10-Q 1 nvcr-20220930.htm 10-Q nvcr-20220930
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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, 2022
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)
Jersey98-1057807
(State or Other Jurisdiction of(I.R.S. Employer
Incorporation or Organization)Identification No.)
No. 4 The Forum
Grenville Street
St. Helier, Jersey JE2 4UF
(Address of principal executive offices, including zip code)
+44 (0) 15 3475 6700
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
_______________________________________________________
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary Shares, no par valueNVCRThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒    No  ☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  .
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOutstanding as of October 21, 2022
Ordinary shares, no par value 
104,950,082 Shares




CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical facts or statements of current condition, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements contained in this report are based on our current plans, expectations, hopes, beliefs, intentions or strategies concerning future developments and their impact on us. Forward-looking statements contained in this report constitute our expectations or forecasts of future events as of the date this report was filed with the Securities and Exchange Commission (the “SEC”) and are not statements of historical fact. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as “anticipate,” “will,” “estimate,” “expect,” “project,” “intend,” “should,” “plan,” “believe,” “hope” and other words and terms of similar meaning in connection with any discussion of, among other things, future operating or financial performance, strategic initiatives and business strategies, regulatory or competitive environments, our intellectual property and research and development related to our Tumor Treating Fields devices marketed under various brand names, including Optune and Optune Lua, and software and systems to support and optimize the delivery of Tumor Treating Fields (collectively, our “Products”). In particular, these forward-looking statements include, among others, statements about:
our research and development, clinical study and commercialization activities and projected expenditures;
the further commercialization of our Products for current and future indications;
our business strategies and the expansion of our sales and marketing efforts in the United States and in other countries;
the market acceptance of our Products for current and future indications by patients, physicians, third-party payers and others in the healthcare and scientific community;
our plans to pursue the use of our Products for the treatment of solid tumor cancers other than glioblastoma multiforme (“GBM”) and malignant pleural mesothelioma (“MPM”);
our estimates regarding revenues, expenses, capital requirements and needs for additional financing;
our ability to obtain regulatory approvals for the use of our Products in indications other than GBM and MPM;
our ability to acquire from third-party suppliers the supplies needed to manufacture our Products;
our ability to manufacture adequate supply of our Products;
our ability to secure and maintain adequate coverage from third-party payers to reimburse us for our Products for current and future indications;
our ability to receive payment from third-party payers for use of our Products for current and future indications;
our ability to maintain and develop our intellectual property position;
our ability to manage the risks associated with business disruptions caused by natural disasters, extreme weather events, pandemics such as the COVID-19 pandemic, including the emergence of variant strains, or international conflict and other disruptions outside of our control;
our cash needs; and
our prospects, financial condition and results of operations.
These forward-looking statements involve a number of risks and uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Factors which may cause such differences to occur include those risks and uncertainties set forth under Part I, Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed on February 24, 2022, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC. In our prior filings, references to NovoTTF-100L now refer
i


to Optune Lua. We do not intend to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
TRADEMARKS
This Quarterly Report on Form 10-Q includes trademarks of NovoCure Limited and other persons. All trademarks or trade names referred to herein are the property of their respective owners.
ii

NovoCure Limited
Quarterly Report on Form 10-Q

1

PART I—FINANCIAL INFORMATION
Item 1.  Financial Statements
NOVOCURE LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
September 30,
2022
December 31, 2021
UnauditedAudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$243,805 $208,802 
Short-term investments726,515 728,898 
Restricted cash231 807 
Trade receivables, net87,552 93,567 
Receivables and prepaid expenses17,478 17,025 
Inventories26,792 24,427 
Total current assets1,102,373 1,073,526 
LONG-TERM ASSETS:
Property and equipment, net29,745 22,693 
Field equipment, net11,985 12,923 
Right-of-use assets19,405 18,267 
Other long-term assets10,707 12,086 
Total long-term assets71,842 65,969 
TOTAL ASSETS$1,174,215 $1,139,495 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2

NOVOCURE LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
September 30,
2022
December 31, 2021
UnauditedAudited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables$77,026 $72,600 
Other payables, lease liabilities and accrued expenses64,050 70,002 
Total current liabilities141,076 142,602 
LONG-TERM LIABILITIES:
Long-term debt, net564,677 562,216 
Deferred revenue3,924 6,477 
Long-term leases14,827 12,997 
Employee benefit liabilities4,088 4,543 
Other long-term liabilities222 166 
Total long-term liabilities587,738 586,399 
TOTAL LIABILITIES728,814 729,001 
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Share capital -
Ordinary shares no par value, unlimited shares authorized; issued and outstanding:
104,942,941 shares and 103,971,263 shares at September 30, 2022 (unaudited) and December 31, 2021, respectively
  
Additional paid-in capital1,188,864 1,099,589 
Accumulated other comprehensive income (loss)(2,306)(3,169)
Retained earnings (accumulated deficit)(741,157)(685,926)
TOTAL SHAREHOLDERS' EQUITY445,401 410,494 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$1,174,215 $1,139,495 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3

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,
20222021202220212021
UnauditedUnauditedAudited
Net revenues$130,998 $133,606 $409,411 $401,818 $535,031 
Cost of revenues29,749 30,206 85,979 85,190 114,877 
Gross profit101,249 103,400 323,432 316,628 420,154 
Operating costs and expenses:
Research, development and clinical studies51,956 48,141 151,265 144,372 201,303 
Sales and marketing41,395 32,580 124,029 98,075 137,057 
General and administrative32,509 31,231 94,683 95,116 126,127 
Total operating costs and expenses125,860 111,952 369,977 337,563 464,487 
Operating income (loss)(24,611)(8,552)(46,545)(20,935)(44,333)
Financial expenses (income), net(1,194)1,981 2,743 5,567 7,742 
Income (loss) before income tax(23,417)(10,533)(49,288)(26,502)(52,075)
Income tax3,159 2,591 5,943 5,391 6,276 
Net income (loss)$(26,576)$(13,124)$(55,231)$(31,893)$(58,351)
Basic net income (loss) per ordinary share$(0.25)$(0.13)$(0.53)$(0.31)$(0.56)
Weighted average number of ordinary shares used in computing basic net income (loss) per share104,884,583 103,731,147 104,552,803 103,281,380 103,433,274 
Diluted net income (loss) per ordinary share$(0.25)$(0.13)$(0.53)$(0.31)$(0.56)
Weighted average number of ordinary shares used in computing diluted net income (loss) per share104,884,583 103,731,147 104,552,803 103,281,380 103,433,274 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4

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,
20222021202220212021
UnauditedUnauditedAudited
Net income (loss)$(26,576)$(13,124)$(55,231)$(31,893)$(58,351)
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustments541 (202)1,550 (57)302 
Unrealized gain (loss) from debt securities(127) (896)  
Pension benefit plan(625)421 209 2,989 361 
Total comprehensive income (loss)$(26,787)$(12,905)$(54,368)$(28,961)$(57,688)

NOVOCURE LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
U.S. dollars in thousands (except share data)
Ordinary sharesAdditional
paid-in
capital
Accumulated
other
comprehensive
loss
Retained earnings (accumulated
deficit)
Total shareholders'
equity
Balance as of December 31, 2021 (audited)103,971,263 $1,099,589 $(3,169)$(685,926)$410,494 
Share-based compensation to employees— 25,045 — — 25,045 
Exercise of options and vested RSUs587,825 3,148 — — 3,148 
Other comprehensive income (loss), net of tax benefit of $0
— — 1,841 — 1,841 
Net income (loss)— — — (4,647)(4,647)
Balance as of March 31, 2022 (Unaudited)104,559,088 $1,127,782 $(1,328)$(690,573)$435,881 
Share-based compensation to employees— 25,823 — — 25,823 
Proceeds from issuance of shares46,709 2,759 — — 2,759 
Exercise of options and vested RSUs121,888 1,984 — — 1,984 
Other comprehensive income (loss), net of tax benefit of $0
— — (767)— (767)
Net income (loss)— — — (24,008)(24,008)
Balance as of June 30, 2022 (Unaudited)104,727,685 $1,158,348 $(2,095)$(714,581)$441,672 
Share-based compensation to employees— 26,305 — — 26,305 
Exercise of options and vested RSUs215,256 4,211 — — 4,211 
Other comprehensive income (loss), net of tax benefit of $0
— — (211)— (211)
Net income (loss)— — — (26,576)(26,576)
Balance as of September 30, 2022 (Unaudited)104,942,941 $1,188,864 $(2,306)$(741,157)$445,401 
5


