Edgar Filing: Novocure Ltd

nvcr-10q_20160630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2016

o	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 x No o.

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 x No o.

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	o			Accelerated filer	o
Non-accelerated filer	x		(Do not check if a smaller reporting company)	Smaller reporting company	o

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

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 July 26, 2016
Ordinary shares, no par value		85,774,774 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 respect s 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.

NovoCure Limited

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

		Page
Cautionary Note Regarding Forward Looking Statements		ii

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 4.	Controls and Procedures	19

PART II—OTHER INFORMATION


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 5.	Other Information	20
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

	June 30,		December 31,
	2016		2015
	Unaudited		Audited
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	80,871	$	119,423
Short-term investments		119,979		150,001
Restricted cash		99		87
Receivables and prepaid expenses		12,534		10,799
Inventories		21,215		13,594
Total current assets		234,698		293,904

LONG-TERM ASSETS:
Property and equipment, net		8,813		6,552
Field equipment, net		5,850		6,029
Severance pay fund		82		79
Other long-term assets		1,076		772
Total long-term assets		15,821		13,432

TOTAL ASSETS	$	250,519	$	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)

	June 30,			December 31,
	2016			2015
	Unaudited			Audited
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Trade payables	$	22,007		$	16,755
Other payables and accrued expenses		12,611			11,872
Total current liabilities		34,618			28,627

LONG-TERM LIABILITIES:
Long-term loan, net of discount and issuance costs		23,292			23,097
Employee benefit liabilities		2,592			2,057
Other long-term liabilities		3,371			2,735
Total long-term liabilities		29,255			27,889

TOTAL LIABILITIES		63,873			56,516

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
Share capital -
Ordinary shares no par value, unlimited shares authorized; issued and outstanding: 85,774,774 shares and 83,778,581 shares at June 30, 2016 and December 31, 2015, respectively		-			-
Additional paid-in capital		652,460			640,406
Accumulated other comprehensive loss		(1,684	)		(1,505	)
Accumulated deficit		(464,130	)		(388,081	)
Total shareholders' equity		186,646			250,820

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	250,519		$	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 June 30,						Six months ended June 30,						Year ended December 31,
	2016			2015			2016			2015			2015
	Unaudited						Unaudited						Audited
Net revenues	$	17,919		$	6,543		$	30,972		$	11,751		$	33,087
Cost of revenues		9,797			4,750			17,779			8,647			20,610
Impairment of field equipment		6,412			-			6,412			-			-

Gross profit		1,710			1,793			6,781			3,104			12,477

Operating costs and expenses:
Research, development and clinical trials		11,318			12,765			22,763			22,692			43,748
Sales and marketing		14,598			8,866			27,906			15,221			38,861
General and administrative		13,031			7,368			25,287			14,343			33,864

Total operating costs and expenses		38,947			28,999			75,956			52,256			116,473

Operating loss		(37,237	)		(27,206	)		(69,175	)		(49,152	)		(103,996	)
Financial expenses, net		555			876			1,104			1,467			3,151

Loss before income tax expense		(37,792	)		(28,082	)		(70,279	)		(50,619	)		(107,147	)
Income tax expense		2,820			1,275			5,770			2,011			4,434

Net loss	$	(40,612	)	$	(29,357	)	$	(76,049	)	$	(52,630	)	$	(111,581	)

Basic and diluted net loss per ordinary share	$	(0.48	)	$	(2.36	)	$	(0.90	)	$	(4.12	)	$	(3.67	)

Weighted average number of ordinary shares used in computing basic and diluted net loss per share		85,274,683			12,427,442			84,843,028			12,783,881			30,401,603

CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

U.S. dollars in thousands

	Three months ended June 30,						Six months ended June 30,						Year ended December 31,
	2016			2015			2016			2015			2015
	Unaudited						Unaudited						Audited
Net loss	$	(40,612	)	$	(29,357	)	$	(76,049	)	$	(52,630	)	$	(111,581	)
Other comprehensive loss, net of tax :
Change in foreign currency translation adjustments		56			-			56			-			-
Pension benefit plan		235			-			(235	)		-			(1,505	)
Total comprehensive loss	$	(40,321	)	$	(29,357	)	$	(76,228	)	$	(52,630	)	$	(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		-			-			11,093		-			-			11,093
Exercise of options and warrants		1,996,193			-			961		-			-			961
Other comprehensive loss, net of tax benefit		-			-			-		(179	)		-			(179	)
Net loss		-			-			-		-			(76,049	)		(76,049	)
Balance as of June 30, 2016 (unaudited)		85,774,774			-		$	652,460	$	(1,684	)	$	(464,130	)	$	186,646

(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 June 30,						Six months ended June 30,						Year ended December 31,
	2016			2015			2016			2015			2015
	Unaudited						Unaudited						Audited
Cash flows from operating activities:
Net loss	$	(40,612	)	$	(29,357	)	$	(76,049	)	$	(52,630	)	$	(111,581	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,407			588			2,510			1,112			3,153
Asset write-downs and impairment of field equipment		6,425			11			6,430			42			46
Accrued interest expense		(637	)		307			-			719			672
Share-based compensation to employees		5,637			2,632			11,093			4,444			11,860
Amortization of discount (premium)		(39	)		88			(56	)		143			329
Increase in receivables and prepaid expenses		(1,672	)		(2,079	)		(2,208	)		(3,026	)		(5,088	)
Increase in inventories		(4,769	)		(1,415	)		(7,621	)		(5,147	)		(10,148	)
Increase in other long-term assets		(111	)		(161	)		(278	)		(171	)		(381	)
Increase in trade payables		2,321			3,757			4,144			3,085			6,961
Increase in other payables and accrued expenses		2,399			3,237			756			518			3,579
Increase in employee benefit liabilities, net		32			-			270			7			133
Increase (decrease) in other long-term liabilities		225			(799	)		638			(753	)		581
Net cash used in operating activities	$	(29,394	)	$	(23,191	)	$	(60,371	)	$	(51,657	)	$	(99,884	)

Cash flows from investing activities:
Purchase of property and equipment	$	(2,338	)	$	(1,808	)	$	(3,340	)	$	(2,417	)	$	(4,667	)
Purchase of field equipment		(4,274	)		(1,142	)		(6,100	)		(2,180	)		(5,604	)
Decrease (increase) in restricted cash		(13	)		40			(12	)		(33	)		(26	)
Proceeds from maturity of short-term investments		-			2,000			150,000			47,000			104,000
Purchase of short-term investments		-			(36,995	)		(119,728	)		(58,992	)		(208,998	)
Net cash provided by (used in) investing activities	$	(6,625	)	$	(37,905	)	$	20,820		$	(16,622	)	$	(115,295	)

Cash flows from financing activities:
Proceeds from issuance of shares, net	$	-		$	94,599		$	-		$	94,599		$	252,133
Proceeds from long-term loan, net		17			(920	)		17			22,886			22,886
Deferred IPO costs		-			(294	)		-			(294	)		-
Repayment of other long-term loan		(19	)		(15	)		(35	)		(31	)		(63	)
Purchase of shares in respect of settlement		-			-			-			(5	)		(5	)
Exercise of options and warrants		904			16			961			19			2,038
Net cash provided by financing activities	$	902		$	93,386		$	943		$	117,174		$	276,989

Effect of exchange rate changes on cash and cash equivalents	$	56		$	-		$	56		$	-		$	-

Increase (decrease) in cash and cash equivalents		(35,061	)		32,290			(38,552	)		48,895			61,810
Cash and cash equivalents at the beginning of the period		115,932			74,218			119,423			57,613			57,613

Cash and cash equivalents at the end of the period	$	80,871		$	106,508		$	80,871		$	106,508		$	119,423

Supplemental cash flow activities: