapy, across 81 participating centers. Median overall survival for patients treated with TTFields therapy was 19.6 months (95% CI, 17.9-22.4) and median progression-free survival was 10.2 months (95% CI, 9.4-11.4). TTFields therapy use was not associated with an increase in systemic toxicity and was well tolerated. The outcomes observed in the TIGER study are consistent with the survival and safety results from our phase 3 EF-14 clinical trial. In March 2024, an exploratory subgroup analysis of the phase 3 INNOVATE-3 clinical trial was presented at the European Society of Gynaecological Oncology 2024 Congress. The randomized, phase 3 INNOVATE-3 trial evaluated the use of TTFields therapy together with paclitaxel in platinum-resistant ovarian cancer in patients with a maximum of five total prior lines of systemic therapy. While the INNOVATE-3 trial did not meet its primary overall survival endpoint in the intent-to-treat population, the exploratory subgroup analysis found that pegylated liposomal doxorubicin (PLD) -naïve patients randomized to receive TTFields therapy and paclitaxel demonstrated significant improvement in median overall survival compared to PLD-naïve patients treated with paclitaxel alone. These data provide valuable insights into the use of TTFields therapy in the treatment of solid tumors and will be informative in the design of future clinical trials. Novocure and investigators will continue to analyze the data from the INNOVATE-3 trial. We have several ongoing or planned trials which will further explore the use of TTFields therapy in the treatment of NSCLC, pancreatic cancer, and primary brain cancer. Alongside the LUNAR and METIS phase 3 trials, our NSCLC program includes the phase 3 LUNAR-2 trial, which explores the use of TTFields therapy together with pembrolizumab and platinum-based chemotherapy as first-line treatment for metastatic NSCLC and the phase 2 LUNAR-4 trial, which evaluates the use of TTFields therapy together with an immune checkpoint inhibitor (ICI) following prior ICI treatment as a second-line treatment for metastatic NSCLC. LUNAR-2 and LUNAR-4 are currently open and enrolling. Finally, our phase 2 KEYNOTE B36 trial is exploring the use of TTFields therapy together with pembrolizumab for front-line treatment of locally advanced or metastatic NSCLC. We are evaluating appropriate next steps for this trial given its pace of enrollment and our focus on LUNAR-2. Our pancreatic cancer program is comprised of the phase 3 PANOVA-3 trial and the phase 2 PANOVA-4 trial. The PANOVA-3 trial is exploring the use of TTFields therapy together with nab-paclitaxel and gemcitabine as front-line treatment for unresectable locally advanced pancreatic cancer and is fully enrolled with top-line data anticipated in the fourth quarter of 2024. The PANOVA-4 trial is exploring the use of TTFields therapy together with atezolizumab, gemcitabine and nab-paclitaxel for the treatment of metastatic pancreatic cancer and has completed enrollment with data anticipated in 2026. Our primary brain cancer clinical trial program includes the fully enrolled phase 3 TRIDENT trial and the phase 3 KEYNOTE D58 trial. The TRIDENT trial is exploring the use of TTFields therapy concomitant with radiation and chemotherapy for the treatment of newly diagnosed GBM and data is anticipated in 2026. The KEYNOTE D58 trial is evaluating the use of TTFields therapy together with temozolomide and pembrolizumab for the treatment of newly diagnosed GBM and we are initiating clinical sites. 21 Table of Contents We anticipate expanding our clinical pipeline over time to study the safety and efficacy of TTFields therapy for additional solid tumor indications and combinations with other cancer treatment modalities.The table below presents the current status of the ongoing clinical trials 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. One of these initiatives is the launch of new arrays, which are thinner, lighter and more flexible. We have obtained a CE Mark and rolled out our new arrays in multiple European countries. We submitted the new arrays for regulatory approval in the U.S. and Japan and are awaiting regulatory decisions. In 2018, we granted Zai Lab (Shanghai) Co., Ltd. ("Zai") a license to commercialize our Products in China, Hong Kong, Macau and Taiwan ("Greater China") under a License and Collaboration Agreement (the "Zai Agreement"). The Zai Agreement also establishes a development partnership intended to accelerate the development of TTFields therapy in multiple solid tumor cancer indications. For additional information, see Note 13 to the 2023 10-K. In September 2024, we announced that our Chief Executive Officer (CEO), Asaf Danziger, will