Ordinary sharesAdditional
paid-in
capital
Accumulated
other
comprehensive
loss
Retained earnings (accumulated
deficit)
Total shareholders'
equity
Balance as of December 31, 2020 (audited)102,334,276 $1,111,435 $(3,832)$(631,077)$476,526 
Share-based compensation to employees— 18,863 — — 18,863 
Exercise of options and vested RSUs853,184 7,961 — — 7,961 
Cumulative effect adjustment resulting from ASU 2020-06 early adoption— (132,474)— 3,502 (128,972)
Other comprehensive income (loss), net of tax benefit of $0
— — 1,884 — 1,884 
Net income (loss)— — — (4,128)(4,128)
Balance as of March 31, 2021 (Unaudited)103,187,460 $1,005,785 $(1,948)$(631,703)$372,134 
Share-based compensation to employees— 27,881 — — 27,881 
Proceeds from issuance of shares17,291 2,371 — — 2,371 
Exercise of options and vested RSUs436,487 8,695 — — 8,695 
Other comprehensive income (loss), net of tax benefit of $0
— 829 — 829 
Net income (loss)— — (14,641)(14,641)
Balance as of June 30, 2021 (Unaudited)103,641,238 $1,044,732 $(1,119)$(646,344)$397,269 
Share-based compensation to employees— 25,758 — — 25,758 
Exercise of options and vested RSUs176,328 3,042 — — 3,042 
Other comprehensive income (loss), net of tax benefit of $0
— — 219 — 219 
Net income (loss)— — — (13,124)(13,124)
Balance as of September 30, 2021 (Unaudited)103,817,566 $1,073,532 $(900)$(659,468)$413,164 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
6

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,
20222021202220212021
UnauditedUnauditedAudited
Cash flows from operating activities:
Net income (loss)$(26,576)$(13,124)$(55,231)$(31,893)$(58,351)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization2,659 2,734 7,924 7,584 10,251 
Accrued Interest1  (822) (94)
Asset write-downs and impairment of field equipment163 113 514 467 649 
Share-based compensation26,305 25,758 77,173 72,502 94,900 
Foreign currency remeasurement loss (gain)(141)495 1,051 3,024 3,231 
Decrease (increase) in accounts receivables11,522 (3,726)6,318 3,923 5,270 
Amortization of discount (premium)232 785 1,743 2,313 3,101 
Decrease (increase) in inventories2,952 3,818 (2,061)4,185 2,483 
Decrease (increase) in other long-term assets1,665 1,367 5,885 4,383 4,519 
Increase (decrease) in accounts payables and accrued expenses5,265 8,126 (1,895)10,622 27,777 
Increase (decrease) in other long-term liabilities(1,627)(1,946)(6,104)(8,758)(10,980)
Net cash provided by (used in) operating activities$22,420 $24,400 $34,495 $68,352 $82,756 
Cash flows from investing activities:
Purchase of property, equipment and field equipment$(5,703)$(3,297)$(14,927)$(9,896)$(24,170)
Proceeds from maturity of short-term investments358,729 350,000 1,074,763 958,000 958,000 
Purchase of short-term investments(503,270)(44,000)(1,071,733)(593,848)(1,078,664)
Net cash provided by (used in) investing activities$(150,244)$302,703 $(11,897)$354,256 $(144,834)
Cash flows from financing activities:
Proceeds from issuance of shares, net$ $ $2,759 $2,371 $4,546 
Repayment of long-term debt(7)(6)(21)(19)(26)
Exercise of options4,211 3,042 9,343 19,698 21,182 
Net cash provided by (used in) financing activities$4,204 $3,036 $12,081 $22,050 $25,702 
Effect of exchange rate changes on cash, cash equivalents and restricted cash$(107)$(34)$(252)$(139)$(188)
Increase (decrease) in cash, cash equivalents and restricted cash(123,727)330,105 34,427 444,519 (36,564)
Cash, cash equivalents and restricted cash at the beginning of the period367,763 360,587 209,609 246,173 246,173 
Cash, cash equivalents and restricted cash at the end of the period$244,036 $690,692 $244,036 $690,692 $209,609 
7

