nvcr-10q_20160930.htm

 

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, 2016

or

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 (Channel Islands)

 

98-1057807

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification No.)

 

Le Masurier House

La Rue Le Masurier

St. Helier, Jersey JE2 4YE

(Address of principal executive offices)

+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)

 

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, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting 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

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 classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding as of October 27, 2016

Ordinary shares, no par value

 

86,780,413 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. 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, and our other TTFields delivery system candidates;

 

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 and our other TTFields delivery systems by patients, physicians, third-party payers and others in the healthcare and scientific community;

 

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

 

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

 

our ability to obtain regulatory approvals for additional indications and any future TTFields delivery systems;

 

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

 

our ability to manufacture adequate supply;

 

our ability to secure adequate coverage from third-party payers to reimburse us for Optune or future TTFields delivery systems;

 

our ability to maintain and develop our intellectual property position;

 

our cash needs; and

 

our prospects, financial condition and results of operations.

These forward-looking statements involve a number of risks and uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Factors which may cause such differences to occur include those risks and uncertainties set forth under Part I, Item 1A., “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, 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. 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.

 

 

 

ii


NovoCure Limited

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

 

 

 

 

 

Page

Cautionary Note Regarding Forward Looking Statements

 

ii

Trademarks

 

ii

 

 

 

 

PART I—FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements

  

2

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

12

Item 4.

 

Controls and Procedures

  

20

 

PART II—OTHER INFORMATION

 

Item 6.

 

Exhibits

  

21

 

 

 

Signatures

 

22

 

 

- 1 -


 

PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements

NOVOCURE LIMITED AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

 

 

September 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

Unaudited

 

 

Audited

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

115,822

 

 

$

119,423

 

Short-term investments

 

 

119,724

 

 

 

150,001

 

Restricted cash

 

 

72

 

 

 

87

 

Receivables and prepaid expenses

 

 

11,840

 

 

 

10,799

 

Inventories

 

 

23,972

 

 

 

13,594

 

Total current assets

 

 

271,430

 

 

 

293,904

 

 

 

 

 

 

 

 

 

 

LONG-TERM ASSETS:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

9,886

 

 

 

6,552

 

Field equipment, net

 

 

8,042

 

 

 

6,029

 

Severance pay fund

 

 

89

 

 

 

79

 

Other long-term assets

 

 

1,646

 

 

 

772

 

Total long-term assets

 

 

19,663

 

 

 

13,432

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

291,093

 

 

$

307,336

 

 

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

- 2 -


 

NOVOCURE LIMITED AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

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

 

 

 

September 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

Unaudited

 

 

Audited

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Trade payables

 

$

15,243

 

 

$

16,755

 

Other payables and accrued expenses

 

 

14,469

 

 

 

11,872

 

Total current liabilities

 

 

29,712

 

 

 

28,627

 

 

 

 

 

 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

 

Long-term loan, net of discount and issuance costs

 

 

95,970

 

 

 

23,097

 

Employee benefit liabilities

 

 

3,132

 

 

 

2,057

 

Other long-term liabilities

 

 

4,036

 

 

 

2,735

 

Total long-term liabilities

 

 

103,138

 

 

 

27,889

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

132,850

 

 

 

56,516

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Share capital -

 

 

 

 

 

 

 

 

Ordinary shares no par value, unlimited shares authorized; issued and outstanding:

   85,775,203 (unaudited) shares and 83,778,581 shares at September 30, 2016 and

   December 31, 2015, respectively

 

 

-

 

 

 

-

 

Additional paid-in capital

 

 

658,086

 

 

 

640,406

 

Accumulated other comprehensive loss

 

 

(2,085

)

 

 

(1,505

)

Accumulated deficit

 

 

(497,758

)

 

 

(388,081

)

Total shareholders' equity

 

 

158,243

 

 

 

250,820

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

291,093

 

 

$

307,336

 

 

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

 

 

- 3 -


 

NOVOCURE LIMITED AND SUBSIDIARIES

CONDENSED INTERIM 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,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

2015

 

 

 

Unaudited

 

 

Unaudited

 

 

Audited

 

Net revenues

 

$

21,674

 

 

$

8,953

 

 

$

52,646

 

 

$

20,704

 

 

$

33,087

 

Cost of revenues

 

 

11,118

 

 

 

5,659

 

 

 

28,897

 

 

 

14,306

 

 

 

20,610

 

Impairment of field equipment

 

 

-

 

 

 

-

 

 

 

6,412

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

10,556

 

 

 

3,294

 

 

 

17,337

 

 

 

6,398

 

 

 

12,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research, development and clinical trials

 

 

10,233

 

 

 

10,211

 

 

 

32,996

 

 

 

32,903

 

 

 

43,748

 

Sales and marketing

 

 

15,865

 

 

 

8,916

 

 

 

43,771

 