retire at year-end 2024 and Novocure’s Chief Financial Officer (CFO), Ashley Cordova, will succeed him as the company’s next CEO. Mr. Danziger, who has served as CEO since 2002, will serve as Senior Advisor through 2026, and will continue to serve on Novocure’s Board of Directors. These changes will become effective on January 1, 2025. In addition, Mukund Paravasthu transitioned into the role of Chief Operating Officer, effective October 1, 2024. In October 2024, we announced the appointment of Christoph Brackmann as our CFO, effective January 1, 2025. Mr. Brackmann joined in October 2024 as a Senior Finance Advisor and will continue in that role until his appointment as CFO takes effect. Prior to joining Novocure, Mr. Brackmann served as Senior Vice President, Finance at Moderna Inc. from October 2019 to June 2024. During that time Mr. Brackmann built out the finance team across FP&A, accounting, tax, treasury, procurement and business service centers to support Moderna’s scale-up. Mr. Brackmann earned his Master of Business Administration from the SDA Bocconi School of Management in 2003 and holds a degree in Business and Economics from the University of Manheim. We view our operations and manage our business in one operating segment. For the three and nine months ended September 30, 2024, our net revenues were $155.1 million and $444.0 million, respectively. Our net loss for the three and nine months ended September 30, 2024 was $30.6 million and $102.7 million, respectively. As of September 30, 2024, we had an accumulated deficit of $1,088.2 million. Impact of Current Events On October 7, 2023, the State of Israel was attacked and is in a state of war. As of the date of this filing, we believe that there is no immediate risk to our business facilities or operations. Our supply chain teams have increased stock levels to mitigate distribution and service risks from our suppliers in Israel. 22 Table of Contents Commentary on Results of Operations Net revenues . Our revenues are primarily derived from patients using our Products in our active markets. We charge for treatment with our Products on a monthly basis. Our potential net revenues per patient are determined by our ability to secure payment, the monthly fee we collect and the number of months that the patient remains on therapy. We also receive revenues pursuant to the Zai Agreement. For additional information regarding the Zai Agreement, see Note 13 to the Consolidated Financial Statements in our 2023 10-K. Cost of revenues. We contract with third parties to manufacture our Products. Our cost of revenues is primarily comprised of the following: • disposable arrays; • depreciation expense for the field equipment, including the electric field generator used by patients; • patient support and other personnel costs; and • 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. Our operating expenses consist of research, development and clinical studies, sales and marketing and general and administrative expenses. Personnel costs are a significant component for each category of operating expenses and consist of wages, benefits and bonuses. Personnel costs also include share-based compensation. 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. dollar. We have historically held substantially all of our cash balances in U.S. dollar denominated accounts to minimize the risk of translational currency exposure. 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, 2024 as compared to the three and nine months ended September 30, 2023. The tables contained in this section report U.S. dollars in thousands (except share, patient, and prescription data). The following table sets forth our consolidated statements of operations data: 23 Table of Contents Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Unaudited Unaudited Net revenues $ 155,095 $ 127,321 $ 443,954 $ 375,554 Cost of revenues 35,372 32,092 103,715 95,724 Gross profit 119,723 95,229 340,239 279,830 Operating costs and expenses: Research, development and clinical studies 51,882 53,623 158,435 168,754 Sales and marketing 59,830 57,964 171,652 167,621 General and administrative 40,103 41,887 117,344 124,609 Total operating costs and expenses 151,815 153,474 447,431 460,984 Operating income (loss) (32,092) (58,245) (107,192) (181,154) Financial income (expenses), net 10,507 10,023 31,236 27,948 Income (loss) before income taxes (21,585) (48,222) (75,956) (153,206) Income taxes 8,985 1,263 26,749 6,758 Net income (loss) $ (30,570) $ (49,485) $ (102,705) $ (159,964) Basic and diluted net income (loss) per ordinary share $ (0.28) $ (0.46) $ (0.95) $ (1.51) Weighted average number of ordinary shares used in computing basic and diluted net income (loss) per share 108,247,716 106,772,814 107,679,501 106,219,194 The following table details the share-based compensation expense included in costs and expenses: Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Unaudited Unaudited Cost of revenues $ 1,834 $ 1,511 $ 5,280 $ 5,540 Research, development and clinical studies 7,294 6,683 25,421 26,999 Sales and marketing 10,276 8,973 31,220 30,830 General and administrative 11,960 9,179 35,357 34,801 Total share-based compensation expense $ 31,364 $ 26,346 $ 97,278 $ 98,170 Key performance indicators 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. 