NOVOCURE LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Supplemental cash flow activities:
Cash paid during the period for:
Income taxes paid (refunded), net$907 $991 $3,933 $1,075 $3,110 
Interest paid$1 $1 $3 $3 $101 
Non-cash activities:
Right-of-use assets obtained in exchange for lease liabilities$2,828 $1,023 $6,687 $1,972 $5,387 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
8

NOVOCURE LIMITED AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share data)
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
Organization. NovoCure Limited (including its consolidated subsidiaries, the "Company") was incorporated in the Bailiwick of Jersey and is principally engaged in the development, manufacture and commercialization of Tumor Treating Fields ("TTFields") devices, including Optune and Optune Lua (collectively, our "Products"), for the treatment of solid tumor cancers. The Company currently markets Optune in the United States ("U.S."), Germany, Japan and certain other countries. The Company currently markets Optune Lua in the U.S. and European Union. The Company also has a License and Collaboration Agreement (the "Zai Agreement") with Zai Lab (Shanghai) Co., Ltd. ("Zai") to market Optune in China, Hong Kong, Macau and Taiwan ("Greater China").
During the year ended December 31, 2019, the Company implemented changes to its corporate entity operating structure, including transferring certain intellectual property to its Swiss subsidiary, primarily to align corporate entities with the Company’s evolving operations and business model. As of January 1, 2022, the effective place of daily management and control of the Company moved to Switzerland and the Company has become a Swiss tax resident.
Financial statement preparation. The accompanying unaudited consolidated financial statements include the accounts of the Company and intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation for the periods presented. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. These consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on February 24, 2022 (the "2021 10-K").
The significant accounting policies applied in the audited annual consolidated financial statements of the Company as disclosed in the 2021 10-K are applied consistently in these unaudited interim consolidated financial statements, except as noted below:
Short-term investments
The Company accounts for investments in debt securities in accordance with ASC 320, "Investments—Debt and Equity Securities."
Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date. The Company classifies part of its debt securities as available-for-sale ("AFS") and the rest of the balance as held-to-maturity ("HTM") when the Company has the intent and ability to hold the securities to maturity.
Available-for-sale debt securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in shareholders’ equity. Realized gains and losses on sale of investments are included in financial income, net and are derived using the specific identification method for determining the cost of securities sold.
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest on securities is included in financial income, net.
Each reporting period, the Company evaluates whether declines in fair value below amortized cost are due to expected credit losses, as well as the Company’s ability and intent to hold the investment until a forecasted recovery occurs. Allowance for credit losses on available-for-sale debt securities are recognized in the Company’s consolidated statements of income, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in stockholders’ equity.
9

