nvcr-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-37565

NovoCure Limited

(Exact Name of Registrant as Specified in Its Charter)


Jersey						98-1057807
(State or Other Jurisdiction of						(I.R.S. Employer
Incorporation or Organization)						Identification No.)

No. 4 The Forum

Grenville Street

St. Helier, Jersey JE2 4UF

(Address of principal executive offices, including zip code)

+44 (0) 15 3475 6700

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

_______________________________________________________

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares, no par value	NVCR	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding as of April 22, 2022
Ordinary shares, no par value						104,586,094 Shares

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical facts or statements of current condition, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements contained in this report are based on our current plans, expectations, hopes, beliefs, intentions or strategies concerning future developments and their impact on us. Forward-looking statements contained in this report constitute our expectations or forecasts of future events as of the date this report was filed with the Securities and Exchange Commission (the “SEC”) and are not statements of historical fact. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as “anticipate,” “will,” “estimate,” “expect,” “project,” “intend,” “should,” “plan,” “believe,” “hope” and other words and terms of similar meaning in connection with any discussion of, among other things, future operating or financial performance, strategic initiatives and business strategies, regulatory or competitive environments, our intellectual property and research and development related to our Tumor Treating Fields devices marketed under various brand names, including Optune and Optune Lua, and software and systems to support and optimize the delivery of Tumor Treating Fields (collectively, our “Products”). In particular, these forward-looking statements include, among others, statements about:

•our research and development, clinical study and commercialization activities and projected expenditures;

•the further commercialization of our Products for current and future indications;

•our business strategies and the expansion of our sales and marketing efforts in the United States and in other countries;

•the market acceptance of our Products for current and future indications by patients, physicians, third-party payers and others in the healthcare and scientific community;

•our plans to pursue the use of our Products for the treatment of solid tumor cancers other than glioblastoma multiforme (“GBM”) and malignant pleural mesothelioma (“MPM”);

•our estimates regarding revenues, expenses, capital requirements and needs for additional financing;

•our ability to obtain regulatory approvals for the use of our Products in indications other than GBM and MPM;

•our ability to acquire from third-party suppliers the supplies needed to manufacture our Products;

•our ability to manufacture adequate supply of our Products;

•our ability to secure and maintain adequate coverage from third-party payers to reimburse us for our Products for current and future indications;

•our ability to receive payment from third-party payers for use of our Products for current and future indications;

•our ability to maintain and develop our intellectual property position;

•our ability to manage the risks associated with business disruptions caused by natural disasters, extreme weather events, pandemics such as the COVID-19 pandemic, including the emergence of variant strains, or international conflict and other disruptions outside of our control;

•our cash needs; and

•our prospects, financial condition and results of operations.

These forward-looking statements involve a number of risks and uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Factors which may cause such differences to occur include those risks and uncertainties set forth under Part I, Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed on February 24, 2022, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC. In our prior filings, references to NovoTTF-100L now refer

to Optune Lua. We do not intend to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

TRADEMARKS

This Quarterly Report on Form 10-Q includes trademarks of NovoCure Limited and other persons. All trademarks or trade names referred to herein are the property of their respective owners.

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NovoCure Limited

Quarterly Report on Form 10-Q

TABLE OF CONTENTS


		Page
Cautionary Note Regarding Forward Looking Statements		i
Trademarks		ii

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24

	Signatures	25

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements


NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
	March 31, 2022		December 31, 2021
	Unaudited		Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	190,739	$	208,802
Short-term investments	741,562		728,898
Restricted cash	889		807
Trade receivables, net	100,965		93,567
Receivables and prepaid expenses	17,343		17,025
Inventories	29,084		24,427
Total current assets	1,080,582		1,073,526
LONG-TERM ASSETS:
Property and equipment, net	25,072		22,693
Field equipment, net	12,792		12,923
Right-of-use assets	19,937		18,267
Other long-term assets	11,827		12,086
Total long-term assets	69,628		65,969
TOTAL ASSETS	$	1,150,210	$	1,139,495