 

 

24,137

 

 

 

38,861

 

General and administrative

 

 

12,723

 

 

 

8,405

 

 

 

38,010

 

 

 

22,748

 

 

 

33,864

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating costs and expenses

 

 

38,821

 

 

 

27,532

 

 

 

114,777

 

 

 

79,788

 

 

 

116,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(28,265

)

 

 

(24,238

)

 

 

(97,440

)

 

 

(73,390

)

 

 

(103,996

)

Financial expenses, net

 

 

2,189

 

 

 

809

 

 

 

3,293

 

 

 

2,277

 

 

 

3,151

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income tax expense

 

 

(30,454

)

 

 

(25,047

)

 

 

(100,733

)

 

 

(75,667

)

 

 

(107,147

)

Income tax expense

 

 

3,174

 

 

 

976

 

 

 

8,944

 

 

 

2,986

 

 

 

4,434

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(33,628

)

 

$

(26,023

)

 

$

(109,677

)

 

$

(78,653

)

 

$

(111,581

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per ordinary share

 

$

(0.39

)

 

$

(2.09

)

 

$

(1.29

)

 

$

(6.21

)

 

$

(3.67

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of ordinary shares used in

   computing basic and diluted net loss per share

 

 

85,774,874

 

 

 

12,431,586

 

 

 

85,153,644

 

 

 

12,666,455

 

 

 

30,401,603

 

 

CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

U.S. dollars in thousands

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

Year ended

December 31,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

2015

 

 

 

Unaudited

 

 

Unaudited

 

 

Audited

 

Net loss

 

$

(33,628

)

 

$

(26,023

)

 

$

(109,677

)

 

$

(78,653

)

 

$

(111,581

)

Other comprehensive loss, net of tax :

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustments

 

 

8

 

 

 

-

 

 

 

64

 

 

 

-

 

 

 

-

 

Pension benefit plan

 

 

(409

)

 

 

-

 

 

 

(644

)

 

 

-

 

 

 

(1,505

)

Total comprehensive loss

 

$

(34,029

)

 

$

(26,023

)

 

$

(110,257

)

 

$

(78,653

)

 

$

(113,086

)

 

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

 

 

- 4 -


 

NOVOCURE LIMITED AND SUBSIDIARIES

CONDENSED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

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

 

 

 

Ordinary shares

 

 

Preferred shares

 

 

Additional

paid-in

 

 

Accumulated other comprehensive

 

 

Accumulated

 

 

Total shareholders'

 

 

 

Shares

 

 

Shares

 

 

capital

 

 

loss

 

 

deficit

 

 

equity

 

Balance as of January 1, 2015 (audited)

 

 

13,431,414

 

 

 

58,676,017

 

 

$

374,375

 

 

$

-

 

 

$

(276,500

)

 

$

97,875

 

Share-based compensation to employees

 

 

-

 

 

 

-

 

 

 

11,860

 

 

 

-

 

 

 

-

 

 

 

11,860

 

Exercise of options and warrants

 

 

731,665

 

 

 

-

 

 

 

2,038

 

 

 

-

 

 

 

-

 

 

 

2,038

 

Issuance of Series J preferred shares, net (a)

 

 

-

 

 

 

4,068,500

 

 

 

94,599

 

 

 

-

 

 

 

-

 

 

 

94,599

 

Issuance of shares and options in respect of

   settlement, net of fair value of shares

   provided as indemnification

 

 

(1,005,210

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of ordinary shares upon IPO and

   exercise of over-allotment, net (b)

 

 

7,876,195

 

 

 

-

 

 

 

157,534

 

 

 

-

 

 

 

-

 

 

 

157,534

 

Conversion of preferred shares to ordinary

   shares

 

 

62,744,517

 

 

 

(62,744,517

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Other comprehensive loss, net of tax benefit

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,505

)

 

 

-

 

 

 

(1,505

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(111,581

)

 

 

(111,581

)

Balance as of December 31, 2015 (audited)

 

 

83,778,581

 

 

 

-

 

 

 

640,406

 

 

 

(1,505

)

 

 

(388,081

)

 

 

250,820

 

Share-based compensation to employees

 

 

-

 

 

 

-

 

 

 

16,719

 

 

 

-

 

 

 

-

 

 

 

16,719

 

Exercise of options and warrants

 

 

1,996,622

 

 

 

-

 

 

 

961

 

 

 

-

 

 

 

-

 

 

 

961

 

Other comprehensive loss, net of tax benefit

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(580

)

 

 

-

 

 

 

(580

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(109,677

)

 

 

(109,677

)

Balance as of September 30, 2016 (unaudited)

 

 

85,775,203

 

 

 

-

 

 

$

658,086

 

 

$

(2,085

)

 

$

(497,758

)

 

$

158,243

 

 

(a)

Net of issuance expenses of $319

(b)

Net of issuance expenses (including underwriter fees) of $15,742

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

 

 

- 5 -


 

NOVOCURE LIMITED AND SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED CASH FLOWS

U.S. dollars in thousands

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

Year ended

December 31,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

2015

 

 

 

Unaudited

 

 

Unaudited

 

 

Audited

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(33,628

)

 

$

(26,023

)

 

$

(109,677

)

 

$

(78,653

)

 

$

(111,581

)

Adjustments to reconcile net loss to net cash used in

   operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,553

 

 

 

893

 

 

 

4,063

 

 

 

2,005

 

 

 

3,153

 

Asset write-downs and impairment of field equipment

 

 

10

 

 

 

-

 

 

 

6,440

 

 

 

42

 

 

 

46

 

Increase (decrease) in accrued interest expense

 

 

222

 

 

 

(565

)

 

 

222

 

 

 

154

 

 

 

672

 

Share-based compensation to employees

 

 

5,626

 

 

 

2,928

 

 

 

16,719

 

 

 

7,372

 

 

 

11,860

 

Amortization of discount

 

 

81

 

 

 

88

 

 

 

25

 

 

 

231

 

 

 

329

 

Decrease (increase) in receivables and prepaid expenses

 

 

694

 

 

 

(1,427

)

 

 

(1,514

)

 

 

(4,453

)

 

 

(5,088

)

Increase in inventories

 

 

(2,757

)

 

 

(2,556

)

 

 

(10,378

)

 

 

(7,703

)

 

 

(10,148

)

Decrease (increase) in other long-term assets

 

 

(526

)

 

 

250

 

 

 

(804

)

 

 

79

 

 

 

(381

)

Increase (decrease) in trade payables

 

 

(6,765

)

 

 

1,512

 

 

 

(2,621

)

 

 

4,597

 

 

 

6,961

 

Increase in other payables and accrued expenses

 

 

1,651

 

 

 

2,374

 

 

 

2,407

 

 

 

2,892

 

 

 

3,579

 

Increase (decrease) in employee benefit liabilities, net

 

 

80

 

 

 

(10

)

 

 

350

 

 

 

(3

)

 

 

133

 

Increase (decrease) in other long-term liabilities

 

 

263

 

 

 

430

 

 

 

901

 

 

 

(323

)

 

 

581

 

Net cash used in operating activities

 

$

(33,496

)

 

$

(22,106

)

 

$

(93,867

)

 

$

(73,763

)

 

$

(99,884

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

$

(1,715

)

 

$

(1,196

)

 

$

(5,055

)

 

$

(3,613

)

 

$

(4,667

)

Purchase of field equipment

 

 

(3,113

)

 

 

(1,367

)

 

 

(9,213

)

 

 

(3,547

)

 

 

(5,604

)

Decrease (increase) in restricted cash

 

 

27

 

 

 

(72

)

 

 

15

 

 

 

(105

)

 

 

(26

)

Proceeds from maturity of short-term investments

 

 

120,000

 

 

 

30,000

 

 

 

270,000

 

 

 

77,000

 

 

 

104,000

 

Purchase of short-term investments

 

 

(119,613

)

 

 

-

 

 

 

(239,341

)

 

 

(58,992

)

 

 

(208,998

)

Net cash provided by (used in) investing activities

 

$

(4,414

)

 

$

27,365

 

 

$

16,406

 

 

$

10,743

 

 

$

(115,295

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of shares, net

 

$

-

 

 

$

-

 

 

$

-

 

 

$

94,599

 

 

$

252,133

 

Proceeds from long-term loan, net

 

 

72,870

 

 

 

-

 

 

 

72,887

 

 

 

22,886

 

 

 

22,886

 

Deferred IPO costs

 

 

-

 

 

 

(1,439

)

 

 

-

 

 

 

(1,733

)

 

 

-

 

Repayment of other long-term loan

 

 

(17

)

 

 

(16

)

 

 

(52

)

 

 

(47

)

 

 

(63

)

Purchase of shares in respect of settlement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5

)

 

 

(5

)

Exercise of options and warrants

 

 

-

 

 

 

12

 

 

 

961

 

 

 

31

 

 

 

2,038

 

Net cash provided by (used in) financing activities

 

$

72,853

 

 

$

(1,443

)

 

$

73,796

 

 

$

115,731

 

 

$

276,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

$

8

 

 

$

-

 

 

$

64

 

 

$

-

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

 

34,951

 

 

 

3,816

 

 

 

(3,601

)

 

 

52,711

 

 

 

61,810

 

Cash and cash equivalents at the beginning of the period

 

 

80,871

 

 

 

106,508

 

 

 

119,423

 

 

 

57,613

 

 

 

57,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

 

$

115,822

 

 

$

110,324

 

 

$

115,822

 

 

$

110,324

 

 

$

119,423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow activities: