NOVOCURE LTD, 10-K filed on 2/25/2021
Annual Report
v3.20.4
Cover - USD ($)
12 Months Ended
Dec. 31, 2020
Feb. 22, 2021
Jun. 30, 2020
Cover [Abstract]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2020    
Current Fiscal Year End Date --12-31    
Document Transition Report false    
Entity File Number 001-37565    
Entity Registrant Name NovoCure Limited    
Entity Incorporation, State or Country Code Y9    
Entity Tax Identification Number 98-1057807    
Entity Address, Address Line One No. 4 The Forum    
Entity Address, Address Line Two Grenville Street    
Entity Address, City or Town St. Helier    
Entity Address, Country JE    
Entity Address, Postal Zip Code JE2 4UF    
Country Region +44    
City Area Code (0) 15    
Local Phone Number 3475 6700    
Title of 12(b) Security Ordinary shares, no par value per share    
Trading Symbol NVCR    
Security Exchange Name NASDAQ    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
ICFR Auditor Attestation Flag true    
Entity Shell Company false    
Entity Public Float     $ 2,773,948,801
Entity Common Stock, Shares Outstanding   102,411,738  
Documents Incorporated by Reference Portions of the registrant’s definitive proxy statement for its 2020 annual meeting of shareholders are incorporated by reference into Items 10, 11, 12, 13, and 14 of Part III of this Form 10-K.  Such definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2020.    
Amendment Flag false    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Entity Central Index Key 0001645113    
v3.20.4
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 234,674 $ 177,321
Short-term investments 607,902 148,769
Restricted cash 11,499 2,095
Trade receivables, net 96,699 58,859
Receivables and prepaid expenses 21,245 29,202
Inventories 27,422 23,701
Total current assets 999,441 439,947
Long-term assets:    
Property and equipment, net 11,395 9,342
Field equipment, net 11,230 7,684
Right-of-use assets 19,009 17,571
Other long-term assets 10,908 4,904
Total long-term assets 52,542 39,501
Total assets 1,051,983 479,448
Current liabilities:    
Trade payables 53,647 36,925
Other payables and accrued expenses 59,965 49,386
Total current liabilities 113,612 86,311
Long-term liabilities:    
Long-term debt, net 429,905 149,424
Deferred revenues 12,139 7,807
Long term leases 14,293 14,140
Employee benefit liabilities 5,171 3,754
Other long-term liabilities 337 222
Total long-term liabilities 461,845 175,347
Total liabilities 575,457 261,658
Commitments and contingencies
Shareholders’ equity:    
Ordinary shares - No par value, Unlimited shares authorized; Issued and outstanding: 102,334,276 shares and 99,528,435 shares at December 31, 2020 and December 31, 2019 respectively; 0 0
Additional paid-in capital 1,111,435 871,442
Accumulated other comprehensive loss (3,832) (2,767)
Accumulated deficit (631,077) (650,885)
Total shareholders’ equity 476,526 217,790
Total liabilities and shareholders’ equity $ 1,051,983 $ 479,448
v3.20.4
Consolidated Balance Sheets (Parenthetical) - shares
Dec. 31, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Common stock issued (in shares) 102,334,276 99,528,435
Common stock outstanding (in shares) 102,334,276 99,528,435
v3.20.4
Consolidated Statements of Operations - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Income Statement [Abstract]      
Net revenues $ 494,366 $ 351,318 $ 248,069
Cost of revenues 106,501 88,606 80,048
Gross profit 387,865 262,712 168,021
Operating costs and expenses:      
Research, development and clinical trials 132,010 79,003 50,574
Sales and marketing 118,017 96,675 77,663
General and administrative 107,437 87,948 73,456
Total operating costs and expenses 357,464 263,626 201,693
Operating income (loss) 30,401 (914) (33,672)
Financial expenses (income), net 12,299 7,910 12,270
Income (loss) before income taxes 18,102 (8,824) (45,942)
Income tax (1,706) (1,594) 17,617
Net income (loss) $ 19,808 $ (7,230) $ (63,559)
Basic net income (loss) per ordinary share (in usd per share) $ 0.20 $ (0.07) $ (0.69)
Weighted average number of ordinary shares used in computing basic net income (loss) per share (in shares) 100,930,866 97,237,549 91,828,043
Diluted net income (loss) per ordinary share (in usd per share) $ 0.18 $ (0.07) $ (0.69)
Weighted average number of ordinary shares used in computing diluted net income (loss) per share (in shares) 108,877,648 97,237,549 91,828,043
v3.20.4
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Comprehensive Income [Abstract]      
Net income (loss) $ 19,808 $ (7,230) $ (63,559)
Other comprehensive income (loss), net of tax :      
Change in foreign currency translation adjustments (85) (304) 27
Pension benefit plan (980) (1,063) (84)
Total comprehensive income (loss) $ 18,743 $ (8,597) $ (63,616)
v3.20.4
Statements of Changes in Shareholders' Equity - USD ($)
$ in Thousands
Total
Cumulative Effect, Period of Adoption, Adjustment
Ordinary shares
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings (accumulated deficit)