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

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NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
	March 31, 2022		December 31, 2021
	Unaudited		Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables	$	69,186	$	72,600
Other payables, lease liabilities and accrued expenses	58,613		70,002
Total current liabilities	127,799		142,602
LONG-TERM LIABILITIES:
Long-term debt, net	563,026		562,216
Deferred revenue	5,511		6,477
Long-term leases	14,813		12,997
Employee benefit liabilities	3,024		4,543
Other long-term liabilities	156		166
Total long-term liabilities	586,530		586,399
TOTAL LIABILITIES	714,329		729,001
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
Share capital -
Ordinary shares no par value, unlimited shares authorized; issued and outstanding: 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
Accumulated other comprehensive income (loss)	(1,328)		(3,169)
Retained earnings (accumulated deficit)	(690,573)		(685,926)
TOTAL SHAREHOLDERS' EQUITY	435,881		410,494
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,150,210	$	1,139,495

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

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NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except share and per share data)
	Three months ended March 31,			Year ended December 31,
		2022		2021		2021
	Unaudited			Audited
Net revenues		$	137,547	$	134,695	$	535,031
Cost of revenues		27,727		26,385		114,877
Gross profit		109,820		108,310		420,154

Operating costs and expenses:
Research, development and clinical studies		42,234		45,916		201,303
Sales and marketing		37,884		31,357		137,057
General and administrative		30,508		31,125		126,127
Total operating costs and expenses		110,626		108,398		464,487

Operating income (loss)		(806)		(88)		(44,333)
Financial expenses (income), net		1,709		2,646		7,742

Income (loss) before income tax		(2,515)		(2,734)		(52,075)
Income tax		2,132		1,394		6,276
Net income (loss)		$	(4,647)	$	(4,128)	$	(58,351)

Basic net income (loss) per ordinary share		$	(0.04)	$	(0.04)	$	(0.56)
Weighted average number of ordinary shares used in computing basic net income (loss) per share		104,186,120		102,633,545		103,433,274

Diluted net income (loss) per ordinary share		$	(0.04)	$	(0.04)	$	(0.56)
Weighted average number of ordinary shares used in computing diluted net income (loss) per share		104,186,120		102,633,545		103,433,274

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

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
U.S. dollars in thousands
	Three months ended March 31,			Year ended December 31,
		2022		2021		2021
	Unaudited			Audited
Net income (loss)		$	(4,647)	$	(4,128)	$	(58,351)
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustments		330		(268)		302
Pension benefit plan		1,511		2,152		361
Total comprehensive income (loss)		$	(2,806)	$	(2,244)	$	(57,688)


NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
U.S. dollars in thousands (except share data)
	Ordinary shares	Additional paid-in capital		Accumulated other comprehensive loss		Retained earnings (accumulated deficit)		Total shareholders' equity

Balance as of December 31, 2021 (audited)	103,971,263	$	1,099,589	$	(3,169)	$	(685,926)	$	410,494

Share-based compensation to employees	—	25,045		—		—		25,045
Exercise of options and vested RSUs	587,825	3,148		—		—		3,148
Other comprehensive income (loss), net of tax benefit of $0	—	—		1,841		—		1,841
Net income (loss)	—	—		—		(4,647)		(4,647)
Balance as of March 31, 2022 (Unaudited)	104,559,088	$	1,127,782	$	(1,328)	$	(690,573)	$	435,881




	Ordinary shares	Additional paid-in capital		Accumulated other comprehensive loss		Retained earnings (accumulated deficit)		Total shareholders' equity

Balance as of December 31, 2020 (audited)	102,334,276	$	1,111,435	$	(3,832)	$	(631,077)	$	476,526

Share-based compensation to employees	—	18,863		—		—		18,863
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	—	—		1,884		—		1,884
Net income (loss)	—	—		—		(4,128)		(4,128)
Balance as of March 31, 2021 (Unaudited)	103,187,460	$	1,005,785	$	(1,948)	$	(631,703)	$	372,134