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. A "prescription received" is a commercial order for Optune Gio or Optune Lua that is received from a physician certified to treat patients with our Products for a patient not previously on Optune Gio or Optune Lua. Orders to renew or extend treatment are not included in this total. 24 Table of Contents The following table includes certain commercial operating statistics for and as of the end of the periods presented. September 30, Operating statistics 2024 2023 Active patients at period end United States 2,200 2,179 International markets: Germany 570 492 France 393 165 Japan 437 353 Other international 513 450 International markets - Total 1,913 1,460 Total 4,113 3,639 Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Prescriptions received in period United States 934 920 2,881 2,952 International markets: Germany 217 163 629 575 France 171 150 533 302 Japan 99 85 298 249 Other international 165 149 522 441 International markets - Total 652 547 1,982 1,567 Total 1,586 1,467 4,863 4,519 Three and nine months ended September 30, 2024 compared to three and nine months ended September 30, 2023 Three months ended September 30, Nine months ended September 30, 2024 2023 % Change 2024 2023 % Change Net revenues $ 155,095 $ 127,321 22 % $ 443,954 $ 375,554 18 % Net revenues. Net revenues increased 22% to $155.1 million for the three months ending September 30, 2024 from $127.3 million for the same period in 2023. For the three and nine months ended September 30, 2024, the increase primarily resulted from $11.1 million and $35.8 million of net revenues from the successful launch in France and $12.1 million and $26.2 million of net revenues in the U.S. due to improved approval rates. The improved approval rates in the U.S. resulted in $4.7 million and $14.0 million of increased net revenue from prior period claims during the three- and nine- month periods, primarily from 2023. Three months ended September 30, Nine months ended September 30, 2024 2023 % Change 2024 2023 % Change Cost of revenues $ 35,372 $ 32,092 10 % $ 103,715 $ 95,724 8 % Cost of revenues. Our cost of revenues for the three months ended September 30, 2024 was $35.4 million, an increase of 10% from $32.1 million for the same period in 2023. For the three and nine months ended September 30, 2024, the increase in cost of revenues was primarily due to 13% growth in active patients, partially offset by lower equipment sales to Zai in the amount of $1.5 million and $1.9 million, respectively. Excluding sales to Zai, cost of revenues per active patient per month was $2,713 for the three months ended September 30, 2024, an increase of 4% from $2,599 for the same period in 2023, primarily due to an increase in 25 Table of Contents costs related to the rollout of our new arrays. 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. This quarterly figure is then divided by three to estimate the monthly cost of revenues per active patient. 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 $2.5 million and $8.4 million for the three and nine months ended September 30, 2024 compared to $4.0 million and $10.3 million for the three and nine months ended September 30, 2023. Gross margin was 77% for the three months ended September 30, 2024 compared to 75% for the three months ended September 30, 2023. The improvement in gross margin is due to the increase in net revenue per patient primarily attributed to our improved approval rates in the US and successful launch in France. We expect that our gross margins will be impacted by current and future product enhancements, such as the launch of our new arrays in the U.S. and our launch in NSCLC. 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, 2024 2023 % Change 2024 2023 % Change Research, development and clinical studies $ 51,882 $ 53,623 (3) % $ 158,435 $ 168,754 (6) % Sales and marketing 59,830 57,964 3 % 171,652 167,621 2 % General and administrative 40,103 41,887 (4) % 117,344 124,609 (6) % Total operating expenses $ 151,815 $ 153,474 (1) % $ 447,431 $ 460,984 (3) % Research, development and clinical study expenses. Research, development and clinical study expenses decreased 3% to $51.9 million for the three months ended September 30, 2024 from $53.6 million for the same period in 2023. For the three and nine months ended September 30, 2024, the change was primarily due to a decrease in 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 3% to $59.8 million for the three months ended September 30, 2024 from $58.0 million for the same period in 2023. For the three months ended September 30, 2024, the change was primarily driven by an $7.8 million increase in costs related to a sales force expansion in anticipation of a potential launch in NSCLC, partially offset by a $6.2 million reduction in marketing spend. For the nine months ended September 30, 2024, the increase was primarily driven by a $10.8 million increase related to the sales force expansion for NSCLC, partially offset by a $6.7 million reduction in marketing spend. General and administrative expenses. General and administrative expenses decreased 4% to $40.1 million for the three-month period ended September 30, 2024 from $41.9 million for the same period in 2023. For the three and nine months ended September 30, 2024, these changes were primarily due to lower personnel and professional service expenses. Three months ended September 30, Nine months ended September 30, 2024 2023 % Change 2024 2023 % Change Financial income (expenses), net $ 10,507 $ 10,023 5 % $ 31,236 $ 27,948 12 % Financial income (expenses), net. For the three months ended September 30, 2024, financial income increased $0.5 million or 5% to $10.5 million from $10.0 million for the same period in 2023, primarily due to $0.8 million higher interest income and $3.5 million in favorable foreign exchange adjustments, offset by $3.0 million in interest expenses related to the senior secured credit facility (see "Senior Secured Term Loan Credit Facility" below). Financial income increased $3.3 million or 12%, to $31.2 million for the nine months ended September 30, 2024 26 Table of Contents from $27.9 million in income for the same period in 2023, primarily due to $5.0 million in higher interest income, $2.3 million in favorable foreign exchange impact and $1.1 million in gain from redemption of the Notes, offset by $4.9 million in interest expenses related to the senior secured credit facility. Three months ended September 30, Nine months ended September 30, 2024 2023 % Change 2024 2023 % Change Income taxes $ 8,985 $ 1,263 611 % $ 26,749 $ 6,758 296 % Income taxes . Income taxes increased 611% to $9.0 million for the three months ended September 30, 2024 from $1.3 million for the same period in 2023 primarily due to $5.6 million resulting from the utilization of tax credits in 2023 related to prior years and a change in the mix of applicable statutory tax rates. Income taxes increased 296% to $26.7 million for the nine months ended September 30, 2024 from $6.8 million for the same period in 2023 primarily due to a $7.3 million decrease in tax benefits from share-based compensation, $5.2 million resulting from the utilization of tax credits in 2023 related to prior years and a change in the mix of applicable statutory tax rates. Non-GAAP financial measures We also measure our performance using a non-GAAP measurement of earnings before interest, taxes, depreciation, amortization and shared-based compensation (“Adjusted EBITDA”). We believe Adjusted EBITDA is useful to investors in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of earnings attributable to our capital structure, tax rate and material non-cash items, specifically share-based compensation. We calculate Adjusted EBITDA as operating income before financial expenses and income taxes, net of depreciation, amortization and share-based compensation. 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, 2024 2023 % Change 2024 2023 % Change Net income (loss) $ (30,570) $ (49,485) (38) % $ (102,705) $ (159,964) (36) % Add: Income tax 8,985 1,263 611 % 26,749 6,758 296 % Add: Financial expenses (income), net (10,507) (10,023) 5 % (31,236) (27,948) 12 % Add: Depreciation and amortization 2,458 2,803 (12) % 8,131 8,246 (1) % EBITDA $ (29,634) $ (55,442) (47) % $ (99,061) $ (172,908) (43) % Add: Share-based compensation 31,364 26,346 19 % 97,278 98,170 (1) % Adjusted EBITDA $ 1,730 $ (29,096) (106) % $ (1,783) $ (74,738) (98) % Adjusted EBITDA increased by $30.8 million to $1.7 million for the three months ended September 30, 2024 from $(29.1) million for the same period in 2023. This increase was primarily driven by revenue growth from improved approval rates in the U.S. and a successful launch in France. The revenue increase drove a $24.5 million increase in gross profit. Actions taken during the November 2023 restructuring and a heightened focus on operational efficiencies reduced total operating expenses, excluding share-based compensation, by $6.3 million year-over-year. We intend to take actions that prioritize growth and maintain financial health and flexibility as we position our company for future profitability. 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, 2024, we had an accumulated deficit of $1,088.2 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, 2024, we had $959.9 million in cash, cash equivalents and short-term investments, an increase of $49.3 million compared to $910.6 million at December 31, 2023, primarily as a result of the $100 million draw down of the first tranche of our senior secured credit facility in May 2024 (see "Senior Secured Term Loan Credit Facility" below), offset by net cash used in operations and used in investing activities. We believe our cash, cash equivalents and short-term investments as of September 30, 2024 are sufficient for our operations for at least the next 12 27 Table of Contents 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, 2024 2023 Change % Change Net cash provided by (used in) operating activities $ (22,918) $ (58,778) $ 35,860 (61) % Net cash provided by (used in) investing activities (118,031) 85,648 (203,679) (238) % Net cash provided by financing activities 87,630 13,877 73,753 531 % Effect of exchange rate changes on cash and cash equivalents (46) (69) 23 (33) % Net increase (decrease) in cash, cash equivalents and restricted cash $ (53,365) $ 40,678 $ (94,043) (231) % Operating activities. Net cash used in or provided by operating activities represents our net income (loss) for the periods presented, share-based compensation and depreciation and amortization. Operating cash flows are also impacted by changes in working capital. Net cash used in operating activities decreased by $35.9 million from $58.8 million net cash used in operating activities for the nine months ended September 30, 2023 to $22.9 million net cash used in operating activities for the nine months ended September 30, 2024. This was a result of a $57.3 million reduction in net loss, offset by a $22.9 million increase in working capital primarily driven by a $33.1 million increase in accounts receivable and a $7.4 million decrease of inventories, a decrease of $6.0 million in cash to non-cash based expenses primarily consisting of shared-based compensation, and a decrease of $4.4 million in other long term assets and an increase of $2.8 million in other long-term liabilities. 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 $118.0 million for the nine months ended September 30, 2024, compared to $85.6 million provided by investing activities for the nine months ended September 30, 2023. The $118.0 million net cash used in investing activities for the nine months ended September 30, 2024 was primarily attributable to $84.1 million of the net purchase of short term investments and the purchase of $33.9 million of property and equipment. The $85.6 million net cash provided by investing activities for the nine months ended September 30, 2023 was primarily attributable to $105.9 million of net proceeds from maturity of short term investments and by the purchase of $20.3 million of property and equipment. Financing activities. Net cash provided by financing activities was $87.6 million for the nine months ended September 30, 2024, as compared to $13.9 million provided by financing activities for the nine months ended September 30, 2023, primarily attributable to $96.9 million of net proceeds from the first tranche of our senior secured credit facility offset by $12.9 million used to partially repay Notes, In addition, the net cash provided by financing activities for the nine months ended September 30, 2024 and September 30, 2023 included proceeds from the exercise of options under the Company's share option plan. Convertible Notes On November 5, 2020, we issued $575.0 million aggregate principal amount of Notes. The Notes are senior unsecured obligations. The Notes do not bear regular interest, and the principal amount of the Notes will not accrete. The Notes are convertible at an initial conversion rate of 5.9439 ordinary shares per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $168.24 per ordinary share. The Notes are convertible at the option of the holders upon the satisfaction of certain other conditions and during certain periods, and if the Company exercises its right to redeem the Notes as permitted or required by the indenture. On or after August 1, 2025 until the close of the business on the business day immediately preceding the 28 Table of Contents maturity date, holders may convert all or any portion of their Notes at the conversion rate at any time irrespective of the foregoing conditions. In January 2021, we irrevocably elected to settle all conversions of Notes by a combination of cash and our 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 our ordinary shares. For more information, see Note 10a. to the Consolidated Financial Statements in the 2023 10-K. Senior Secured Term Loan Credit Facility On May 1, 2024 Novocure Luxembourg S.a.r.l. ("Borrower"), our wholly-owned subsidiary, entered into a new five-year senior secured credit facility of up to $400.0 million (the "Facility") with BPCR Limited Partnership and BioPharma Credit Investments V (Master) LP (collectively, the "Lenders"), BioPharma Credit PLC, as collateral agent for the Lenders, and the guarantors party to such agreement (the "Loan Agreement"). The Facility may be drawn in up to four drawings. The Loan Agreement provides for an initial term loan in the principal amount of $100.0 million (the "Tranche A Loan"), which was funded to the Borrower on May 1, 2024 (the "Tranche A Funding Date"). Under the Loan Agreement, the Borrower is required to draw $100.0 million on the Facility on or before June 30, 2025 (the "Tranche B Loan"), subject to customary conditions precedent as set forth in the Loan Agreement. Not later than December 31, 2025, the Borrower has the option to draw an additional $100.0 million of the Facility (the "Tranche C Loan") if (i) (A) we have received positive results from our PANOVA-3 phase 3 clinical trial or (B) our trailing net revenues for the most recently completed four quarters as reported in our financial statements filed with the U.S. Securities and Exchange Commission ("Trailing Four Quarters of Net Revenue") are greater than $575.0 million and (ii) the Notes are extinguished in full and are no longer outstanding. Not later than March 31, 2026, the Borrower has the option to draw an additional $100.0 million of the Facility (the "Tranche D Loan") if (i) we receive an approval or clearance from the U.S. Food and Drug Administration for our Tumor Treating Fields device for a pancreatic cancer indication or (ii) Trailing Four Quarters of Net Revenue is greater than $625.0 million. The obligations under the Loan Agreement are guaranteed by certain of our subsidiaries and secured by a first lien on the Borrower's and certain of our other subsidiaries’ assets. Outstanding term loans under the Loan Agreement will bear interest at an annual rate equal to 6.25% plus the three-month SOFR (subject to a 3.25% floor), payable quarterly in arrears and calculated on the basis of actual days elapsed in a 360-day year. The Borrower must pay 2.5% of additional consideration on each principal draw, with payment for the Tranche A Loan and the Tranche B Loan paid on the Tranche A Funding Date, and payments for the Tranche C Loan and the Tranche D Loan on their respective funding dates. Principal under the Facility will be repaid in eight equal quarterly repayments commencing with the third quarter of 2027 and continuing each quarter thereafter, with the final payment of outstanding principal due on the fifth anniversary of the Tranche A Funding Date. Voluntary prepayment of all, but not less than all, of the term loans outstanding is permitted at any time, subject to make-whole and prepayment premiums as set forth in the Loan Agreement. Prepayment of all term loans outstanding, subject to make-whole and prepayment premiums, is due and payable upon a change-in-control as defined in the Loan Agreement. Make-whole and prepayment premiums are due and payable for the Tranche B Loans for any voluntary prepayment of the term loans outstanding, upon a change-in-control (as defined in the Loan Agreement), and upon any acceleration of the maturity date, in each case regardless of whether the Tranche B Loan is drawn. The Loan Agreement contains a financial covenant only if the Tranche C Loan and/or Tranche D Loan are funded, in which case we are required to maintain at least Trailing Four Quarters of Net Revenue of at least $500.0 million, calculated on a trailing twelve-month basis as of the end of each fiscal quarter, beginning with the first quarter of 2027 based on year-end 2026 audited financial statements. Contractual Obligations and Commitments There have been no material changes from the information disclosed in our 2023 10-K. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements as defined under U.S. Securities and Exchange Commission (“SEC”) rules. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes from the information disclosed in our 2023 10-K. 29 Table of Contents