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 September 30, ~~2017~~

2019

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

~~Le Masurier House~~

~~La Rue Le Masurier~~

No. 4 The Forum

Grenville Street

St. Helier, Jersey JE2 ~~4YE~~

4UF

(Address of principal executive ~~offices)~~

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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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. ~~(Check one):~~

Large accelerated filer

☒

☐

Accelerated filer

☒

☐

Non-accelerated filer

☐

☐ ~~(Do not check if a smaller reporting company)~~

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 ~~registrant’s~~issuer’s classes of common stock, as of the latest practicable date.

~~Class~~
Class						Outstanding as of October ~~19, 2017~~ 23, 2019
Ordinary shares, no par value						~~89,363,835~~98,968,534 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 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 ~~delivery system~~ research and ~~development.~~development related to our Tumor Treating Fields delivery systems marketed under various brand names, including Optune, the NovoTTF-100L System (“NovoTTF-100L”) and software and systems to support and optimize the delivery of Tumor Treating Fields (collectively, the “Products”). In particular, these forward-looking statements include, among others, statements about:

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

•the further commercialization of ~~Optune®,~~ our ~~first Tumor Treating Fields (“TTFields”) delivery system,~~Products for current and ~~our other TTFields delivery system candidates;~~

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 ~~Optune~~our Products for current and ~~our other TTFields delivery systems~~future indications by patients, physicians, third-party payers and others in the healthcare and scientific community;

•our plans to pursue the use of ~~TTFields~~our Products for the treatment of ~~other~~ solid tumor ~~cancers;~~

cancers other than glioblastoma (“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 ~~additional indications~~the use of our Products in cancers other than GBM and ~~any future TTFields delivery systems;~~

MPM;

•our ability to acquire from third-party suppliers the supplies needed to manufacture our ~~TTFields delivery systems from third-party suppliers;~~

Products;

•our ability to manufacture adequate supply;

•our ability to secure and maintain adequate coverage from third-party payers to reimburse us for ~~Optune or~~our Products for current and future ~~TTFields delivery systems;~~

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 cash needs;

and

~~our ongoing legal proceedings and tax audits; 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~~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” of our ~~Annual~~Quarterly Report on Form ~~10-K~~10-Q for the fiscal ~~year~~quarter ended ~~December 31, 2016,~~June 30, 2019, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange ~~Commission~~.Commission. 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.

Table of Contents

NovoCure Limited

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

1 -

Table of Contents

PART I—~~FINANCI~~ALFINANCIAL INFORMATION

Item 1. Financial Statements

~~NOVOCURE LIMITED AND SUBSIDIARIES~~


NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
	September 30, 2019		December 31, 2018
	Unaudited		Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	208,034	$	140,622
Short-term investments	104,565		105,256
Restricted cash	2,134		2,134
Trade receivables	49,904		36,523
Receivables and prepaid expenses	17,917		14,279
Inventories	24,388		22,555
Total current assets	406,942		321,369
LONG-TERM ASSETS:
Property and equipment, net	8,425		8,442
Field equipment, net	8,139		6,924
Right-of-use assets, net	14,635		—
Other long-term assets	5,717		3,058
Total long-term assets	36,916		18,424
TOTAL ASSETS	$	443,858	$	339,793

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

Table of Contents ~~CONSOLIDATED BALANCE SHEETS~~

~~U.S. dollars in thousands~~

September 30,

December 31,

2017

2016

Unaudited

Audited

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$
82,104

$
99,780

Short-term investments

104,453

119,854

Restricted cash

2,129

267

Trade receivables

23,000

6,339

Receivables and prepaid expenses

5,559

10,084

Inventories

24,642

25,549

Total current assets

241,887

261,873

LONG-TERM ASSETS:

Property and equipment, net

9,361

9,812

Field equipment, net

8,948

8,808

Severance pay fund

104

88

Other long-term assets

1,978

1,500

Total long-term assets

20,391

20,208

TOTAL ASSETS

$
262,278

$
282,081


NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
	September 30, 2019		December 31, 2018
	Unaudited		Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables	$	31,998	$	26,708
Other payables, lease liabilities and accrued expenses	48,407		37,852
Total current liabilities	80,405		64,560
LONG-TERM LIABILITIES:
Long-term loan, net of discount and issuance costs	149,384		149,268
Deferred revenue	8,341		9,929
Employee benefits	3,701		2,683
Long-term leases	11,367		—
Other long-term liabilities	295		1,094
Total long-term liabilities	173,088		162,974

TOTAL LIABILITIES	253,493		227,534

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
Share capital -
Ordinary shares no par value, unlimited shares authorized; issued and outstanding: 98,948,935 shares and 93,254,185 shares at September 30, 2019 (unaudited) and December 31, 2018, respectively	—		—
Additional paid-in capital	848,151		757,314
Accumulated other comprehensive income (loss)	(2,641)		(1,400)
Retained earnings (accumulated deficit)	(655,145)		(643,655)
TOTAL SHAREHOLDERS' EQUITY	190,365		112,259

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	443,858	$	339,793

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

~~- 2 -~~

Table of Contents~~NOVOCURE LIMITED AND SUBSIDIARIES~~

~~CONSOLIDATED BALANCE SHEETS~~

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

September 30,

December 31,

2017

2016

Unaudited

Audited

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Trade payables

$
14,143

$
18,356

Other payables and accrued expenses

26,842

18,526

Total current liabilities

40,985

36,882

LONG-TERM LIABILITIES:

Long-term loan, net of discount and issuance costs

97,049

96,231

Employee benefit liabilities

2,489

2,590

Other long-term liabilities

5,070

4,033

Total long-term liabilities

104,608

102,854

TOTAL LIABILITIES

145,593

139,736

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:

Share capital -

-

-

Ordinary shares no par value, unlimited shares authorized; issued and outstanding:
89,355,679 shares and 87,066,446 shares at September 30, 2017 (unaudited) and
December 31, 2016, respectively

Additional paid-in capital

689,460

664,154

Accumulated other comprehensive loss

(1,462
)

(1,883
)
Accumulated deficit

(571,313
)

(519,926
)
Total shareholders' equity

116,685

142,345

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$
262,278

$
282,081


NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except share and per share data)
	Three months ended September 30,						Nine months ended September 30,				Year ended December 31,
	2019		2018		2019		2018		2018
	Unaudited						Unaudited				Audited
Net revenues	$	92,062	$	64,756	$	252,084	$	178,395	$	248,069
Cost of revenues	22,900		18,949		63,820		57,020		80,048
Gross profit	69,162		45,807		188,264		121,375		168,021

Operating costs and expenses:
Research, development and clinical trials	18,766		13,074		55,262		35,540		50,574
Sales and marketing	23,830		19,124		69,871		56,455		77,663
General and administrative	22,711		18,855		64,198		54,388		73,456
Total operating costs and expenses	65,307		51,053		189,331		146,383		201,693

Operating income (loss)	3,855		(5,246)		(1,067)		(25,008)		(33,672)
Financial expenses (income), net	2,555		2,397		6,165		10,110		12,270

Income (loss) before income taxes	1,300		(7,643)		(7,232)		(35,118)		(45,942)
Income taxes	(630)		4,051		4,258		12,810		17,617
Net income (loss)	$	1,930	$	(11,694)	$	(11,490)	$	(47,928)	$	(63,559)

Basic net income (loss) per ordinary share	$	0.02	$	(0.13)	$	(0.12)	$	(0.52)	$	(0.69)
Weighted average number of ordinary shares used in computing basic net income (loss) per share	98,485,519		92,911,375		96,551,041		91,409,619		91,828,043

Diluted net income (loss) per ordinary share	$	0.02	$	(0.13)	$	(0.12)	$	(0.52)	$	(0.69)
Weighted average number of ordinary shares used in computing diluted net income (loss) per share	107,604,578		92,911,375		96,551,041		91,409,619		91,828,043

Table of Contents


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
U.S. dollars in thousands
	Three months ended September 30,						Nine months ended September 30,				Year ended December 31,
	2019		2018		2019		2018		2018
	Unaudited						Unaudited				Audited
Net income (loss)	$	1,930	$	(11,694)	$	(11,490)	$	(47,928)	$	(63,559)
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustments	(216)		(2)		(430)		19		27
Pension benefit plan	(68)		147		(811)		197		(84)
Total comprehensive income (loss)	$	1,646	$	(11,549)	$	(12,731)	$	(47,712)	$	(63,616)

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

~~- 3 -~~

Table of Contents~~NOVOCURE LIMITED AND SUBSIDIARIES~~


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, 2018 (audited)	93,254,185	$	757,314	$	(1,400)	$	(643,655)	$	112,259

Share-based compensation to employees	—	9,649		—		—		9,649
Exercise of options and warrants and vested RSUs	2,438,612	16,978		—		—		16,978
Other comprehensive income (loss), net of tax benefit of $11	—	—		(342)		—		(342)
Net income (loss)	—	—		—		(12,150)		(12,150)
Balance as of March 31, 2019 (unaudited)	95,692,797	$	783,941	$	(1,742)	$	(655,805)	$	126,394

Share-based compensation to employees	—	13,732		—		—		13,732
Proceeds from issuance of shares	43,421	1,208		—		—		1,208
Exercise of options and warrants and vested RSUs	2,122,658	19,457		—		—		19,457
Other comprehensive income (loss), net of tax benefit of $69	—	—		(615)		—		(615)
Net income (loss)	—	—		—		(1,270)		(1,270)
Balance as of June 30, 2019 (unaudited)	97,858,876	$	818,338	$	(2,357)	$	(657,075)	$	158,906

Share-based compensation to employees	—	14,338		—		—		14,338
Proceeds from issuance of shares	—	—		—		—		—
Exercise of options and warrants and vested RSUs	1,090,059	15,475		—		—		15,475
Other comprehensive income (loss), net of tax benefit of $11	—	—		(284)		—		(284)
Net income (loss)	—	—		—		1,930		1,930
Balance as of September 30, 2019 (unaudited)	98,948,935	$	848,151	$	(2,641)	$	(655,145)	$	190,365

Table of Contents ~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~U.S. dollars in thousands (except share and per share data)~~

Three months ended September 30,

Nine months ended September 30,

Year ended
December 31,

2017

2016

2017

2016

2016

Unaudited

Unaudited

Audited

Net revenues

$
50,109

$
21,674

$
123,365

$
52,646

$
82,888

Cost of revenues

15,153

11,118

39,969

28,897

39,870

Impairment of field equipment

-

-

-

6,412

6,412

Gross profit

34,956

10,556

83,396

17,337

36,606

Operating costs and expenses:

Research, development and clinical trials

9,273

10,233

28,055

32,996

41,467

Sales and marketing

16,387

15,865

47,503

43,771

59,449

General and administrative

15,215

12,723

42,660

38,010

51,007

Total operating costs and expenses

40,875

38,821

118,218

114,777

151,923

Operating loss

(5,919
)

(28,265
)

(34,822
)

(97,440
)

(115,317
)
Financial expenses, net

2,156

2,189

6,785

3,293

6,147

Loss before income tax expense

(8,075
)

(30,454
)

(41,607
)

(100,733
)

(121,464
)
Income tax expense

3,423

3,174

9,110

8,944

10,381

Net loss

$
(11,498
)

$
(33,628
)

$
(50,717
)

$
(109,677
)

$
(131,845
)

Basic and diluted net loss per ordinary share

$
(0.13
)

$
(0.39
)

$
(0.57
)

$
(1.29
)

$
(1.54
)

Weighted average number of ordinary shares used in
computing basic and diluted net loss per share

89,125,646

85,774,874

88,265,835

85,153,644

85,558,448


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

Balance as of December 31, 2017 (audited)	89,478,032	$	697,165	$	(1,343)	$	(582,258)	$	113,564

Share-based compensation to employees	—	8,520		—		—		8,520
Exercise of options and warrants and vested RSUs	920,869	2,581		—		—		2,581
Cumulative effect adjustment on retained earnings (*)	—	—		—		2,162		2,162
Other comprehensive income (loss), net of tax benefit of $5	—	—		15		—		15
Net income (loss)	—	—		—		(20,724)		(20,724)
Balance as of March 31, 2018 (unaudited)	90,398,901	$	708,266	$	(1,328)	$	(600,820)	$	106,118

