10-Q 1 nvcr-20210930.htm 10-Q nvcr-20210930
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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, 2021
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 22, 2021
Ordinary shares, no par value 
103,819,257 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 delivery systems 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 trial 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, 2020 filed on February 25, 2021, 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,
2021
December 31, 2020
UnauditedAudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$689,837 $234,674 
Short-term investments243,948 607,902 
Restricted cash855 11,499 
Trade receivables, net94,129 96,699 
Receivables and prepaid expenses17,595 21,245 
Inventories22,642 27,422 
Total current assets1,069,006 999,441 
LONG-TERM ASSETS:
Property and equipment, net11,699 11,395 
Field equipment, net12,553 11,230 
Right-of-use assets16,460 19,009 
Other long-term assets10,735 10,908 
Total long-term assets51,447 52,542 
TOTAL ASSETS$1,120,453 $1,051,983 
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,
2021
December 31, 2020
UnauditedAudited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables$60,005 $53,647 
Other payables, lease liabilities and accrued expenses64,544 59,965 
Total current liabilities124,549 113,612 
LONG-TERM LIABILITIES:
Long-term debt, net561,388 429,905 
Deferred revenue7,464 12,139 
Long-term leases11,478 14,293 
Employee benefits2,031 5,171 
Other long-term liabilities379 337 
Total long-term liabilities582,740 461,845 
TOTAL LIABILITIES707,289 575,457 
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Share capital -
Ordinary shares no par value, unlimited shares authorized; issued and outstanding:
103,817,566 shares and 102,334,276 shares at September 30, 2021 (unaudited) and December 31, 2020, respectively
  
Additional paid-in capital1,073,532 1,111,435 
Accumulated other comprehensive income (loss)(900)(3,832)
Retained earnings (accumulated deficit)(659,468)(631,077)
TOTAL SHAREHOLDERS' EQUITY413,164 476,526 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$1,120,453 $1,051,983 
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,
20212020202120202020
UnauditedUnauditedAudited
Net revenues$133,606 $132,660 $401,818 $350,413 $494,366 
Cost of revenues30,206 28,395 85,190 78,365 106,501 
Gross profit103,400 104,265 316,628 272,048 387,865 
Operating costs and expenses:
Research, development and clinical trials48,141 32,818 144,372 88,008 132,010 
Sales and marketing32,580 29,364 98,075 86,658 118,017 
General and administrative31,231 27,061 95,116 79,073 107,437 
Total operating costs and expenses111,952 89,243 337,563 253,739 357,464 
Operating income (loss)(8,552)15,022 (20,935)18,309 30,401 
Financial expenses (income), net1,981 3,983 5,567 9,032 12,299 
Income (loss) before income tax(10,533)11,039 (26,502)9,277 18,102 
Income tax2,591 1,755 5,391 (5,614)(1,706)
Net income (loss)$(13,124)$9,284 $(31,893)$14,891 $19,808 
Basic net income (loss) per ordinary share$(0.13)$0.09 $(0.31)$0.15 $0.20 
Weighted average number of ordinary shares used in computing basic net income (loss) per share103,731,147 101,234,306 103,281,380 100,601,427 100,930,866 
Diluted net income (loss) per ordinary share$(0.13)$0.09 $(0.31)$0.14 $0.18 
Weighted average number of ordinary shares used in computing diluted net income (loss) per share103,731,147 108,643,814 103,281,380 108,113,416 108,877,648 
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,
20212020202120202020
UnauditedUnauditedAudited
Net income (loss)$(13,124)$9,284 $(31,893)$14,891 $19,808 
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustments(202)143 (57)26 (85)
Pension benefit plan421 153 2,989 (495)(980)
Total comprehensive income (loss)$(12,905)$9,580 $(28,961)$14,422 $18,743 

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, 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 (see Note 5)— (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 
5



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, 2019 (audited)99,528,435 $871,442 $(2,767)$(650,885)$217,790 
Share-based compensation to employees— 16,557 — — 16,557 
Exercise of options and vested RSUs834,538 4,511 — — 4,511 
Other comprehensive income (loss), net of tax benefit of $0
— — (862)— (862)
Net income (loss)— — — 3,952 3,952 
Balance as of March 31, 2020 (Unaudited)100,362,973 $892,510 $(3,629)$(646,933)$241,948 
Share-based compensation to employees— 18,770 — — 18,770 
Proceeds from issuance of shares33,075 1,667 — — 1,667 
Exercise of options and vested RSUs624,673 3,685 — — 3,685 
Other comprehensive income (loss), net of tax benefit of $0
— 97 — 97 
Net income (loss)— — 1,655 1,655 
Balance as of June 30, 2020 (Unaudited)101,020,721 $916,632 $(3,532)$(645,278)$267,822 
Share-based compensation to employees— 20,121 — — 20,121 
Exercise of options and vested RSUs707,606 9,514 — — 9,514 
Other comprehensive income (loss), net of tax benefit of $0
— — 296 — 296 
Net income (loss)— — — 9,284 9,284 
Balance as of September 30, 2020 (Unaudited)101,728,327 $946,267 $(3,236)$(635,994)$307,037 