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

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NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
	Three months ended March 31,			Year ended December 31,
		2022		2021		2021
	Unaudited			Audited
Cash flows from operating activities:
Net income (loss)		$	(4,647)	$	(4,128)	$	(58,351)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		2,610		2,370		10,251
Accrued Interest		(221)		—		(94)
Asset write-downs and impairment of field equipment		135		176		649
Share-based compensation		25,045		18,863		94,900
Foreign currency remeasurement loss (gain)		249		2,157		3,231
Decrease (increase) in accounts receivables		(7,461)		4,624		5,270
Amortization of discount (premium)		684		603		3,101
Decrease (increase) in inventories		(4,804)		(1,296)		2,483
Decrease (increase) in other long-term assets		1,863		1,432		4,519
Increase (decrease) in accounts payables and accrued expenses		(14,809)		(2,626)		27,777
Increase (decrease) in other long-term liabilities		(2,331)		(4,394)		(10,980)
Net cash provided by (used in) operating activities		$	(3,687)	$	17,780	$	82,756

Cash flows from investing activities:
Purchase of property, equipment and field equipment		$	(5,093)	$	(3,981)	$	(24,170)
Proceeds from maturity of short-term investments		279,000		608,000		958,000
Purchase of short-term investments		(291,317)		(549,848)		(1,078,664)
Net cash provided by (used in) investing activities		$	(17,410)	$	54,171	$	(144,834)

Cash flows from financing activities:
Proceeds from issuance of shares, net		$	—	$	—	$	4,546

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

Effect of exchange rate changes on cash, cash equivalents and restricted cash		$	(25)	$	(102)	$	(188)

Increase (decrease) in cash, cash equivalents and restricted cash		(17,981)		79,804		(36,564)
Cash, cash equivalents and restricted cash at the beginning of the period		209,609		246,173		246,173

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





Supplemental cash flow activities:
Cash paid during the period for:
Income taxes paid (refunded), net		$	1,173	$	(2,405)	$	3,110
Interest paid		$	1	$	1	$	101
Non-cash activities:
Right-of-use assets obtained in exchange for lease liabilities		$	3,580	$	284	$	5,387

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

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NOVOCURE LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share data)

NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION

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") 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. The accompanying unaudited consolidated financial statements include the accounts of the Company and intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation for the periods presented. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. These consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the "2021 10-K") filed with the Securities and Exchange Commission on February 24, 2022.

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:

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.

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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.

NOTE 2: 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 March 31, 2022 and December 31, 2021, the Company’s cash and cash equivalents were composed of:


	March 31, 2022		December 31, 2021
	Unaudited		Audited
Cash	$	8,376	$	3,139
Money market funds	92,071		64,668
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

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:


	March 31, 2022		December 31, 2021
	Unaudited		Audited
U.S. Treasury bills	$	24,857	$	199,981
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”), 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”.

NOTE 3: INVENTORIES

Inventories are stated at the lower of cost or net realizable value. The weighted average methodology is applied to determine cost. As of March 31, 2022 and December 31, 2021, the Company’s inventories were composed of:


	March 31, 2022		December 31, 2021
	Unaudited		Audited
Raw materials	$	1,831	$	1,485
Work in progress	14,010		8,274
Finished products	13,243		14,668
Total	$	29,084	$	24,427

NOTE 4: COMMITMENTS AND CONTINGENT LIABILITIES

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Operating Leases. The facilities of the Company are leased under various operating lease agreements for periods, including options for extensions, ending no later than 2044. The Company also leases motor vehicles under various operating leases, which expire on various dates, the latest of which is in 2025.

Pledged deposits and bank guarantees. 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 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 March 31, 2022, the Company had no outstanding balance borrowed under the facility.

NOTE 5: 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 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.

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


	March 31, 2022		December 31, 2021
	Unaudited		Audited
Liability component, net:
Principal amount	$	575,000	$	575,000
Unamortized issuance costs	(11,974)		(12,784)
Net carrying amount of liability component (1)	$	563,026

SEC Form 10-Q filed by NovoCure Limited