Share-based compensation to employees	—	10,206		—		—		10,206
Proceeds from issuance of shares	54,386	938		—		—		938
Exercise of options and warrants and vested RSUs	2,049,986	10,274		—		—		10,274
Other comprehensive income (loss), net of tax benefit of $3	—	—		55		—		55
Net income (loss)	—	—		—		(15,510)		(15,510)
Balance as of June 30, 2018 (unaudited)	92,503,273	$	729,684	$	(1,273)	$	(616,330)	$	112,081

Share-based compensation to employees	—	10,479		—		—		10,479
Proceeds from issuance of shares	—	—		—		—		—
Exercise of options and warrants and vested RSUs	504,571	3,924		—		—		3,924
Other comprehensive income (loss), net of tax benefit of $11	—	—		146		—		146
Net income (loss)	—	—		—		(11,694)		(11,694)
Balance as of September 30, 2018 (unaudited)	93,007,844	$	744,087	$	(1,127)	$	(628,024)	$	114,936

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~U.S. dollars in thousands~~

Three months ended September 30,

Nine months ended September 30,

Year ended
December 31,

2017

2016

2017

2016

2016

Unaudited

Unaudited

Audited

Net loss

$
(11,498
)

$
(33,628
)

$
(50,717
)

$
(109,677
)

$
(131,845
)
Other comprehensive income (loss), net of tax :

Change in foreign currency translation adjustments

(2
)

8

8

64

10

Pension benefit plan

279

(409
)

413

(644
)

(388
)
Total comprehensive loss

$
(11,221
)

$
(34,029
)

$
(50,296
)

(110,257
)

$
(132,223
)

(*) Resulting from the adoption of ASC 606.

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

~~- 4 -~~

Table of Contents~~NOVOCURE LIMITED AND SUBSIDIARIES~~


NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
	Three months ended September 30,						Nine months ended September 30,				Year ended December 31,
	2019		2018		2019		2018		2018
	Unaudited						Unaudited				Audited
Cash flows from operating activities:
Net income (loss)	$	1,930	$	(11,694)	$	(11,490)	$	(47,928)	$	(63,559)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1,932		2,311		5,993		6,801		9,006
Asset write-downs and impairment of field equipment	78		178		239		320		407
Amortization of discount (premium)	(547)		(555)		(1,712)		1,502		1,022
Share-based compensation to employees	14,338		10,479		37,719		29,205		39,846
Decrease (increase) in accounts receivables	(9,986)		3,577		(17,020)		(4,805)		(10,325)
Decrease (increase) in inventories	1,067		(1,735)		(1,832)		385		(529)
Increase (decrease) in accounts payables and accrued expenses	6,433		2,839		10,902		(2,760)		13,713
Decrease (increase) in other long-term assets	1,069		155		1,151		(743)		(949)
Increase (decrease) in other long-term liabilities	(1,407)		83		(4,292)		(656)		9,503
Net cash provided by (used in) operating activities	$	14,907	$	5,638	$	19,658	$	(18,679)	$	(1,865)

Cash flows from investing activities:
Purchase of property, equipment and field equipment	$	(2,708)	$	(1,353)	$	(7,430)	$	(4,918)	$	(6,711)
Proceeds from maturity of short-term investments	105,000		45,000		315,661		150,000		255,000
Purchase of short-term investments	(104,466)		(44,652)		(313,142)		(148,786)		(253,782)
Net cash provided by (used in) investing activities	$	(2,174)	$	(1,005)	$	(4,911)	$	(3,704)	$	(5,493)

Cash flows from financing activities:
Proceeds from issuance of shares, net	$	—	$	—	$	1,208	$	938	$	1,835
Proceeds from long-term loan, net	—		—		—		149,150		149,150
Repayment of long-term loan	(7)		(22)		(23)		(100,063)		(100,084)
Exercise of options and warrants	15,475		3,924		51,910		16,779		18,468
Net cash provided by (used in) financing activities	$	15,468	$	3,902	$	53,095	$	66,804	$	69,369

Effect of foreign currency translation	$	(216)	$	(2)	$	(430)	$	19	$	27

Increase (decrease) in cash, cash equivalents and restricted cash	27,985		8,533		67,412		44,440		62,038
Cash, cash equivalents and restricted cash at the beginning of the period	182,183		116,625		142,756		80,718		80,718

Cash, cash equivalents and restricted cash at the end of the period	$	210,168	$	125,158	$	210,168	$	125,158	$	142,756

Table of Contents ~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY~~

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

Ordinary shares

Additional
paid-in

Accumulated
other
comprehensive

Accumulated

Total shareholders'

Shares

capital

loss

deficit

equity

Balance as of December 31, 2015 (audited)

83,778,581

$
640,406

$
(1,505
)

$
(388,081
)

$
250,820

Share-based compensation to employees

-

21,441

-

-

21,441

Exercise of options and warrants

3,195,477

993

-

-

993

Issuance of shares in connection with employee stock
   purchase plan

92,388

616

-

-

616

Tax benefit from share-based award activity

-

698

-

-

698

Other comprehensive loss, net of tax benefit of $38

-

-

(378
)

-

(378
)
Net loss

-

-

-

(131,845
)

(131,845
)
Balance as of December 31, 2016 (audited)

87,066,446

$
664,154

$
(1,883
)

$
(519,926
)

$
142,345

Share-based compensation to employees

-

20,760

-

-

20,760

Exercise of options and warrants

2,172,266

3,095

-

-

3,095

Cumulative effect adjustment resulting from ASU
   2016-09 adoption (see Note 1)

-

670

-

(670
)

-

Issuance of shares in connection with employee stock
   purchase plan

116,967

781

-

-

781

Other comprehensive income, net of tax benefit of $57

-

-

421

-

421

Net loss

-

-

-

(50,717
)

(50,717
)
Balance as of September 30, 2017 (unaudited)

89,355,679

$
689,460

$
(1,462
)

$
(571,313
)

$
116,685


NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
	Three months ended September 30,						Nine months ended September 30,				Year ended December 31,
	2019		2018		2019		2018		2018
	Unaudited						Unaudited				Audited
Supplemental cash flow activities:
Cash paid during the period for:
Income taxes	$	3,040	$	4,145	$	10,431	$	16,159	$	20,350
Interest	$	3,453	$	3,454	$	10,247	$	9,879	$	13,334
Non-cash activities in accordance with of ASC-842:
Right-of-use assets obtained in exchange for lease obligations	$	1,062	—		$	18,335	—		—

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

~~- 5 -~~

Table of Contents

NOVOCURE LIMITED AND SUBSIDIARIES

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~U.S. dollars in thousands~~

Three months ended September 30,

Nine months ended September 30,

Year ended
December 31,

2017

2016

2017

2016

2016

Unaudited

Unaudited

Audited

Cash flows from operating activities:

Net loss

$
(11,498
)

$
(33,628
)

$
(50,717
)

$
(109,677
)

$
(131,845
)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:

Depreciation and amortization

2,053

1,553

5,524

4,063

5,652

Asset write-downs and impairment of field equipment

72

10

206

6,440

6,446

Increase in accrued interest expense

-

222

-

222

-

Share-based compensation to employees

8,629

5,626

20,760

16,719

22,139

Excess tax benefits from share-based award activity

-

-

-

-

(698
)
Increase in trade receivables

(9,112
)

-

(16,661
)

-

(6,339
)
Amortization of discount

17

81

226

25

155

Decrease (increase) in receivables and prepaid expenses

5,986

694

4,525

(1,514
)

243

Decrease (increase) in inventories

504

(2,757
)

907

(10,378
)

(11,955
)
Increase in other long-term assets

(238
)

(526
)

(532
)

(804
)

(692
)
Increase (decrease) in trade payables

983

(6,765
)

(4,213
)

(2,621
)

1,601

Increase in other payables and accrued expenses

4,830

1,651

8,308

2,407

6,647

Increase in employee benefit liabilities, net

113

80

352

350

97

Increase in other long-term liabilities

208

263

1,079

901

957

Net cash provided by (used in) operating activities

$
2,547

$
(33,496
)

$
(30,236
)

$
(93,867
)

$
(107,592
)

Cash flows from investing activities:

Purchase of property and equipment

$
(544
)

$
(1,715
)

$
(1,951
)

$
(5,055
)

$
(5,674
)
Purchase of field equipment

(1,208
)

(3,113
)

(3,469
)

(9,213
)

(11,990
)
Decrease (increase) in restricted cash

(592
)

27

(1,861
)

15

(180
)
Proceeds from maturity of short-term investments

-

120,000

120,000

270,000

270,000

Purchase of short-term investments

-

(119,613
)

(104,006
)

(239,341
)

(239,341
)
Net cash provided by (used in) investing activities

$
(2,344
)

$
(4,414
)

$
8,713

$
16,406

$
12,815

Cash flows from financing activities:

Proceeds from issuance of shares, net

$
-

$
-

$
781

$
-

$
616

Proceeds from long-term loan, net

-

72,870

19

72,887

72,887

Excess tax benefits from share-based award activity

-

-

-

-

698

Repayment of other long-term loan

(19
)

(17
)

(56
)

(52
)

(70
)
Exercise of options and warrants

1,732

-

3,095

961

993

Net cash provided by financing activities

$
1,713

$
72,853

$
3,839

$
73,796

$
75,124

Effect of exchange rate changes on cash and cash equivalents

$
(2
)

$
8

$
8

$
64

$
10

Increase (decrease) in cash and cash equivalents

1,914

34,951

(17,676
)

(3,601
)

(19,643
)
Cash and cash equivalents at the beginning of the period

80,190

80,871

99,780

119,423

119,423

Cash and cash equivalents at the end of the period

$
82,104

$
115,822

$
82,104

$
115,822

$
99,780

Supplemental cash flow activities:

Cash paid during the period for:

Income taxes

$
2,335

$
4,624

$
7,237

$
7,793

$
9,447

Interest

$
2,561

$
1,880

$
7,603

$
3,813

$
6,595

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

~~- 6 -~~

~~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”)~~delivery systems, including Optune andNovoTTF-100L, for the treatment of solid tumors. The Company has received regulatory approval from the U.S. Food and Drug Administration (“FDA”) under the Premarket Approval pathway and regulatory approvals and clearances in certain other countries for Optune ~~its first TTFields delivery system,~~ to treat adult patients with ~~glioblastoma (“GBM”).~~

GBM. The Company also has received FDA approval under the Humanitarian Device Exemption pathway to market NovoTTF-100L for unresectable, locally advanced or metastatic MPM in combination with standard chemotherapies.

Financial statement preparation. The accompanying consolidated financial statements include the accounts of the Company ~~and its consolidated subsidiaries,~~ 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.~~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, ~~2016~~2018 (the ~~“2016~~“2018 10-K”) filed with the Securities and Exchange Commission ~~(the “SEC”)~~ on February ~~23, 2017.~~

28, 2019.

The significant accounting policies applied in the audited annual consolidated financial statements of the Company as disclosed in the ~~2016~~2018 10-K are applied consistently in these unaudited interim consolidated financial statements, except as noted below:

Recently Adopted Accounting ~~Pronouncements~~. Pronouncements. In ~~March~~ 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in ASU 2016-09 affect all entities that issue share-based payment awards to their employees and involve multiple aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted ASU 2016-09 during the quarter ended March 31, 2017, at which time it changed its accounting policy to account for forfeitures as they occur. The change was applied on a modified retrospective basis with a cumulative effect adjustment to accumulated deficit of $670 as of January 1, 2017. In addition, excess tax benefits for share-based payments are now presented ~~as an operating activity in the statements of cash flows~~ ~~rather than financing~~ ~~activity. The changes have been applied prospectively in accordance with the ASU and prior periods have not been adjusted.~~

~~Recent Accounting Pronouncements.~~ ~~In May 2014,~~ FASB issued ASU ~~2014-09, Revenue from Contracts with Customers~~No. 2016-02, “Leases (Topic ~~606) (ASU 2014-09)~~842)”, which amends the existing ~~accounting~~ standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The Company is currently evaluating the requirements of the new standardlease accounting, requiring lessees to insure that it has processes, systems and internal controls in place to collect the necessary information to implement the standard, which will be effective as of January 1, 2018. Currently, the Company anticipates using a portfolio approach to apply the standard to portfolios of contracts with similar characteristics and anticipates that it will apply the cumulative catch-up transition method which requires the application of the provisions of the new standard as of the date of adoption with the cumulative effect of the retrospective application of the provisions as an adjustment through retained earnings. While the Company is still in the process of completing its assessmentrecognize most leases on the impact this guidance will have on its consolidated financial statements and related disclosures, the Company does not anticipate that the adoption of this standard will have a material impact on its financial position, results of operations or cash flows.