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,
20212020202120202020
UnauditedUnauditedAudited
Cash flows from operating activities:
Net income (loss)$(13,124)$9,284 $(31,893)$14,891 $19,808 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization2,734 2,188 7,584 6,677 9,150 
Asset write-downs and impairment of field equipment113 124 467 263 429 
Share-based compensation25,758 20,121 72,502 55,448 75,721 
Foreign currency remeasurement loss (gain)495 (79)3,024 (549)(699)
Decrease (increase) in accounts receivables(3,726)(7,678)3,923 (33,556)(30,354)
Amortization of discount (premium)785 424 2,313 (654)3,260 
Decrease (increase) in inventories3,818 (55)4,185 (2,446)(2,935)
Decrease (increase) in other long-term assets1,367 (5,173)4,383 (2,794)(1,366)
Increase (decrease) in accounts payables and accrued expenses8,126 9,908 10,622 7,974 25,470 
Increase (decrease) in other long-term liabilities(1,946)1,905 (8,758)413 664 
Net cash provided by (used in) operating activities$24,400 $30,969 $68,352 $45,667 $99,148 
Cash flows from investing activities:
Purchase of property, equipment and field equipment$(3,297)$(2,782)$(9,896)$(9,209)$(14,968)
Proceeds from maturity of short-term investments350,000 150,000 958,000 150,000 150,000 
Purchase of short-term investments(44,000) (593,848) (607,879)
Net cash provided by (used in) investing activities$302,703 $147,218 $354,256 $140,791 $(472,847)
Cash flows from financing activities:
Proceeds from issuance of shares, net$ $ $2,371 $1,667 $3,370 
Proceeds from long term debt, net    558,439 
Repayment of long-term loan(6)(150,007)(19)(150,022)(150,028)
Exercise of options and warrants3,042 9,514 19,698 17,710 28,428 
Net cash provided by (used in) financing activities$3,036 $(140,493)$22,050 $(130,645)$440,209 
Effect of exchange rate changes on cash, cash equivalents and restricted cash$(34)$102 $(139)$152 $247 
Increase (decrease) in cash, cash equivalents and restricted cash330,105 37,796 444,519 55,965 66,757 
Cash, cash equivalents and restricted cash at the beginning of the period360,587 197,585 246,173 179,416 179,416 
Cash, cash equivalents and restricted cash at the end of the period$690,692 $235,381 $690,692 $235,381 $246,173 
7

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,
20212020202120202020
UnauditedUnauditedAudited
Supplemental cash flow activities:
Cash paid during the period for:
Income taxes paid (refunded), net$991 $4,382 $1,075 $11,319 $(3,261)
Interest paid$1 $1,840 $3 $8,671 $8,686 
Non-cash activities:
Right-of-use assets obtained in exchange for lease liabilities$1,023 $675 $1,972 $2,849 $5,617 
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") delivery systems, 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."), Austria, Germany, Israel, Japan, Sweden and Switzerland. The Company currently markets Optune Lua in the U.S. 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").
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, 2020 (the "2020 10-K") filed with the Securities and Exchange Commission on February 25, 2021.
The significant accounting policies applied in the audited annual consolidated financial statements of the Company as disclosed in the 2020 10-K are applied consistently in these unaudited interim consolidated financial statements, except as noted below:
Recently Adopted Accounting Pronouncements.
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under Accounting Standards Codification ("ASC Topic 815"), Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS), which is consistent with the Company’s accounting treatment under the current standard. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis. The Company early adopted ASU 2020-06, effective January 1, 2021 on a modified retrospective basis.
The impact of the Company’s adoption of ASU 2020-06 on the balance sheet as of January 1, 2021 was an increase in long term debt, net of $128,972, a decrease in additional paid-in capital of $132,474, and a decrease in accumulated deficit of $3,502. Interest expense recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost. For additional information see Note 5 of these unaudited consolidated financial statements.
In December 2019, the FASB issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance. ASU 2019-12 is effective for the Company as of January 1, 2021 and the adoption of this standard did not have a material impact on the Company's consolidated financial statements.
9