Held-to-maturity debt securities are stated at amortized cost of which is adjusted for amortization of premiums and accretion of discounts to maturity and any credit losses. Such amortization and interest are included in the consolidated statement of operations as financial income or expenses, as appropriate.
NOTE 2: CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents include items almost as liquid as cash with maturity periods of three months or less when purchased, and short-term investments include items with maturity dates between three months and one year when purchased. As of September 30, 2022 and December 31, 2021, the Company’s cash and cash equivalents and short-term investments were composed of:
September 30, 2022
Fair value levelAdjusted cost basisUnrealized gainsUnrealized lossesFair market valueRecorded basisCash and cash equivalentsShort-term investments
Cash$35,113 $— $— $35,113 $35,113 $35,113 $— 
Money market fundsLevel 1117,400 — — 117,400 117,400 117,400 — 
Certificate of deposits and term depositsLevel 2337,447 — — 337,447 337,447 75,857 261,590 
AFS securities (1)
U.S. Treasury billsLevel 1 487  (4)483 483 — 483 
Government and governmental agenciesLevel 2 8,264  (48)8,216 8,216 503 7,713 
Corporate debt securitiesLevel 2 137,850 8 (852)137,006 137,006 137,006 
$146,601 $8 $(904)$145,705 $145,705 $503 $145,202 
HTM securities (2)
U.S. Treasury billsLevel 1$147,936 $ $(279)$147,657 $147,936 $— $147,936 
Government and governmental agenciesLevel 2$34,582 $ $(14)$34,568 $34,582 $ $34,582 
Corporate debt securitiesLevel 2152,137  (464)151,673 152,137 14,932 137,205 
$334,655 $ $(757)$333,898 $334,655 $14,932 $319,723 
Total$971,216 $8 $(1,661)$969,563 $970,320 $243,805 $726,515 

10

December 31, 2021
Fair value levelAdjusted cost basisUnrealized gainsUnrealized lossesFair market valueRecorded basisCash and cash equivalentsShort-term investments
Cash$3,139 $— $— $3,139 $3,139 $3,139 $— 
Money market fundsLevel 164,668 — — 64,668 64,668 64,668 — 
Certificate of deposits, notes and term depositsLevel 2565,089 — — 565,089 565,089 140,995 424,094 
HTM securities (2)
U.S. Treasury billsLevel 1 199,981 8  199,989 199,981 — 199,981 
Corporate debt securitiesLevel 2 104,823   104,823 104,823 — 104,823 
$304,804 $8 $ $304,812 $304,804 $— $304,804 
Total$937,700 $8 $ $937,708 $937,700 $208,802 $728,898 
(1) Changes in fair value of AFS securities are recorded in other comprehensive income. If unrealized loss is identified as credit loss, this loss will be recorded as finance expenses.
(2) Changes in fair value of HTM securities are presented for disclosure purposes as required by ASC 320 and are recorded as finance expenses only if the unrealized loss is identified as a credit loss.
As of September 30, 2022 and December 31, 2021, all investments and equivalents mature in one year or less.
Unrealized losses from debt securities are primarily attributable to changes in interest rates. The Company does not believe any remaining unrealized losses represent impairments based on the evaluation of available evidence.
Debt securities with continuous unrealized losses for less than 12 months and their related fair values were as follows:
September 30, 2022
Less than 12 months
Fair valueUnrealized loss
U.S. Treasury bills$483 $(4)
Government and governmental agencies6,703 (48)
Corporate debt securities132,242 (852)
Total$139,428 $(904)
As of September 30, 2022, no continuous unrealized losses for 12 months or greater was identified.

11

NOTE 3: INVENTORIES
Inventories are stated at the lower of cost or net realizable value. The weighted average methodology is applied to determine cost. As of September 30, 2022 and December 31, 2021, the Company’s inventories were composed of:
September 30,
2022
December 31,
2021
 UnauditedAudited
Raw materials$3,138 $1,485 
Work in progress8,992 8,274 
Finished products14,662 14,668 
Total$26,792 $24,427 