In April 2016, FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. ASU 2016-10 covers two specific topics: performance obligations and licensing. This amendment includes guidance on immaterial promised goods or services, shipping or handling activities, separately identifiable performance obligations, functional or symbolic intellectual property licenses, sales-based and usage-based royalties, license restrictions (time, use, geographical) and licensing renewals. In addition, in May 2016, FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company is currently evaluating the impact of the adoption of both revenue standards on its consolidated financial statements.

In February 2016, FASB issued ASU 2016-02-Leases (ASC 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors).their balance sheets. The new standard establishes a right-of-use model that requires ~~lessees~~a lessee to ~~apply~~

~~- 7 -~~

a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to recordrecognize a right-of-use asset and a lease liability on the balance sheet for all leases with a term ~~of greater~~longer than ~~twelve months regardless of their classification.~~12 months. Leases ~~with a term of twelve months or less~~ will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASC 842 supersedes the previous leases standard, ASC 840.classified as finance or operating. The standard is effective ~~on January 1, 2019,~~for interim and annual reporting periods beginning after December 15, 2018.

The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. In July 2018, the FASB issued ASU No. 2018-11, “Targeted Improvements - Leases (Topic 842)” (together with ~~early~~ASU 2016-02, “ASC 842”). This update provides an additional (and optional) transition method to adopt the new leases standard. Under this method, an entity initially applies the new leases standard at the adoption ~~permitted.~~date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the prior comparative period’s financials will remain the same as those previously presented. The Company ~~currently anticipates adopting~~adopted the new standard ~~effective~~as of January 1, 2019 and it has also elected to adopt the package of practical expedients permitted in ASC 842.

ASC 842 provides lessors with a practical expedient, by class of underlying asset, not to separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606). Our product supply agreements include the right to use the device (lease component), the supply obligation of disposable transducer arrays and technical support for the term of treatment (non-lease component). As the non-lease component(s) associated with the lease component is ~~evaluating~~ the ~~impact~~predominant component of the ~~adoption of this standard on its~~combined component, the Company accounts for the combined component in accordance with Topic 606.

The consolidated financial ~~statements.~~

~~In May 2017, FASB issued ASU 2017-09,~~ ~~Compensation-Stock Compensation (Topic 718) Scope~~statements for the three and nine months ended September 30, 2019 are presented under the new standard, while comparative year and other periods presented are not adjusted and continue to be reported in accordance with Topic 840, Leases.

Table of ~~Modification Accounting.~~ ASU 2017-09 provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. ~~The Company is evaluating the impact of ASU~~ ~~2017-09~~.

Contents

NOTE 2: CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents include items almost as liquid as cash, such as certificates of deposit and time deposits with maturity periods of three months or less when purchased.


	September 30, 2019		December 31, 2018
	Unaudited		Audited
Cash	$	5,851	$	9,197
Money market funds	202,183		131,425
Total cash and cash equivalents	$	208,034	$	140,622

The Company invests in marketable U.S. Treasury Bills (“T-bills”) that are classified as held-to-maturity securities. The amortized cost and recorded basis of the T-bills are presented as short-term investments.


	September 30, 2019		December 31, 2018
	Unaudited		Audited
Short-term investments	$	104,565	$	105,256

Quoted market prices were applied to determine the fair value of cash equivalents and short-term investments, therefore they are categorized as Level 1 in accordance with ASC 820, “Fair Value Measurements and Disclosures.” The estimated fair value of the ~~amount of $104,453 and $119,854~~Company’s short-term investments as of September 30, ~~2017~~2019 and December 31, ~~2016, respectively,~~2018 was $104,613 and ~~their estimated fair value as of September 30, 2017 and December 31, 2016 was $104,419 and $119,825,~~$105,266, respectively.

NOTE 3: INVENTORIES

Inventories are stated at the lower of cost or ~~market.~~net realizable value. The weighted average methodology is applied to determine cost. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company’s inventories were composed of:

	September 30,		December 31,
	2017		2016			September 30, 2019		December 31, 2018
	Unaudited		Audited			Unaudited		Audited
Raw materials	$	5,936	$	5,243	Raw materials	$	3,077	$	870
Work in progress		10,621		8,292	Work in progress	9,860		8,667
Finished products		8,085		12,014	Finished products	11,451		13,018
Total	$	24,642	$	25,549	Total	$	24,388	$	22,555

NOTE 4: COMMITMENTS, RIGHTS OF USE AND CONTINGENT LIABILITIES

Operating Leases and Rights of Use. The facilities of the Company are leased under various operating lease agreements for periods, including options for extensions, ending no later than ~~2024.~~2029. The Company also leases motor vehicles under various operating leases, which expire on various dates, the latest of which is in ~~2020.~~

2022.

Under ASC 842, all leases with durations greater than 12 months, including non-cancelable operating leases, are now recognized on the balance sheet. The aggregated present value of lease agreements, net of deferred rent, is recorded as a long-term asset titled right-of-use assets. The corresponding lease liabilities are split between other payables and long-term lease liabilities.

Table of Contents

Upon implementation of ASC 842, effective January 1, 2019, the Company recorded an increase in right-of-use assets obtained in exchange for lease obligations of $15,733 on our opening balance sheet. Lease and rental payments for the nine months ended September 30, 2019, totaled $3,799. Future minimum lease payments under non-cancelable operating leases as of September 30, 2019, are as follows:


	September 30, 2019
	Unaudited
Future minimum lease payments:
2019 (remainder of the year)	$	1,146
2020	4,519
2021	4,193
2022	3,130
2023	1,933
Thereafter	3,651
Total future minimum lease payments	$	18,572
Less imputed interest	(2,956)
Net present value of future minimum lease payments	$	15,616

Presented as of September 30, 2019:
Short-term lease liabilities	$	4,249
Long-term lease liabilities	11,367
Net present value of future minimum lease payments	$	15,616

Weighted average of remaining operating lease term	4.85

Weighted average of operating lease discount rate	7.51%

Pledged deposits and bank guarantees. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company pledged bank deposits of ~~$1,051~~ $1,325and ~~$807,~~$1,143, respectively, to cover bank guarantees in respect of its leases of operating facilities and obtained bank guarantees ~~by the bank~~ for the fulfillment of the Company’s lease and other contractual commitments of ~~$1,212~~ $1,491and ~~$955, respectively.~~

In January 2017, two putative class action lawsuits were filed against the Company, its directors and certain of its officers, as well as the underwriters in the Company’s October 2015 initial public offering. The complaints, which purport to be brought on behalf of a class of persons and/or entities who purchased or otherwise acquired ordinary shares of the Company pursuant and/or traceable to the registration statement and prospectus issued in connection with the Company’s initial public offering, allege material misstatements and/or omissions in the Company’s initial public offering materials in alleged violation of the federal securities laws and seek compensatory damages, among other remedies. The two actions have been consolidated and the plaintiffs filed a consolidated amended complaint on May 31, 2017. The court granted the defendants’ motion to bifurcate the motion to dismiss into two stages: a threshold motion to dismiss for lack of personal jurisdiction, lack of subject matter jurisdiction, and insufficient process and service of process; and, if the matter is not dismissed following that threshold motion, a subsequent merits motion to dismiss regarding whether the allegations in the amended complaint state a claim under the securities laws. The defendants filed the threshold motion to dismiss on July 31, 2017, and the plaintiffs filed an opposition to the threshold motion to dismiss on September 29, 2017. The Company believes that the amended complaint is without merit and plans to defend the consolidated lawsuits vigorously. The Company has not

~~- 8 -~~

~~accrued any amounts in respect of these lawsuits, as a liability is not probable and the amount of any potential liability cannot be reasonably estimated.~~

$1,299, respectively.

NOTE 5: SHARE CAPITAL

For the nine months ended September 30, 2017, warrants to purchase 1,418,711 ordinary shares with an exercise price of $3.59 per share were cashlessly exercised, resulting in the issuance of 803,138 ordinary shares. Also, warrants to purchase 6,498 ordinary shares with an exercise price of $3.59 per share were exercised for cash. For the nine months ended September 30, 2017, options to purchase 1,370,810 ordinary shares were exercised, resulting in the issuance of 1,364,645 ordinary shares.

~~NOTE 6: EQUITY INCENTIVE PLANS~~

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

Options granted under the 2015 Plan generally have a ~~four-year~~four-year vesting period and expire ten years after the date of grant. Options granted under the 2015 Plan that are ~~cancelled~~canceled or forfeited before expiration become available for future grants. RSUs granted under the 2015 Plan generally vest ~~in equal installments~~ over a ~~three-year~~three-year period. RSUs granted under the 2015 Plan that are canceled before expiration become available for future grants. As of September 30, ~~2017,~~ ~~9,563,985~~2019, 11,915,754 ordinary shares were available for grant under the 2015 Plan.

Table of Contents

A summary of the status of the Company’s option plans as of September 30, ~~2017~~2019 and changes during the period then ended is presented below:


	Nine months ended September 30, 2017						Nine months ended September 30, 2019
	Unaudited						Unaudited
	Number of options			Weighted average exercise price			Number of options	Weighted average exercise price
Outstanding at beginning of year		11,377,354		$	9.76	Outstanding at beginning of year	14,438,215	$	13.56
Granted		5,117,088			9.96	Granted	1,496,161	49.43
Exercised		(1,370,810	)		2.31	Exercised	(4,914,918)	10.55
Forfeited and cancelled		(310,693	)		12.39
Outstanding as of September 30, 2017		14,812,939			10.46
Forfeited and canceled						Forfeited and canceled	(144,403)	19.91
Outstanding as of September 30, 2019						Outstanding as of September 30, 2019	10,875,055	$	19.77

Exercisable options		6,119,710			8.17	Exercisable options	3,444,478	$	14.61

Vested and expected to vest		14,812,939		$	10.46

For the nine months, ended September 30, 2019, options to purchase 4,914,918 ordinary shares were exercised, resulting in the issuance of 4,914,918 ordinary shares.

A summary of the status of the Company’s RSUs as of September 30, ~~2017~~2019 and changes during the period then ended is presented below:


	Nine months ended September 30, 2017						Nine months ended September 30, 2019
	Unaudited						Unaudited
	Number of RSUs			Weighted average grant date fair value price			Number of RSUs	Weighted average grant date fair value price
Unvested at beginning of year		-		$	-	Unvested at beginning of year	1,613,197	14.04
Granted		1,661,619			9.64	Granted	597,583	50.71
Vested		-			-	Vested	(736,411)	13.36
Forfeited and cancelled		(10,400	)		7.15	Forfeited and cancelled	(24,356)	34.32
Unvested as of September 30, 2017		1,651,219		$	9.66
Unvested as of September 30, 2019						Unvested as of September 30, 2019	1,450,013	29.16

~~- 9 -~~

In September 2015, the Company adopted an employee share purchase plan (“ESPP”) to encourage and enable eligible employees to acquire ownership of the Company’s ordinary shares purchased through accumulated payroll deductions on an after-tax basis. In the United States, the ESPP is intended to be an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code and the provisions of the ESPP ~~will be~~are construed in a manner consistent with the requirements of such section. ~~The Company began its offerings under the ESPP on August 1, 2016.~~ As of September 30, ~~2017, 2,328,171~~2019, 3,078,989 ordinary shares were available to be purchased by eligible employees under the ESPP and ~~209,355~~390,614 shares had been issued under the ESPP.

Table of Contents

The fair value of ~~all equity-based~~share-based awards was estimated using the Black-Scholes ~~option-pricing~~ model ~~with~~for all equity grants. For market condition awards, the Company also applied the Monte-Carlo simulation model. We assessed fair value using the following underlying ~~assumptions, excluding market condition awards for which fair value was estimated using the Monte Carlo option-pricing model:~~

assumptions:


	Nine months ended September 30,			Year ended December 31,		Nine months ended September 30,							Year ended December 31, 2018
	2017	2016		2016		2019		2018				Year ended December 31, 2018
	Unaudited			Audited		Unaudited							Audited
Stock Option Plans					Stock Option Plans
Expected term (years)	5.5-6.25	6.25		6.25	Expected term (years)	5.50-6.50		5.50-6.25		5.50-6.25
Expected volatility	56.74%-59.45%	59.80%-61.65%		58.40%-61.70%	Expected volatility	55%-61%		52%-55%		52%-55%
Risk-free interest rate	1.97%-2.23%	1.23%-1.88%		1.23%-1.88%	Risk-free interest rate	1.90%-2.40%		2.70%-2.89%		2.70%-2.99%
Dividend yield	0.00%	0.00%		0.00%	Dividend yield	0.00	%	0.00	%	0.00	%
ESPP					ESPP
Expected term (years)	0.50		0.42	0.42	Expected term (years)	0.50		0.50		0.50
Expected volatility	76.37%-82.00%	70.45%		70.45%	Expected volatility	44%-62%		45%-53%		45%-53%
Risk-free interest rate	0.62%-1.13%	0.40%		0.40%	Risk-free interest rate	2.10%-2.51%		1.61%-2.14%		1.61%-2.14%
Dividend yield	0.00%	0.00%		0.00%	Dividend yield	0.00	%	0.00	%	0.00	%

The total non-cash share-based compensation expense related to all of the Company’s equity-based awards recognized for the three and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 and the year ended December 31, ~~2016~~2018 was:


	Three months ended September 30,				Nine months ended September 30,				Year ended December 31,			Three months ended September 30,						Nine months ended September 30,					Year ended December 31, 2018
	2017		2016		2017		2016		2016			2019		2018		2019		2018				Year ended December 31, 2018
	Unaudited				Unaudited				Audited			Unaudited						Unaudited					Audited
Cost of revenues	$	79	$	160	$	353	$	471	$	623	Cost of revenues	$	605	$	464	$	1,626	$	891	$	1,261
Research, development and clinical trials		972		776		2,645		2,378		3,155	Research, development and clinical trials	2,202		1,223		5,203		3,415		4,709
Sales and marketing		1,874		1,249		4,264		3,888		5,111	Sales and marketing	3,368		1,979		8,585		5,309		7,393
General and administrative		5,704		3,441		13,498		9,982		12,552	General and administrative	8,163		6,813		22,305		19,590		26,483
Total share-based compensation expense	$	8,629	$	5,626	$	20,760	$	16,719	$	21,441	Total share-based compensation expense	$	14,338	$	10,479	$	37,719	$	29,205	$	39,846

NOTE 6: EARNINGS PER SHARE

Basic net income (loss) per share is computed based on the weighted average number of ordinary shares outstanding during each period. Diluted net income per share is computed based on the weighted average number of ordinary shares outstanding during the period, plus potential dilutive shares considered outstanding during the period, in accordance with ASC 260-10, as determined under the treasury stock method. Basic and diluted net loss per ordinary share was the same for each period presented, except for the three months ended September 30, 2019, as the inclusion of all potential dilutive shares (deriving from options, RSUs and the ESPP) outstanding would be anti-dilutive.

The calculation of diluted earnings per share includes the weighted average of potentially dilutive securities, which consists of ordinary shares underlying outstanding share options, RSUs and the ESPP. The effect of these dilutive securities under the treasury stock method was approximately 9,119,059 shares for the three months ended September 30, 2019.

The Company excluded 57,782 share options from the computation of dilutive net income per share for the three months ended September 30, 2019 because including them would had have an anti-dilutive effect.

NOTE 7: SUPPLEMENTAL INFORMATION

The Company operates in a single reportable segment.

The following table presents long-lived assets by location:

September 30,

December 31,

2017

2016

Unaudited

Audited

United States

$
10,942

$
11,981

Switzerland

5,057

4,346

Israel

1,884

1,915

Others

426

378

Total

$
18,309

$
18,620

~~- 10 -~~

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	September 30, 2019		December 31, 2018
	Unaudited		Audited
United States	$	8,170	$	8,289
Switzerland	3,695		2,513
Israel	2,393		2,236
Germany	778		1,054
Others	1,528		1,274
Total	$	16,564	$	15,366

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


	Three months ended September 30,				Nine months ended September 30,				Year ended December 31,			Three months ended September 30,						Nine months ended September 30,					Year ended December 31, 2018
	2017		2016		2017		2016		2016			2019		2018		2019		2018				Year ended December 31, 2018	Year ended December 31, 2018
	Unaudited				Unaudited				Audited			Unaudited						Unaudited				Year ended December 31, 2018	Audited
United States	$	35,300	$	18,131	$	95,826	$	46,264	$	72,771	United States	$	61,399	$	44,469	$	166,937	$	124,206	$	168,414
EMEA (*)		14,757		3,519		27,316		6,296		10,028	EMEA (*)	24,482		18,295		69,507		50,692		72,485
Japan		52		24		223		86		89	Japan	4,779		1,992		12,334		3,497		6,351
Greater China (1)											Greater China (1)	1,402		—		3,306		—		819
Total	$	50,109	$	21,674	$	123,365	$	52,646	$	82,888	Total	$	92,062	$	64,756	$	252,084	$	178,395	$	248,069

(*) including Germany	$	14,664	$	1,766		26,880		2,659	$	9,799

~~- 11 -~~


(*) including Germany			$	21,688					$	17,536					$	64,065					$	48,545					$	67,849

(1) Reflects revenue recognized in accordance with a License and Collaboration Agreement between us and Zai Lab (Shanghai) Co., Ltd. (“Zai”), dated September 10, 2018, pursuant to which Zai is commercializing Optune in China, Hong Kong, Macau and Taiwan (referred to in this table as “Greater China”). For additional information, see Note 12 to the Consolidated Financial Statements in our 2018 10-K.

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Item 2. Management’s Discussion and Analysis ofof 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 consolidated financial statements and the notes thereto for the period ended September 30, ~~2017~~2019 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. ~~As a result of many factors, such as those set forth~~Please refer to the information under ~~Part I, Item 1A, “Risk Factors”, of our Annual Report on Form 10-K for~~ the ~~fiscal year ended December 31, 2016 (the “2016 10-K”), our actual results may differ materially from those anticipated~~heading “Cautionary Note Regarding Forward-Looking Statements” elsewhere in ~~these forward-looking statements.~~this report. References to the words “we,” “our,” “us,” and the “Company” in this report refer to NovoCure Limited, including its consolidated subsidiaries.

Overview

We are a ~~commercial stage~~global oncology company ~~developing a profoundly different cancer treatment centered on~~with a proprietary ~~therapy~~platform technology called Tumor Treating Fields, ~~(“TTFields”),~~ the use of electric fields tuned to specific frequencies to disrupt solid tumor cancer cell division. Our key priorities are to ~~accelerate commercial~~drive adoption of Optune and the NovoTTF-100L System (“NovoTTF-100L”), our ~~first~~ commercial ~~TTFields~~Tumor Treating Fields delivery ~~system, for the treatment of glioblastoma (“GBM”)~~systems, and to advance programs testing the safety and efficacy ~~and safety~~ of ~~TTFields~~our products in multiple solid tumor indications through our clinical pipeline.

We ~~were founded~~have built a commercial organization in ~~2000~~the United States, Austria, Germany, Israel, Japan, Sweden and ~~operated~~Switzerland, which we refer to as ~~a development stage company through December 31, 2011. We initially received~~our currently active markets. Optune is approved by the U.S. Food and Drug Administration (“FDA”) ~~approval~~under the Premarket Approval (“PMA”) pathway for ~~Optune~~the treatment of adult patients with newly diagnosed glioblastoma (“GBM”) in ~~2011~~combination with temozolomide, a chemotherapy drug, and for use as a monotherapy treatment for adult patients with GBM following confirmed recurrence after chemotherapy. ~~In October 2015, we received FDA~~We also have approval to market Optune for the treatment of ~~adult patients with newly diagnosed~~ GBM in ~~combination with temozolomide, a chemotherapy drug. We have also received approval to market Optune in Germany, Austria, Switzerland, Israel,~~the European Union, Japan and certain other countries. ~~To date, we have focused on commercializing Optune in the United States, Germany, Austria, Switzerland, Israel and Japan, which we refer to collectively as our currently active markets.~~

In April 2017, we announced final analyses of the full 695 patient dataset with a median follow-up of 40 months from our phase 3 pivotal trial of Optune in combination with temozolomide for patients with newly diagnosed GBM. For patients treated with Optune in combination with temozolomide versus patients treated with temozolomide alone, the two-year survival rate increased from 30 percent to 43 percent and the five-year survival rate increased from five percent to 13 percent. In September 2017, we announced results from health-related quality of life analyses from this same phase 3 pivotal trial. Patients treated with Optune in combination with temozolomide were able to maintain quality of life for longer compared to patients treated with temozolomide alone. These data further support our belief that Optune plus temozolomide is an essential combination treatment for patients with newly diagnosed GBM.

We continue to work with payers to expand access to Optune for patients with ~~newly diagnosed and recurrent~~ GBM. As of September 30, ~~2017, more than 210 million~~2019, a substantial majority of Americans ~~have available~~with private health insurance had coverage ~~for the use~~ of Optune for newly diagnosed and/or recurrent GBM. ~~Additionally, we have signed contracts to establish Optune~~Effective as ~~an in-network benefit for more than 178 million American lives. The percentage~~ of ~~our U.S. active patient population~~September 1, 2019, Americans who are beneficiaries of the Medicare fee-for-service program ~~which has denied~~also have coverage ~~for our claims to date, continues to range from 20 to 25 percent.~~

In Germany, we are able to bill healthcare payers for individual cases and each case is evaluated individually on its merits and under the payer’s specific rules for such cases. In the third quarter 2017, approximately half of ~~German claims were approved for reimbursement. In September 2017, the German Federal Joint Committee, or G-BA, published its decision to support a clinical trial studying~~ Optune for ~~the treatment of~~ newly diagnosed GBM. Our team is focused on working through the typical administrative ramp-up with Medicare to ensure that we realize the full financial benefit as soon as possible. We are actively appealing Medicare fee-for-service coverage denials up to and including the Administrative Law Judge (“ALJ”) process with Centers for Medicare and Medicaid Services (“CMS”).

In June 2019, the German Institute for Quality and Efficiency in Healthcare (“IQWiG”), published its rapid report concluding that, based on a review of our EF-14 phase 3 pivotal trial, patients with newly diagnosed GBM lived longer when treated with Optune in addition to standard chemotherapy, without affecting quality of life. According to the published timeline, we now expect a national reimbursement decision in Germany no later than October 2020.

As of September 30, 2019, the total number of contracted lives globally was more than 407 million.

In order to further advance the scientific evidence supporting the use of Optune in GBM and gather additional information about Optune’s optimal use, we plan to initiate additional randomized trials in GBM. The ~~proposed~~first trial, ~~design~~which we plan to begin in the next few months, will ~~examine~~be a post-marketing trial designed to study the potential benefit of ~~starting~~earlier initiation of Optune, concurrent with radiation therapy, versus initiation post radiation, and ~~temozolomide prior~~is intended to support possible label expansion. A second trial, which we plan to begin in 2020, is currently being designed.