NOTE 2: CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents include items almost as liquid as cash with maturity periods of three months or less when purchased. As of September 30, 2021 and December 31, 2020, the Company’s cash and cash equivalents were composed of:
September 30,
2021
December 31,
2020
UnauditedAudited
Cash$27,768 $20,339 
Money market funds422,082 214,335 
U.S. Treasury bills239,987  
Total cash and cash equivalents$689,837 $234,674 
As of September 30, 2021 and December 31, 2020, the Company’s short-term investments were:
September 30,
2021
December 31,
2020
 UnauditedAudited
U.S. Treasury bills$199,948 607,902 
Term deposits44,000  
Short-term investments$243,948 607,902 
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 cash and cash equivalents and short-term investments according their maturity periods.
Quoted market prices were applied to determine the fair value of cash equivalents and short-term investments, therefore they were categorized as Level 1 in accordance with ASC 820, “Fair Value Measurements and Disclosures.” The estimated fair value of the Company’s short-term investments as of September 30, 2021 and December 31, 2020 was $243,964 and $607,905, respectively.

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, 2021 and December 31, 2020, the Company’s inventories were composed of:
September 30,
2021
December 31,
2020
 UnauditedAudited
Raw materials$1,615 $5,175 
Work in progress5,921 4,896 
Finished products15,106 17,351 
Total$22,642 $27,422 

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 2030. The Company also leases motor vehicles under various operating leases, which expire on various dates, the latest of which is in 2024.
Pledged deposits and bank guarantees. As of September 30, 2021 and December 31, 2020, the Company pledged bank deposits of $1,408 and $1,438, respectively, to cover bank guarantees in respect of its leases of operating
10

facilities and obtained bank guarantees for the fulfillment of the Company’s lease and other contractual commitments of $1,747 and $1,687, respectively.

Senior secured revolving credit facility. On November 6, 2020, the Company entered into a new 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 2020 10-K. As of September 30, 2021, 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 are senior unsecured obligations of the Company. The Notes do not bear regular interest, and the principal amount of the Notes will not accrete. Special interest, if any, payable in accordance with the terms of the Notes will be payable in cash semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2021. The Notes mature on November 1, 2025, unless earlier repurchased, redeemed or converted. For additional information, see Note 10(a) to the Consolidated Financial Statements in the 2020 10-K.
In January 2021, the Company irrevocably elected to settle all conversions of Notes by a combination of cash and the Company's ordinary shares and that the cash portion per $1,000 principal amount of Notes for all conversion settlements shall be $1,000. Accordingly, from and after the date of the election, upon conversion of any Notes, holders of Notes will receive, with respect to each $1,000 principal amount of Notes converted, cash in an amount up to $1,000 and the balance of the conversion value, if any, in ordinary shares (the "Conversion Shares").
The net carrying amount of the liability and equity components of the Notes as of September 30, 2021 and December 31, 2020 are as follows:
September 30,
2021
December 31,
2020
UnauditedAudited
Liability component, net:
Principal amount$575,000 $575,000 
Unamortized discount  (132,797)
Unamortized issuance costs (13,612)(12,298)
Net carrying amount of liability component (1)$561,388 $429,905 
Equity component, net:
Conversion feature$ $136,402 
Issuance costs
 (3,928)
Net carrying amount of equity component$ $132,474 
(1) An effective 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 value of the Net carrying amount of liability component of the Notes as of September 30, 2021 and December 31, 2020 were $476,789 and $450,437, respectively.

11

Finance expense related to the Notes was as follows:
Three months ended September 30,Nine months ended September 30,Year ended December 31,
2020
2021202020212020
UnauditedUnauditedAudited
Amortization of debt discount
$ $ $ $ $3,605 
Amortization of debt issuance costs
826  2,511  333 
Total finance expense recognized
$826 $ $2,511 $ $3,938 
Effective January 1, 2021, the Company early adopted ASU 2020-06 using the modified retrospective approach.
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 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, 2021, 14,467,854 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, 2021 and changes during the period then ended is presented below:
Nine months ended September 30, 2021
Unaudited
Number
of options
Weighted
average
exercise
price
Outstanding at beginning of year9,220,326 $26.21 
Granted425,339 154.03 
Exercised(918,859)21.54 
Forfeited and canceled(101,320)60.64 
Outstanding as of September 30, 20218,625,486 $32.61 
Exercisable options5,153,158 $19.35 
For the nine months ended September 30, 2021, options to purchase 918,859 ordinary shares were exercised, resulting in the issuance of 918,859 ordinary shares.
A summary of the status of the Company’s RSUs and PSUs as of September 30, 2021 and changes during the period then ended is presented below.
12