NOTE 4: COMMITMENTS AND CONTINGENT LIABILITIES
Operating Leases. The facilities of the Company are leased under various operating lease agreements for periods, including options for extensions, ending no later than 2044. The Company also leases motor vehicles under various operating leases, which expire on various dates, the latest of which is in 2025.
Pledged deposits and bank guarantees. As of September 30, 2022 and December 31, 2021, the Company pledged bank deposits of $2,296 and $2,350, respectively, to cover bank guarantees in respect of its leases of operating facilities and obtained bank guarantees for the fulfillment of the Company’s lease and other contractual commitments of $2,616 and $2,698, respectively.
Senior secured revolving credit facility. On November 6, 2020, the Company entered into a three-year $150,000 senior secured revolving credit facility with a syndicate of relationship banks. For additional information, see Note 12(c) to the Consolidated Financial Statements in the 2021 10-K. As of September 30, 2022, the Company had no outstanding balance borrowed under the facility.
NOTE 5: CONVERTIBLE NOTE
On November 5, 2020, the Company issued $575,000 aggregate principal amount of 0% Convertible Senior Notes due 2025 (the “Notes”).
The Notes mature on November 1, 2025, unless earlier repurchased, redeemed or converted as set forth in the Notes. As of September 30, 2022, the conditions allowing holders of the Notes to convert were not met. The Notes are therefore not convertible as of September 30, 2022 and are classified as long-term liability.
For additional information, see Note 10(a) to the Consolidated Financial Statements in the 2021 10-K.
The net carrying amounts of the liability of the Notes as of September 30, 2022 and December 31, 2021 are as follows:
September 30,
2022
December 31,
2021
UnauditedAudited
Liability component, net:
Principal amount$575,000 $575,000 
Unamortized issuance costs (10,323)(12,784)
Net carrying amount of liability component (1)$564,677 $562,216 
(1) An effective market interest rate determines the fair value of the Notes, therefore they are categorized as Level 3 in accordance with ASC 820, "Fair Value Measurements and Disclosures." The estimated fair values of the net carrying amount of liability component of the Notes as of September 30, 2022 and December 31, 2021 were $413,385 and $467,469, respectively.
12

Finance expense related to the Notes was as follows:
Three months ended September 30,Nine months ended September 30,Year ended December 31,
2021
2022202120222021
UnauditedUnauditedAudited
Amortization of debt issuance costs
831 826 2,461 2,511 3,339 
Total finance expense recognized
$831 $826 $2,461 $2,511 $3,339 
NOTE 6: SHARE OPTION PLANS AND ESPP
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 share units (“RSUs”), performance-based share units (“PSUs”), long-term cash awards and other share-based awards.
Options granted under the 2015 Plan generally have a two-year or four-year vesting period and expire ten years after the date of grant. Options granted under the 2015 Plan that are canceled or forfeited before expiration become available for future grants. RSUs granted under the 2015 Plan generally vest over a three year period. PSUs granted under the 2015 Plan generally vest between a three- and six-year period as performance targets are attained. RSUs and PSUs granted under the 2015 Plan that are canceled before expiration become available for future grants. As of September 30, 2022, 16,836,815 ordinary shares were available for grant under the 2015 Plan.
A summary of the status of the Company’s option plans as of September 30, 2022 and changes during the period then ended is presented below:
Nine months ended September 30, 2022
Unaudited
Number
of options
Weighted
average
exercise
price
Outstanding at beginning of year8,549,322 $33.09 
Granted751,854 79.46 
Exercised(436,289)21.22 
Forfeited and canceled(108,517)83.57 
Outstanding as of September 30, 20228,756,370 $37.04 
Exercisable options7,104,809 $25.32 
For the nine months ended September 30, 2022, options to purchase 436,289 ordinary shares were exercised, resulting in the issuance of 436,289 ordinary shares.
A summary of the status of the Company’s RSUs and PSUs as of September 30, 2022 and changes during the period then ended is presented below.
13

Nine months ended September 30, 2022
Unaudited
Number
of RSU/PSUs
Weighted
average
grant date fair value
Unvested at beginning of year4,459,107 $65.56 
Granted1,195,654 80.21 
Vested(488,680)85.74 
Forfeited and cancelled(98,579)95.45 
Unvested as of September 30, 2022 (1)5,067,502 66.49 

(1) Includes PSUs that have a mix of service, market and other milestone performance vesting conditions which are vested upon achievements of performance milestones which are not probable, as of September 30, 2022, in accordance with ASC 718 as follows:
 September 30, 2022
Number of
PSUs
Fair value at grant date per PSUTotal fair value at grant date
2,703,852 $48.16 $130,218 
108,113 69.37 7,500 
124,701 $80.59 10,050 
17,712 84.68 1,500 
7,605 $87.66 667 
10,532 94.94 1,000 
189,626 $114.26 21,667