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

In May 2019, NovoTTF-100L received approval by the ~~initiation~~FDA under the Humanitarian Device Exemption (“HDE”) pathway to treat unresectable, locally advanced or metastatic malignant pleural mesothelioma (“MPM”) in combination with standard chemotherapies based upon the results of ~~maintenance temozolomide~~our STELLAR trial. In October 2019, results from our STELLAR trial were published in ~~accordance with Section 137e~~The Lancet Oncology. We have initiated a phased launch for MPM shaped by our learnings from our GBM rollout. Our initial launch efforts are focused on certifying radiation oncologists and on supporting the required Institutional Review Board (“IRB”) approval process at the approximately 40 centers that we believe see the majority of U.S. MPM patients. As of September 30, 2019, prescribers were certified at 10 centers across the U.S. and two centers had successfully completed the required IRB approval process. The first MPM commercial patient started therapy in September 2019. We are currently exploring the appropriate regulatory pathway for MPM in our currently active markets outside of the ~~German Healthcare Provision Act.~~U.S.

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We expect to begin a dialogue with payers around access to NovoTTF-100L for patients with MPM in future quarters. We anticipate that MPM claims during the early launch phase will go through an appeal process with payers, similar to our early experience with GBM.

In March 2019, we enrolled the first patient in our ENGOT-ov50/INNOVATE-3 trial, a phase 3 pivotal trial testing the effectiveness of Tumor Treating Fields with paclitaxel in patients with recurrent, platinum-resistant ovarian cancer. The protocol specifies overall survival as primary endpoint and an event-driven interim analysis, which we anticipate will ~~share~~occur in 2022. The European Network for Gynaecological Oncological Trial groups (“ENGOT”) and The GOG Foundation, Inc. (“GOG”), third-party clinical trial networks, are collaborating with us on the ~~costs for~~trial. ENGOT and GOG were involved in the ~~conduct~~development of the ~~clinical~~ trial ~~with~~and the ~~G-BA. The statutory health insurance funds will reimburse treatment costs, including~~collaborations are intended to facilitate enrollment of INNOVATE-3 at leading cancer centers in Europe and the ~~cost of Optune for clinical trial patients. The G-BA decision is an important first step in the process to secure national reimbursement for Optune in Germany.~~

~~In August 2017,~~United States.

Currently, we signed a contract with the Federation of Austrian Social Insurance Institutions to grant reimbursement for Optune. All 18 Austrian insurance funds have agreed to participate in the contract, marking our first national reimbursement decision. We are ~~currently working to implement the contract and believe that our first payments for Austrian claims will begin in the fourth quarter 2017.~~

In April 2017, we submitted our applicate to the Federal Office of Public Health in Switzerland to secure a defined reimbursement rate for Optune based upon the long-term analysis of the EF-14 clinical trial data. We now believe a Swiss reimbursement decision will come no earlier than 2018. Until we secure a defined reimbursement rate, payment is not guaranteed.

~~- 12 -~~

In March 2017, we received Japanese Ministry of Health, Labour and Welfare (“MHLW”) approval for the second generation Optune. In March 2017, we filed an application to request a defined reimbursement rate for Optune based on the December 2016 regulatory approval of Optune to treat newly diagnosed GBM. We are currently in active reimbursement discussions with the MHLW and believe that a reimbursement decision will come before the end of 2017.

We have researched the biological effects of TTFields extensively. Because TTFields are delivered regionally, act only on dividing cells (a biological process known as mitosis) and are frequency-tuned to target cells of a specific size, we believe there is minimal damage to healthy cells. We believe our pre-clinical and clinical research demonstrates that TTFields’ mechanism of action affects fundamental aspects of cell division and may have broad applicability across a variety of solid tumors. We have demonstrated in pre-clinical studies that TTFields can offer additive or synergistic benefits in combination with radiation, chemotherapy and immunotherapy, which may lead to greater efficacy than radiation, chemotherapy and immunotherapy alone, without significantly increasing the side effects when used in combination with other cancer treatments.

~~We are currently planning or~~ conducting ~~clinical~~phase 3 pivotal trials evaluating the use of ~~TTFields~~Tumor Treating Fields in brain metastases, non-small-cell lung cancer, ~~(“NSCLC”),~~ pancreatic cancer and ovarian ~~cancer and mesothelioma.~~cancer. We are also conducting a phase 2 pilot trial evaluating the use of Tumor Treating Fields in liver cancer. We anticipate expanding our clinical pipeline over time to study the safety and efficacy of ~~TTFields~~Tumor Treating Fields for additional solid tumor indications.

The table below presents the current status of the ongoing or completed clinical trials in our ~~clinical~~ pipeline and our expected next milestone for each.

We now expect data from the HEPANOVA phase 2 pilot trial in 2021.

We believe we have a diverse intellectual property portfolio that includes over 145 issued patents and pending patent applications as well as numerous trade secrets. We believe these intellectual property assets provide expansive commercialization rights to our products in the oncology space.

In ~~May 2017,~~2018, we ~~received humanitarian use device (HUD) designation~~granted Zai Lab (Shanghai) Co., Ltd. (“Zai”) a license to commercialize Optune in China, Hong Kong, Macau and Taiwan under a License and Collaboration Agreement (the “Zai Agreement”). The Chinese regulatory authorities designated Optune as an Innovative Medical Device and have accepted the Marketing Authorization Application for the ~~use~~GBM indication in China. Zai is pursuing a clinical trial waiver and, should a clinical trial waiver be granted, Zai intends to launch Optune in China before the end of ~~TTFields for~~2019. On the ~~treatment of pleural mesothelioma. The HUD designation~~clinical development front, Zai is ~~the first step in obtaining a Humanitarian Device Exemption (HDE) for the treatment of pleural mesothelioma with TTFields. An approved HDE would allow us~~working to ~~market TTFields in combination with standard of care chemotherapy as a treatment for pleural mesothelioma in the United States.~~

In October 2016, we enrolled the first patient in our METIS trial, a phase 3 pivotal trial testing the effectiveness of stereotactic radiosurgery plus TTFields compared to stereotactic radiosurgery alone in patients with brain metastases resulting from NSCLC. In September 2017, the FDA approved an IDE supplement amendingfinalize the protocol for a phase 2 pilot trial in gastric cancer and is collaborating closely with our clinical teams to initiate trials in other key indications in China.

Financial Overview. We view our operations and manage our business in one operating segment. For the ~~METIS trial. The protocol amendment is designed to accelerate the pace of enrollment by expanding the eligible patient population. Among other updates, the protocol now allows~~three and nine months ended September 30, 2019, our net revenues were $92.1 million and $252.1 million, respectively. Our net income (loss) for the ~~enrollment~~three and nine months ended September 30, 2019 was $1.9 million and $(11.5) million, respectively. As of ~~patients with infratentorial brain metastases, based upon new scientific information to support a specialized array layout to treat infratentorial tumors.~~

~~We own all commercialization rights to TTFields in oncology. Our robust global patent~~September 30, 2019, we had an accumulated deficit of $655.1 million.

Critical Accounting Policies and intellectual property portfolio consists of over 120 issued patents, with numerous additional patent applications pending worldwide. The patents have expected expiration dates between 2021 and 2035. We have also filed approximately 50 additional patent applications that, if issued, may protect aspects of our platform beyond 2035. We believe we will maintain exclusive rights to market TTFields for all solid tumor indications in our key markets through the life of our patents.

We were incorporated in the Bailiwick of Jersey in 2000. Our U.S. operations are located in Portsmouth, New Hampshire, Malvern, Pennsylvania, and New York City. Additionally, we have offices in Germany, Switzerland, Israel and Japan, and a research center in Israel. We completed our initial public offering of our ordinary shares in October 2015. Our ordinary shares are quoted on the NASDAQ Global Select Market under the symbol “NVCR.”

~~Financial Overview.~~ We expect to continue to incur significant expenses and operating losses for at least the next several years. We expect our research, development and clinical trials expenses to increase in connection with our ongoing activities, and as additional indications enter late-stage clinical development. In addition, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We may need additional funding to support the continuation of our operating activities. Until we can generate substantial revenues (which may not occur), we expect to finance our cash needs through our existing cash, cash equivalents, short-term investments, equity issuances or additional debt, and possibly also from collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. We will need to generate significant revenues to achieve profitability, and we may never do so.

~~- 13 -~~

~~Critical accounting policies and estimates~~

Estimates

In accordance with U.S. ~~GAAP,~~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 ~~2016 10-K.~~Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “2018 10-K”). For additional information, see Note 1 to our Unaudited Consolidated Financial Statements. There ~~have been~~were no other material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our ~~2016~~2018 10-K.

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Commentary on Results of Operations

~~We account for revenue when all revenue recognition criteria have been met or when cash is collected.~~ ~~Revenue recognized in a given period may include a mixture of accrued revenue, cash collections from amounts billed in prior periods and cash collections from amounts billed in the current period~~

Net revenues. ~~We report certain operating statistics to provide additional insight into the commercial performance of Optune in our currently active markets.~~

The number of active patients on Optune is our principal revenue driver. Growth in the number of active patients is a factor of both treatment duration and new patient starts. Median treatment duration differs based upon the clinical diagnosis of the patient. For the three months ended September 30, 2017, more than 60% of prescriptions received were for patients with newly diagnosed GBM. The conversion of prescriptions to new patients is driven by the prescription fill rate and the time to fill. In the twelve months ended September 30, 2017, our prescription fill rate was between 70-75%.

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

September 30,

Operating statistics

2017

2016

Active patients at period end (1)

United States

1,234

783

EMEA (2) (*)

448

202

Japan (2)

1

-

1,683

985

(*) including Germany

331

146

Three months ended September 30,

Nine months ended September 30,

2017

2016

2017

2016

Prescriptions received in period (3)

United States

805

569

2,293

1,800

EMEA (2) (*)

270

120

731

301

Japan (2)

1

1

5

1

1,076

690

3,029

2,102

(*) including Germany

202

87

553

221

~~(1)~~

An “active patient” is a patient who is on Optune 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.

~~(2)~~

As we enter each new market, our commercial activities focus initially on establishing the required in-market infrastructure, certifying physicians to prescribe Optune and obtaining a defined reimbursement pathway. Once established, our commercial efforts turn to increasing adoption.

~~(3)~~

A “prescription received” is a commercial order for Optune that is received from a physician certified to treat patients with Optune for a patient not previously on Optune. Orders to renew or extend treatment are not included in this total.

~~- 14 -~~

~~Net revenues.~~ ~~Substantially all of our~~Our revenues are primarily derived from patients using ~~our TTFields delivery system, marketed as~~ Optune in our currently active markets. We charge ~~patients or their third-party healthcare payers directly~~ for treatment with Optune andNovoTTF-100Lon a monthly ~~basis and bear the financial risk of securing payment in the United States and Europe.~~

~~The following is a summary of gross billings and revenues recorded on an accrual basis and a cash basis by quarters (unaudited):~~

2017

2016

U.S. dollars in millions

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Gross billings

$
101.9

$
87.2

$
73.2

$
63.8

$
57.5

$
54.0

$
45.5

Accrual basis revenue

$
35.7

$
19.1

$
14.7

$
8.5

$
0.0

$
0.0

$
0.0

Cash basis revenue for therapy provided in the period

3.1

5.7

5.9

6.3

8.9

7.6

5.6

Cash basis revenue for therapy provided in previous periods

11.3

13.6

14.3

15.5

12.7

10.3

7.4

Net revenues

$
50.1

$
38.4

$
34.9

$
30.2

$
21.7

$
17.9

$
13.1

~~We began recognizing a portion of our~~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 ~~an accrual basis in the fourth quarter 2016. Prior~~therapy.

We also recognized revenue pursuant to the ~~third~~Zai Agreement in each quarter ~~2017,~~ ~~all~~ of 2019. For additional information regarding the ~~net revenues recognized on an accrual basis represent charges~~Zai Agreement, see Note 12 to ~~certain U.S.-based third-party payers.~~ ~~Beginning~~the Consolidated Financial Statements in the third quarter 2017, net revenues recognized on an accrual basis represent charges to certain U.S.-based third-party payers and certain German payers. In the period of transition from cash-based to accrual-based revenue recognition, there is a one-time impact to net revenues as net revenues in the current period may also include revenues from gross billings from previous periods. In the table above, gross billings reflect the total charges for active patients on Optune without any deductions or adjustments for payer discounts, patient financial assistance, charitable care or other similar items. The subsequent table line items detail the three sources of net revenue in the applicable reporting period.

our 2018 10-K.

Cost of revenues.We contract with third-party manufacturers that manufacture our products. Our cost of revenues is ~~comprised~~ primarily ~~of (i) cost~~comprised of the following:

•disposable transducer ~~arrays purchased from third-party manufacturers, (ii)~~ arrays;

•depreciation expense for the field equipment, including the electric field generator used by ~~patients~~patients; and ~~(iii)~~

•personnel, warranty 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.~~ expenses. Our operating expenses consist of research, development and clinical trials, 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 expenses, ~~net.~~net.Financial expenses, net primarily consists of credit facility interest expense and related debt issuance costs, ~~under our~~ ~~Term Loan Credit Facility (as defined below)~~, interest income from cash balances and short-term investments and gains (losses) from foreign currency transactions.

Our reporting currency is the U.S. dollar. We ~~view~~have historically held substantially all of our ~~operations~~cash balances in U.S. dollar denominated accounts to minimize the risk of translational currency exposure.

Results of Operations

The following table includes certain commercial patient operating statistics for and ~~manage our business~~as of the end of the periods presented.


	September 30,
Operating statistics	2019	2018
Active patients at period end (1)
United States	1,860	1,602
EMEA (*)	731	581
Japan	160	69
Total	2,751	2,252

(*) including Germany	499	399


	Three months ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Gross billings (in millions)	$	171.4	$	139.2	$	499.4	$	401.0
Prescriptions received in period (2)
United States	917		907		2,831		2,800
EMEA (*)	318		288		947		835
Japan	84		48		213		110
Total	1,319		1,243		3,991		3,745

(*) including Germany	218		235		696		635

1.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 ~~one operating segment. For~~less than 60 days.

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2.A “prescription received” is a commercial order for Optune or NovoTTF-100L that is received from a physician certified to treat patients for a patient not previously on Optune or NovoTTF-100L. Orders to renew or extend treatment are not included in this total.

Prescriptions for newly diagnosed GBM represented 82% of total prescriptions for the three ~~and nine~~ months ended September 30, ~~2017, our net revenues were $50.1 million and $123.4 million, respectively, and our net loss was $11.5 million and $50.7 million, respectively. Our net loss~~2019, compared to 75% for the ~~three and nine months ended September 30, 2017 includes $8.6 million and $20.8 million, respectively,~~same period in ~~non-cash share-based compensation expense. As of September 30, 2017, we had an accumulated deficit of $571.3 million.~~

2018.

Three months ended September 30, ~~2017~~2019 compared to three months ended September 30, ~~2016~~

~~(All dollar figures in tables are in thousands unless otherwise indicated)~~

2018

Three months ended September 30,

2017

2016

Change

% Change

Net revenues

$
50,109

$
21,674

$
28,435

131
%


	Three months ended September 30,
	2019		2018		Change		% Change
Net revenues	$	92,062	$	64,756	$	27,306	42	%

Net revenues.Net revenues increased ~~$28.4~~$27.3 million, or ~~131%~~42%, to ~~$50.1~~$92.1 million for the three months September 30, 2019 from $64.8 million for the three months ended September 30, ~~2017 from $21.7 million for the three months ended September 30, 2016.~~2018. This was primarily due to an increase of ~~$17.2 million~~499 active patients in ~~commercial sales of Optune in the United States and an increase of $11.3 million in commercial sales of Optune in~~ our ~~other~~ currently active markets, representing 22% growth, and an improvement in the net revenues booked per active patient. The increase in net revenues per active patient benefited from continued improvements in reimbursement rates in both the U.S. and EMEA. In addition, under the newly defined coverage policy effective as ~~well as~~of September 1, 2019, we recognized the ~~transition to accrual-based revenue recognition for a portion of our billings.~~

~~- 15 -~~

initial benefit from Medicare with $0.5 million in third quarter net revenues.


	Three months ended September 30,
	2019		2018		Change		% Change
Cost of revenues	$	22,900	$	18,949	$	3,951	21	%

Cost of revenues.Our cost of revenues increased by $4.0 million, or ~~36%~~21%, to ~~$15.2~~$22.9 million for the three months endedSeptember 30, ~~2017~~ 2019from ~~$11.1~~$18.9 million for the three months endedSeptember 30, ~~2016.~~2018. The increase ~~resulted~~in cost of revenues was primarily ~~from~~due to the cost of shipping transducer arrays to a higher volume of commercial patients ~~as well as an increase~~partially offset by a reduction in ~~field equipment depreciation. Cost~~the cost of ~~revenues includes $0.1 million of non-cash share-based compensation.~~

goods per active patient driven by ongoing efficiency initiatives and scale. Gross margin was75% for the three months endedSeptember 30, 2019 and71% for the three months endedSeptember 30, 2018.

Operating Expenses.

Three months ended September 30,

2017

2016

Change

% Change

Research, development and clinical trials

$
9,273

$
10,233

$
(960
)

(9
%)
Sales and marketing

16,387

15,865

522

3
%
General and administrative

15,215

12,723

2,492

20
%
Total operating expenses

$
40,875

$
38,821

$
2,054

5
%

Non-cash expenses:

Share-based compensation expense

$
8,550

$
5,466

$
3,084

56
%
Other non-cash expenses

600

708

(108
)

(15
%)
Total non-cash expenses

$
9,150

$
6,174

$
2,976

48
%

Total operating expenses, net of non-cash expenses *

$
31,725

$
32,647

$
(922
)

(3
%)


	Three months ended September 30,
	2019		2018		Change		% Change
Research, development and clinical trials	$	18,766	$	13,074	$	5,692	44	%
Sales and marketing	23,830		19,124		4,706		25	%
General and administrative	22,711		18,855		3,856		20	%
Total operating expenses	$	65,307	$	51,053	$	14,254	28	%

*	~~This non-GAAP metric has been included because management believes that it provides for a more accurate year to year comparison of our operating expenses without the impact of non-cash items.~~

Research, development and clinical trials expenses.Research, development and clinical trials expenses ~~decreased $1.0~~increased $5.7 million, or 9%44%, to ~~$9.3~~$18.8 million for the three months ended September 30, ~~2017~~2019 from ~~$10.2~~$13.1 million for the three months ended September 30, ~~2016.~~2018. The change is primarily due to a decrease in clinical trial expenses resulting from the conclusion of our EF-14 phase 3 pivotal trial in newly diagnosed GBM, a decrease in expenses related to the approval of our second generation Optune and a decrease in medical grants driven principally by timing, partially offset by an increase in clinical trial and personnel expenses for our ~~LUNAR~~phase 3 pivotal trials and ~~METIS trials. These expenses include $1.0 million of non-cash share-based compensation.~~

an increase in costs associated with medical affairs, regulatory matters and engineering.

Sales and marketing expenses.Sales and marketing expenses increased ~~$0.5~~$4.7 million, or 3%25%, to ~~$16.4~~$23.8 million for the three months ended September 30, ~~2017~~2019 from ~~$15.9~~$19.1 million for the three months ended September 30, ~~2016.~~2018. The change was primarily due to increased marketing expenses and personnel costs to support our growing commercial business.

General and administrative expenses. General and administrative expenses increased $3.9 million, or 20%, to $22.7 million for the three months ended September 30, 2019 from $18.9 million for the three months ended September 30, 2018. The change was primarily due to an increase ~~of $1.7 million~~ in personnel costs ~~including an increase of $0.7 million in non-cash share-based compensation,~~ and an increase in professional services.


	Three months ended September 30,
	2019		2018		Change		% Change
Financial expenses (income), net	$	2,555	$	2,397	$	158	7	%

Table of ~~$0.4 million in commercial shipping charges, reflecting our expanding commercial operations in the United States and Germany. This was partially offset by a decrease of $1.6 million in marketing~~Contents

Financial expenses, primarily related to advertising and professional services for the launch of our second generation Optune and the communication of our inclusion in the updated National Comprehensive Cancer Network (NCCN) Clinical Practice Guidelines in Oncology for Central Nervous System Cancer (“NCCN Guidelines”). These expenses include $1.9 million of non-cash share-based compensation.

~~General and administrative expenses.~~ ~~General and administrative~~net. Financial expenses increased ~~$2.5~~$0.2 million, or ~~20%~~7%, to ~~$15.2~~$2.6 million for the three months ended September 30, ~~2017~~2019 from ~~$12.7~~$2.4 million for the three months ended September 30, ~~2016.~~2018. The change was primarily due to an increase of $2.5 million in personnel costs, including an increase of $2.3 million in share based compensation. Personnel costs included $5.7 million of non-cash share-based compensation expense, including equity awards granted to our executive chairman and expenses related to our employee share purchase plan (“ESPP”).

~~Financial expenses, net.~~ ~~Financial expenses remained consistent at $2.2 million for both the three months ended September 30, 2017~~interest income and the ~~three months ended September 30, 2016.~~

unfavorable impact of foreign exchange.

Three months ended September 30,

2017

2016

Change

% Change

Income tax expenses

$
3,423

$
3,174

$
249

8
%


	Three months ended September 30,
	2019		2018		Change		% Change
Income taxes	$	(630)	$	4,051	$	(4,681)	(116)	%

Income taxes.Income taxes ~~increased $0.2~~decreased $4.7 million, or 8%116%, to ~~$3.4~~a benefit of $0.6 million for the three months ended September 30, ~~2017~~2019 from ~~$3.2~~$4.1 million for the three months ended September 30, ~~2016.~~2018. The ~~increase~~change was primarily a result of ~~a change in~~ the mix of applicable statutory tax rates in certain ~~non-US~~active jurisdictions.

~~- 16 -~~

We also recorded an income tax benefit of approximately $1.5 million in the quarter ended September 30, 2019 as a result of research and development credits claimed in the U.S.

Nine months ended September 30, ~~2017~~2019 compared to nine months ended September 30, ~~2016~~

~~(All dollar figures in tables are in thousands unless otherwise indicated)~~

2018

Nine months ended September 30,

2017

2016

Change

% Change

Net revenues

$
123,365

$
52,646

$
70,719

134
%


	Nine months ended September 30,
	2019		2018		Change		% Change
Net revenues	$	252,084	$	178,395	$	73,689	41	%

Net revenues.Net revenues increased ~~by $70.7~~$73.7 million, or ~~134%~~41%, to ~~$123.4~~$252.1 million for the nine months endedSeptember 30, 2019from $178.4 million for the nine months endedSeptember 30, 2018. This was primarily due to an increase of 499 active patients in our currently active markets, representing 22% growth, and an improvement in the net revenues booked per active patient.


	Nine months ended September 30,
	2019		2018		Change		% Change
Cost of revenues	$	63,820	$	57,020	$	6,800	12	%

Cost of revenues. Our cost of revenues increased by $6.8 million, or 12%, to $63.8 million for the nine months ended September 30, ~~2017~~2019 from ~~$52.6~~$57.0 million for the nine months ended September 30, ~~2016. This~~2018. The increase in cost of revenues was primarily due to an increase of $49.6 million in commercial sales of Optune in the United States and an increase of $21.2 million in commercial sales of Optune in our other currently active markets, as well as the transition to accrual-based revenue recognition for a portion of our billings.