Nine months ended September 30, 2021
Unaudited
Number
of RSU/PSUs
Weighted
average
grant date fair value
Unvested at beginning of year4,466,151 $54.06 
Granted592,104 140.46 
Vested(547,140)51.38 
Forfeited and cancelled(52,283)89.79 
Unvested as of September 30, 2021 (1)4,458,832 65.44 

(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, 2021, in accordance with ASC 718 as follows:
 September 30, 2021
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 
17,712 84.68 1,500 
5,266 94.94 500 
94,813 $114.26 10,833 
2,929,756 $150,551 
These PSUs will be expensed over the performance period when the vesting conditions become probable in accordance with ASC 718.
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 are construed in a manner consistent with the requirements of such section. As of September 30, 2021, 4,989,076 ordinary shares were available to be purchased by eligible employees under the ESPP.
13

The fair value of share-based awards was estimated using the Black-Scholes model 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: 
Nine months ended September 30,Year ended December 31,
2020
20212020
UnauditedAudited
Stock Option Plans
Expected term (years)
5.50-6.00
5.50-6.25
5.50-6.25
Expected volatility
60%-63%
54%-56%
54%-56%
Risk-free interest rate
0.78%-1.02%
0.30%-0.86%
0.30%-0.86%
Dividend yield0.00 %0.00 %0.00 %
ESPP
Expected term (years)0.500.500.50
Expected volatility
54%-81%
47%-66%
47%-66%
Risk-free interest rate
0.05%-0.09%
0.17%-1.57%
0.17%-1.57%
Dividend yield0.00 %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, 2021 and 2020 and the year ended December 31, 2020 was:
Three months ended September 30,Nine months ended September 30,Year ended December 31,
2020
2021202020212020
UnauditedUnauditedAudited
Cost of revenues$808 $767 $2,368 $1,916 $2,221 
Research, development and clinical trials7,761 5,101 21,390 12,275 18,125 
Sales and marketing5,806 4,677 16,706 13,061 17,672 
General and administrative11,383 9,576 32,038 28,196 37,703 
Total share-based compensation expense$25,758 $20,121 $72,502 $55,448 $75,721 

NOTE 7: Basic and diluted net income (loss) per ordinary 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 (deriving from options, RSUs, PSUs, convertible notes and the ESPP) considered outstanding during the period, in accordance with ASC 260-10, as determined under the if-converted method.
14

The following table sets forth the computation of the Company’s basic and diluted net income (loss) per ordinary share:
 Three months ended September 30,Nine months ended September 30,Year ended December 31,
2020
 2021202020212020
UnauditedUnauditedAudited
Net income (loss) attributable to ordinary shares as reported used in computing basic and diluted net income (loss) per share$(13,124)$9,284 $(31,893)$14,891 $19,808 
Weighted average number of ordinary shares used in computing basic net income (loss) per share103,731,147 101,234,306 103,281,380 100,601,427 100,930,866 
Potentially dilutive shares that were excluded from the computation of basic net income (loss) per share:
Options 6,656,439  6,688,840 6,967,554 
Restricted share units 738,456  808,536 945,612 
ESPP 14,613  14,613 33,616 
Weighted average number of ordinary shares used in computing diluted net income (loss) per share103,731,147 108,643,814 103,281,380 108,113,416 108,877,648 
Weighted anti-dilutive shares outstanding which were not included in the diluted calculation8,084,045 952,823 8,827,739 717,492 1,307,762 
Basic net income (loss) per ordinary share$(0.13)$0.09 $(0.31)$0.15 $0.20 
Diluted net income (loss) per ordinary share$(0.13)$0.09 $(0.31)$0.14 $0.18 


15

NOTE 8: SUPPLEMENTAL INFORMATION
The Company operates in a single reportable segment.
The following table presents long-lived assets by location:
September 30,
2021
December 31,
2020
 UnauditedAudited
United States$12,172 $11,868 
Israel5,037 4,370 
Switzerland3,978 2,849 
Japan928 1,230 
Germany1,042 1,075 
Others1,095 1,233 
Total$24,252 $22,625