~~Cost of revenues.~~ Our cost of revenues (excluding the impairment of field equipment described below) increased by $11.1 million, or 38%, to $40.0 million for the nine months ended September 30, 2017 from $28.9 million for the nine months ended September 30, 2016. The increase resulted primarily from the cost of shipping transducer arrays to a higher volume of commercial patients ~~as well as an increase in field equipment depreciation. Cost of revenues include $0.4 million of non-cash share-based compensation.~~

~~We received FDA approval on our PMA supplement application to market our second generation Optune~~partially offset by a reduction in the United States in July 2016. In the second quarter 2016, we recorded an impairment loss with respect to the write-off of first generation Optune field equipment (finished goods and production stage) in the amount of $6.4 million that was not recoverable and was presented in cost of ~~revenues. We do not expect~~goods per active patient driven by ongoing efficiency initiatives and scale. Gross margin was 75% for the ~~conversion to our second generation Optune to result in an additional material impairment charge in~~nine months ended September 30, 2019 and 68% for the ~~future.~~

nine months ended September 30, 2018.

Operating Expenses.

Nine months ended September 30,

2017

2016

Change

% Change

Research, development and clinical trials

$
28,055

$
32,996

$
(4,941
)

(15
%)
Sales and marketing

47,503

43,771

3,732

9
%
General and administrative

42,660

38,010

4,650

12
%
Total operating expenses

$
118,218

$
114,777

$
3,441

3
%

Non-cash expenses:

Share-based compensation expense

$
20,407

$
16,248

$
4,159

26
%
Other non-cash expenses

1,749

2,023

(274
)

(14
%)
Total non-cash expenses

$
22,156

$
18,271

$
3,885

21
%

Total operating expenses, net of non-cash expenses

$
96,062

$
96,506

$
(444
)

(0
%)


	Nine months ended September 30,
	2019		2018		Change		% Change
Research, development and clinical trials	$	55,262	$	35,540	$	19,722	55	%
Sales and marketing	69,871		56,455		13,416		24	%
General and administrative	64,198		54,388		9,810		18	%
Total operating expenses	$	189,331	$	146,383	$	42,948	29	%

*	~~This non-GAAP metric has been included because management believes that it provides for a more accurate year to year comparison of our operating expenses without the impact of non-cash items.~~

Research, development and clinical trials expenses.Research, development and clinical trials expenses ~~decreased $4.9~~increased $19.7 million, or ~~15%~~55%, to ~~$28.1~~$55.3 million for the nine months ended September 30, ~~2017~~2019 from ~~$33.0~~$35.5 million for the nine months ended September 30, ~~2016 .~~2018. The change is primarily due to a decrease in clinical trial expenses resulting from the conclusion of our EF-14 phase 3 pivotal trial in newly diagnosed GBM, a decrease in expenses related to the approval of our second generation Optune and a decrease in medical grants driven principally by timing, partially offset by an increase in clinical trial and personnel expenses for our ~~LUNAR~~phase 3 pivotal trials and ~~METIS trials. These expenses include $2.6 million of non-cash share-based compensation.~~

an increase in costs associated with medical affairs, regulatory matters and engineering.

Sales and marketing expenses.Sales and marketing expenses increased ~~$3.7~~$13.4 million, or 9%24%, to ~~$47.5~~$69.9 million for the nine months ended September 30, ~~2017~~2019 from ~~$43.8~~$56.5 million for the nine months ended September 30, ~~2016.~~2018. The change was primarily due to an increase of $6.1 million in personnel costs, including $0.4 million of non-cash share-based compensation, and an increase of $1.2 million in commercial shipping charges, reflecting our expanding commercial operations in the United States and Germany. This was partially offset by a decrease of $1.6 million inincreased marketing expenses ~~primarily~~ related to ~~advertising and professional services for~~ the launch of NovoTTF-100L for MPM and increases in our ~~second generation Optune and the communication of our inclusion in the updated NCCN Guidelines. These expenses include $4.3 million of non-cash share-based compensation.~~

~~- 17 -~~

personnel costs associated with a larger sales force globally.

General and administrative expenses.General and administrative expenses increased ~~$4.7~~$9.8 million, or ~~12%~~18%, to ~~$42.7~~$64.2 million for the nine months ended September 30, ~~2017~~2019 from ~~$38.0~~$54.4 million for the nine months ended September 30, 2016. The change was primarily due to an increase of $5.6 million in personnel costs, including $3.5 million in share based compensation, partially offset by a decrease of $0.9 million in professional services and other expenses. Personnel costs included $13.5 million of non-cash share-based compensation expense, including equity awards granted to our executive chairman and expenses related to our ESPP.

~~Financial expenses, net.~~ ~~Financial expenses, net increased by $3.5 million, or 106%, to $6.8 million for the nine months ended September 30, 2017 from $3.3 million for the nine months ended September 30, 2016.~~2018. The change was primarily due to an increase in ~~interest expense, including amortization expense~~personnel costs and an increase in professional services.

Table of ~~the discount and deferred issuance costs, related~~Contents


	Nine months ended September 30,
	2019		2018		Change		% Change
Financial expenses (income), net	$	6,165	$	10,110	$	(3,945)	(39)	%

Financial expenses, net. Financial expenses decreased $3.9 million, or 39%, to our July 2016 withdrawal of the remaining $75 million in available funds under the term loan credit facility that we, as borrower, entered into with BioPharma Secured Investments III Holdings Cayman LP, as lender, in January 2015, amended as of December 2016, February 2017 and September 2017 (collectively, the “Term Loan Credit Facility”).

Nine months ended September 30,

2017

2016

Change

% Change

Income tax expenses

$
9,110

$
8,944

$
166

2
%

~~Income taxes.~~ ~~Income taxes increased by $0.2 million to $9.1~~$6.2 million for the nine months ended September 30, ~~2017~~2019 from ~~$8.9~~$10.1 million for the nine months ended September 30, ~~2016.~~2018. The ~~increase~~change was primarily due to the 2018 accelerated amortization costs triggered by the repayment of our 2015 term loan credit facility, interest income and the favorable impact of foreign exchange, partially offset by interest expenses on our new $150 million term loan credit facility. For additional information, see Note 10 to our Consolidated Financial Statementsin our 2018 10-K.


	Nine months ended September 30,
	2019		2018		Change		% Change
Income taxes	$	4,258	$	12,810	$	(8,552)	(67)	%

Income taxes. Income taxesdecreased $8.6 million, or67%, to $4.3 million for the nine months endedSeptember 30, 2019from $12.8 million for the nine months endedSeptember 30, 2018. The change was primarily a result of ~~a change in~~ the mix of applicable statutory tax rates in certain ~~non-US~~active jurisdictions.

We also recorded an income tax benefit of approximately $1.5 million in the quarter ended September 30, 2019 as a result of research and development credits claimed in the U.S.

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, 2019, we had an accumulated deficit of $655.1 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, 2019, we had $312.6 million in cash, cash equivalents and short-term investments, an increase of $66.7 million compared to $245.9 million at December 31, 2018. The increase in our cash, cash equivalents and short-term investments was primarily due to cash flow from operations and the exercise of options.

We believe our cash, cash equivalents and short-term investments as of September 30, 2019 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 anticipate continuing to incur significant costs associated with commercializing our products for approved indications. We expect our research and development expenses to increase in connection with our ongoing activities and as we continue to fund investments in our clinical pipeline and technology development. Such expenses may outpace our gross profit. As a result, we may need to raise additional capital to fund our operations.

Sources of Liquidity

Since inception, we have financed our operations primarily through the issuance and sale of equity and the proceeds from long-term loans. As of September 30, ~~2017,~~2019, we had received a total of ~~$715.9~~$839.8 million from these activities. ~~As of September 30, 2017, we had an accumulated deficit of $571.3 million since inception.~~

Our net losses were $50.7 million for the nine months ended September 30, 2017 and $131.8 million for the year ended December 31, 2016. Our net losses primarily resulted from costs incurred in connection with our pre-clinical and clinical trial programs, costs incurred in our commercial launch efforts, and general and administrative costs necessary to operate as a multi-national oncology business.

As of September 30, 2017, we had $82.1 million of cash and cash equivalents and $104.5 million of short-term investments. We believe our cash and cash equivalents and short term investments as of September 30, 2017, are sufficient for our operations for at least the next twelve months, taking into consideration our existing business plan, our ability to control the timing of significant expense commitments and our upcoming milestone payment obligation discussed below.

In the first quarter of 2018, we anticipate making a milestone payment of $5.5 million (the “Milestone Payment”) to the Technion Research and Development Foundation (“Technion”) pursuant to the settlement agreement dated February 10, 2015 (the “Settlement Agreement”). Pursuant to the Settlement Agreement, we are obligated to pay the Milestone Payment to Technion in the quarter following the quarter in which we achieve $250.0 million of cumulative net sales (as defined in the Settlement Agreement) (the “Net Sales Milestone”). We anticipate achieving the Net Sales Milestone in the fourth quarter of 2017. We previously accrued for the anticipated Milestone Payment in the fourth quarter of 2016.

~~We also expect that our research, development and clinical trials expenses, sales and marketing expenses and general and administrative~~ ~~expenses will continue to increase over the next several years. As a result, we may need to raise additional capital in the future to fund our operations.~~

~~- 18 -~~

Nine months ended September 30,

2017

2016

Net cash used in operating activities

$
(30,236
)

$
(93,867
)
Net cash provided by investing activities

8,713

16,406

Net cash provided by financing activities

3,839

73,796

Net decrease in cash and cash equivalents

(17,684
)

(3,665
)
Effect of exchange rates on cash and cash equivalents

8

64

Changes in short-term investments

(15,994
)

(30,277
)
Net decrease in cash, cash equivalents and short-term investments

$
(33,670
)

$
(33,878
)


	Nine months ended September 30,
	2019		2018		Change		% Change
Net cash provided by (used in) operating activities	$	19,658	$	(18,679)	$	38,337	(205)	%

Operating ~~activities~~

activities. Net cash ~~used in~~provided by (used in) operating activities primarily represents our net ~~loss~~income (loss) for the periods presented. Adjustments to net ~~loss~~income (loss) for non-cash items include share-based compensation, depreciation and amortization, accrued interest and impairments. Operating cash flows are also impacted by changes in ~~operating assets and liabilities,~~working capital, principally trade receivables, prepaid expenses, inventories, trade payables and accrued expenses.

Net cash ~~used in~~provided by operating activities was ~~$30.2~~$19.7 million for the nine months ended September 30, ~~2017,~~2019, as compared to ~~$93.9~~$18.7 million used in operating activities for the nine months ended September 30, 2018. Gross profit increased by $66.9 million for the nine months ended September 30, ~~2016, reflecting a net loss~~2019 versus the nine months ended September 30, 2018, fully funding incremental investments of ~~$50.7 million and a change of $6.2~~$19.7 million in ~~our net~~research and development and $23.2 million in sales, marketing, general and administrative expenses. The transition to positive cash flow from operations, with a $38.3 million increase in cash provided by operating ~~assets and liabilities, partially offset by non-cash charges of $26.7 million.~~

~~The change in our net operating assets and liabilities~~activities, was primarily ~~the result of~~driven by a decrease in net loss, an increase in ~~other payables of $8.3 million, a decrease in other receivables of $4.5 million, an increase in other long-term liabilities~~share-based compensation and ~~employee benefit liabilities, net of $1.4 million, and a decrease in inventories of $0.9 million offset by~~ an increase in trade ~~receivables~~receivables.

Table of $16.7 million, a decrease in trade payables of $4.2 million, and an increase in other long-term assets of $0.5 million. Non-cash charges included $20.8 million of share-based compensation, $5.7 million of depreciation and amortization and $0.2 million in impairments.

Contents


	Nine months ended September 30,
	2019	2018	Change		% Change
Net cash provided by (used in) investing activities	(4,911)	(3,704)	$	(1,207)	33	%

Investing ~~activities~~

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

Net cash ~~provided by~~used in investing activities was ~~$8.7~~$4.9 million for the nine months ended September 30, ~~2017,~~2019, compared to ~~$16.4~~$3.7 million for the nine months ended September 30, ~~2016, reflecting an increase~~2018. The increased net cash used in investing activities was primarily attributable to ~~our receipt of $120.0 million from the maturity of short-term investments, partially offset by~~ the purchase ~~of $104.0 million of new short-term investments, purchases of $3.5 million of field equipment, purchases of $2.0 million~~ of property and equipment ~~and a $1.9 million increase in restricted cash.~~

to support our growing commercial business partially offset by net proceeds generated from the sale of investments for cash needs.


	Nine months ended September 30,
	2019	2018	Change		% Change
Net cash provided by (used in) financing activities	53,095	66,804	$	(13,709)	(21)	%

Financing ~~activities~~

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 ~~$3.8~~$53.1 million for the nine months ended September 30, ~~2017,~~2019, as compared to ~~$73.8~~$66.8 million for the nine months ended September 30, ~~2016, reflecting~~2018. The year-over-year decrease in cash provided by financing activities was primarily related to the 2018 principal amount of our credit facility and partially offset by proceeds ~~received~~ from the exercise of ~~warrants and options and our ESPP.~~

options.

Our material outstanding indebtedness consists of our ~~Term Loan Credit Facility.~~term loan credit facility. As of September 30, ~~2017,~~2019, the aggregate principal balance of amounts outstanding under the ~~Term Loan Credit Facility~~term loan credit facility was ~~$100.0~~$150.0 million. We may prepay the term ~~loans,~~loan, in ~~whole,~~full, at any ~~time,~~time. We must prepay the term loan (i) in full or in part upon the entry into certain licensing arrangements and ~~must prepay~~(ii) in full in the event of a change of ~~control, in~~control. In each case, any prepayment (whether permitted or mandatory) is subject to a ~~pay-down fee,~~ prepayment premium and/or make-whole payment. ~~Interest on the outstanding loan is 10% annually, payable quarterly in arrears.~~ The ~~pay-down fee on all principal payments to be paid on the date such payments are made is 0.75% and the pre-payment~~prepayment fee if we prepay outstanding loan amounts prior to February 7, 2021 is 2.0% and is 1.0% if made after the ~~first, second or third year~~February 7, 2021 but prior to February 7, 2022. If we prepay outstanding loan amounts prior to August 7, 2020, we must pay a make-whole amount equal to the amount of interest that would have accrued on the amount of all principal we prepaid from the ~~initial funding~~ date ~~is 3.0%, 2.0% or 1.0%, respectively.~~

~~- 19 -~~

of such prepayment through February 7, 2021.

All obligations under the ~~Term Loan Credit Facility~~term loan credit facility are guaranteed by certain of our current and future domestic direct and indirect subsidiaries. In addition, the obligations under the ~~Term Loan Credit Facility~~term loan credit facility are secured by a first-priority security interest in substantially all of the property and assets of, as well as the equity interests owned by, us and the other guarantors. On March 28, 2017, the Term Loan Credit Facility was amended as of February 21, 2017 to increase to $1.5 million the limit in the Company’s pledges and deposits security liability for reimbursement or indemnification obligations in respect of letters ofThe term loan credit or bank guarantees for the benefit of the Company’s landlords. On September 29, 2017, the Term Loan Credit Facility was amended as of September 27, 2017 to increase the limit on the Company’s cash held at any financial institution to secure one or more letters of credit issued by such financial institution in respect of leased premises to $1.5 million, to increase the limit on the aggregate balance in certain of the Company’s operating accounts to $2.5 million, and to add certain provisions enabling the Company’s use of storage facilities to facilitate distribution of products to patients.

~~The Term Loan Credit Facility has a minimum liquidity covenant, which is tested quarterly. In addition, we must meet certain pro forma net sales requirements. The Term Loan Credit Facility also~~facility contains other customary covenants.

Contractual Obligations and Commitments

There ~~were~~have been no material changes from the information disclosed in our ~~commitments under contractual obligations during the three months ended September 30, 2017.~~

The total amount of unrecognized tax benefits for uncertain tax positions was $3.5 million and $2.4 million at September 30, 2017 and December 31, 2016, respectively. Payment of these obligations would result from settlements with taxing authorities. Discussions with the taxing authorities are ongoing and we cannot estimate with reasonable certainty the timing or amount of any such payments.

2018 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 ~~SEC~~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 ~~Annual Report on Form 10-K for the year ended December 31, 2016.~~

2018 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of ~~the design and operation of~~ our disclosure controls and procedures as of September 30, ~~2017.~~2019. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a

Table of Contents

company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, ~~2017,~~2019, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, ~~2017,~~2019, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended September 30, ~~2017,~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~- 20 -~~

Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

~~In January 2017, two putative class action lawsuits were filed against the Company, its directors and certain of its officers, as well as the underwriters~~

There have been no material changes to our legal proceedings disclosed in the ~~Company’s October 2015 initial public offering. The complaints, which purport~~2018 10-K except as noted below.

In February 2019, a civil claim was filed in the District Court in Haifa, Israel (the “Court”), by Ofir Paz (“Paz”), a former member of our Board of Directors, and EES Investments Ltd., a company wholly owned by Paz (together with Paz, “Plaintiff”) against us and Prof. Yoram Palti (“Respondents”). Plaintiff claims that he is entitled to ~~be brought on behalf~~210,000 ordinary shares (adjusted for share capital splits since 2003) from Respondents pursuant to an alleged 2003 verbal agreement between Plaintiff and Prof. Palti, who was also a member of our Board of Directors at that time, for Plaintiff’s contribution to the advancement of our business and the consummation of a ~~class of persons and/or entities who purchased or otherwise acquired ordinary shares of the Company pursuant and/or traceable to the registration statement and prospectus issued~~third party investment in connection with the Company’s initial public offering, allege material misstatements and/or omissions in the Company’s initial public offering materials in alleged violation of the federal securities laws and seek compensatory damages, among other remedies. The two actions have been consolidated and the plaintiffsour company. In May 2019, we filed a ~~consolidated amended complaint on May 31, 2017. The court granted the defendants’ motion to bifurcate the~~ motion to dismiss ~~into two stages:~~the claim that is still pending. In September 2019, Plaintiff filed a ~~threshold~~ motion to ~~dismiss for lack of personal jurisdiction, lack of subject matter jurisdiction, and insufficient process and service of process; and, if~~amend the ~~matter~~claim, requesting that Asaf Danziger be added as a Respondent. That motion is ~~not dismissed following~~still pending. We believe that ~~threshold motion, a subsequent merits motion to dismiss regarding whether~~ the allegations in the amended complaint state a claim under the securities laws. The defendants filed the threshold motion to dismiss on July 31, 2017, and the plaintiffs filed an opposition to the threshold motion to dismiss on September 29, 2017. The Company believes that the amended complaint is without merit and ~~plans~~plan to defend ~~the consolidated lawsuits~~against this claim vigorously. ~~The Company has~~We have not accrued any amounts in respect of these ~~lawsuits,~~claims, as awe believe liability is not probable and the amount of any potential liability cannot be reasonably estimated.

Item 1A. Risk Factors

There have been no material changes to our risk factors disclosed in Part I, Item 1A “Risk Factors” to our ~~Annual Report~~Form 10-Q filed with the Securities and Exchange Commission on ~~Form 10-K for the year ended December 31, 2016.~~

July 25, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In July 2017, an investor in our 2007 Series E preferred shares offering exercised warrants to purchase 1,293 ordinary shares with an exercise price of $3.59 per share. We believe that this issuance was exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

~~- 21 -~~

Table of Contents

Item 6. Exhibits

EXHIBIT INDEX

Exhibit

Incorporated by Reference

Filed
Number

Exhibit Description

Form

Date

Number

Herewith
10.1

Third Amendment to Loan and Security Agreement, dated as of September 27, 2017, by and between the Company and BioPharma Secured Investments III Holdings Cayman LP

8-K

10/5/17

10.1

31.1

Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended


X
31.2

Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended


X
32.1*

Certification of Principal Executive Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350


X
32.2*

Certification of Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350


X
99.1

NovoCure Limited Policy on Recoupment of Incentive Compensation

8-K

8/1/17

99.1

101.INS

XBRL Instance Document

X
101.SCH

XBRL Taxonomy Extension Schema Document

X
101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

X
101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

X
101.LAB

XBRL Taxonomy Extension Label Linkbase Document

X
101.PRE

XBRL Extension Presentation Linkbase Document

X

~~The certifications attached as Exhibits 32.1~~

Exhibit
Number

Incorporated by Reference

Filed
Herewith

Exhibit Description

Form

Date

Number

31.1

Certification of Principal Executive Officer Required Under Rule 13a-14(a) and ~~32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing~~15d-14(a) of ~~NovoCure Limited under the Securities Act of 1933, as amended, or~~ the Securities Exchange Act of 1934, as amended ~~whether made before or after~~

31.2

Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the ~~date~~Securities Exchange Act of ~~this Form 10-Q, irrespective~~1934, as amended

32.1*

Certification of ~~any general incorporation language~~Principal Executive Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350

32.2*

Certification of Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Extension Presentation Linkbase Document

104

Cover Page Interactive Date File (formatted as Inline XBRL and contained in ~~such filing.~~

Exhibit 101)

~~- 22 -~~

* The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of NovoCure Limited under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

Table of Contents ~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	~~NovoCure Limited~~
		NovoCure Limited

Date: October ~~26, 2017~~ 31, 2019		/s/ Wilco Groenhuysen
		Wilco Groenhuysen
	Chief Financial Officer
	(principal financial and accounting officer and duly authorized officer)

~~- 23 -~~

	Ordinary shares		Additional paid-in		Accumulated other comprehensive			Accumulated			Total shareholders'
	Shares		capital		loss			deficit			equity

Balance as of December 31, 2015 (audited)		83,778,581	$	640,406	$	(1,505	)	$	(388,081	)	$	250,820
Share-based compensation to employees		-		21,441		-			-			21,441
Exercise of options and warrants		3,195,477		993		-			-			993
Issuance of shares in connection with employee stock purchase plan		92,388		616		-			-			616
Tax benefit from share-based award activity		-		698		-			-			698
Other comprehensive loss, net of tax benefit of $38		-		-		(378	)		-			(378	)
Net loss		-		-		-			(131,845	)		(131,845	)
Balance as of December 31, 2016 (audited)		87,066,446	$	664,154	$	(1,883	)	$	(519,926	)	$	142,345

Share-based compensation to employees		-		20,760		-			-			20,760
Exercise of options and warrants		2,172,266		3,095		-			-			3,095
Cumulative effect adjustment resulting from ASU 2016-09 adoption (see Note 1)		-		670		-			(670	)		-
Issuance of shares in connection with employee stock purchase plan		116,967		781		-			-			781
Other comprehensive income, net of tax benefit of $57		-		-		421			-			421
Net loss		-		-		-			(50,717	)		(50,717	)
Balance as of September 30, 2017 (unaudited)		89,355,679	$	689,460	$	(1,462	)	$	(571,313	)	$	116,685

	2017						2016
U.S. dollars in millions	Q3		Q2		Q1		Q4		Q3		Q2		Q1
Gross billings	$	101.9	$	87.2	$	73.2	$	63.8	$	57.5	$	54.0	$	45.5

Accrual basis revenue	$	35.7	$	19.1	$	14.7	$	8.5	$	0.0	$	0.0	$	0.0
Cash basis revenue for therapy provided in the period		3.1		5.7		5.9		6.3		8.9		7.6		5.6
Cash basis revenue for therapy provided in previous periods		11.3		13.6		14.3		15.5		12.7		10.3		7.4
Net revenues	$	50.1	$	38.4	$	34.9	$	30.2	$	21.7	$	17.9	$	13.1

Exhibit		Incorporated by Reference			Filed
Number	Exhibit Description	Form	Date	Number	Herewith
10.1	Third Amendment to Loan and Security Agreement, dated as of September 27, 2017, by and between the Company and BioPharma Secured Investments III Holdings Cayman LP	8-K	10/5/17	10.1
31.1	Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended				X
31.2	Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended				X
32.1*	Certification of Principal Executive Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350				X
32.2*	Certification of Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350				X
99.1	NovoCure Limited Policy on Recoupment of Incentive Compensation	8-K	8/1/17	99.1
101.INS	XBRL Instance Document				X
101.SCH	XBRL Taxonomy Extension Schema Document				X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document				X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document				X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document				X
101.PRE	XBRL Extension Presentation Linkbase Document				X