Retained earnings (accumulated deficit)
Cumulative Effect, Period of Adoption, Adjustment
Beginning balance at Dec. 31, 2017 $ 113,564 $ 2,162   $ 697,165 $ (1,343) $ (582,258) $ 2,162
Beginning balance (in shares) at Dec. 31, 2017     89,478,032        
Share-based compensation to employees 39,846     39,846      
Exercise of options and warrants 18,468     18,468      
Exercise of options and warrants (in shares)     3,688,781        
Issuance of shares in connection with employee stock purchase plan 1,835     1,835      
Issuance of shares in connection with employee stock purchase plan (in shares)     87,372        
Other comprehensive income (loss), net of tax (benefit) expense (57)       (57)    
Net income (loss) (63,559)         (63,559)  
Ending balance at Dec. 31, 2018 112,259     757,314 (1,400) (643,655)  
Ending balance (in shares) at Dec. 31, 2018     93,254,185        
Share-based compensation to employees 52,416     52,416      
Exercise of options 59,245     59,245      
Exercise of options (in shares)     6,206,884        
Issuance of shares in connection with employee stock purchase plan 2,467     2,467      
Issuance of shares in connection with employee stock purchase plan (in shares)     67,366        
Other comprehensive income (loss), net of tax (benefit) expense (1,367)       (1,367)    
Net income (loss) (7,230)         (7,230)  
Ending balance at Dec. 31, 2019 217,790     871,442 (2,767) (650,885)  
Ending balance (in shares) at Dec. 31, 2019     99,528,435        
Share-based compensation to employees 75,721     75,721      
Exercise of options $ 28,428     28,428      
Exercise of options (in shares) 1,816,851   2,739,150        
Issuance of shares in connection with employee stock purchase plan $ 3,370     3,370      
Issuance of shares in connection with employee stock purchase plan (in shares)     66,691        
Conversion feature of convertible note, net 132,474     132,474      
Other comprehensive income (loss), net of tax (benefit) expense (1,065)       (1,065)    
Net income (loss) 19,808         19,808  
Ending balance at Dec. 31, 2020 $ 476,526     $ 1,111,435 $ (3,832) $ (631,077)  
Ending balance (in shares) at Dec. 31, 2020     102,334,276        
v3.20.4
Statements of Changes in Shareholders' Equity (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Stockholders' Equity [Abstract]      
Tax expense (benefit) for other comprehensive income (loss) $ 0 $ 145 $ (10)
v3.20.4
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Cash flows from operating activities:      
Net income (loss) $ 19,808 $ (7,230) $ (63,559)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:      
Depreciation and amortization 9,150 8,460 9,006
Asset write-downs and impairment of field equipment 429 398 407
Share-based compensation 75,721 52,416 39,846
Foreign currency remeasurement loss (gain) (699) (917) 0
Decrease (increase) in accounts receivables (30,354) (36,496) (10,325)
Amortization of discount (premium) 3,260 (2,176) 1,022
Decrease (increase) in inventories (2,935) (1,159) (529)
Decrease (increase) in other long-term assets (1,366) 3,446 (949)
Increase (decrease) in accounts payables and accrued expenses 25,470 16,883 13,713
Increase (decrease) in other long-term liabilities 664 (7,006) 9,503
Net cash provided by (used in) operating activities 99,148 26,620 (1,865)
Cash flows from investing activities:      
Purchase of property, equipment and field equipment (14,968) (10,485) (6,711)
Proceeds from maturity of short-term investments 150,000 420,661 255,000
Purchase of short-term investments (607,879) (461,843) (253,782)
Net cash provided by (used in) investing activities (472,847) (51,667) (5,493)
Cash flows from financing activities:      
Proceeds from issuance of shares, net 3,370 2,467 1,835
Proceeds from long-term debt, net 558,439 0 149,150
Repayment of long-term debt (150,028) (31) (100,084)
Exercise of options and warrants 28,428 59,245 18,468
Net cash provided by (used in) financing activities 440,209 61,681 69,369
Effect of exchange rate changes on cash, cash equivalents and restricted cash 247 26 27
Increase (decrease) in cash, cash equivalents and restricted cash 66,757 36,660 62,038
Cash, cash equivalents and restricted cash at the beginning of the year 179,416 142,756 80,718
Cash, cash equivalents and restricted cash at the end of the year 246,173 179,416 142,756
Cash paid during the year for:      
Income taxes paid (refunded), net (3,261) 11,241 20,350
Interest 8,686 13,699 13,334
Non-cash activities:      
Right-of-use assets obtained in exchange for lease liabilities $ 5,617 $ 22,943 $ 0
v3.20.4
Organization
12 Months Ended
Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization 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 (our "Products"), for the treatment of solid tumor cancers. The Company currently markets Optune in the 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 Greater China. See Note 12.
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.
v3.20.4
Basis of Presentation and Significant Accounting Policies
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Basis of Presentation and Significant Accounting Policies Basis of presentation and significant accounting policies
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
a. Use of estimates:
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, tax liabilities, useful-life of field equipment, right-of-use assets and lease liabilities, convertible notes, pension liabilities, revenue recognition, and share-based compensation costs. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting period. Actual results could differ from those estimates.
b. Financial statements in U.S. dollars:
The accompanying financial statements have been prepared in U.S. dollars in thousands, except for share and per-share data.
The Company finances its operations in U.S. dollars and a substantial portion of its costs and revenues from its primary markets is incurred in U.S. dollars. As such, the Company’s management believes that the U.S. dollar is the currency of the primary economic environment in which NovoCure Limited and certain subsidiaries operate. The Company’s reporting currency is U.S. dollars.
Transactions and balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts maintained in currencies other than the U.S. dollar are re-measured into dollars in accordance with Accounting Standards Codification (ASC) No. 830-10, "Foreign Currency Matters." All transaction gains and losses of the re-measurement of monetary balance sheet items are reflected in the consolidated statements of operations as financial income or expenses, as applicable.
For a subsidiary whose functional currency has been determined to be its local currency, assets and liabilities are translated at year-end exchange rates and statement of operations items are translated at average exchange rates prevailing during the year. Such translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) in shareholders' equity.
c. Principles of consolidation:
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances, including unrealized profits from intercompany sales, have been eliminated upon consolidation.
d. Cash equivalents:
Cash equivalents are short-term, highly liquid investments that are readily convertible into cash with a maturity of three months or less at the date acquired. 
e. 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 in marketable debt securities at the time of purchase and reevaluates such determinations at each balance sheet date. For the years ended December 31, 2020 and 2019, all securities are classified as held-to-maturity since the Company has the intent and ability to hold the securities to maturity and, accordingly, debt securities are stated at amortized cost.
The amortized cost of held-to-maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity and any other than temporary impairment losses. Such amortization and interest are included in the consolidated statement of operations as financial income or expenses, as appropriate.
For the three years ended December 31, 2020, no impairment losses have been identified.
f. Restricted cash
The Company has restricted cash used as security for the use of Company credit cards and cash management, presented in short-term assets. Additionally, the Company has pledged bank deposits to cover bank guarantees related to facility rental agreements, fleet lease agreements and customs payments presented in other long-term assets (see Note 12).
g. Trade receivables:
The Company’s trade receivables balance contains billed and unbilled commercial activities. As needed, the Company records an allowance for doubtful accounts by reserving for specifically identified doubtful accounts. The Company periodically reviews its customers’ credit risk and payment history. To date, the Company has not experienced any material credit losses related to counter-party risk.
h. Inventories:
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. The Company regularly evaluates its ability to realize the value of inventory. If the inventories are deemed damaged, if actual demand for the Company’s delivery systems deteriorates, or if market conditions are less favorable than those projected, inventory write-offs may be required.
Inventory write-offs of $616, $310 and $684, respectively, were recorded for the years ended December 31, 2020, 2019 and 2018.
i. Property and equipment:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following rates:
 %
Computers and laboratory equipment
15 - 33
Office furniture
6 - 33
Production equipment20
Leasehold improvementsOver the shorter of the term of the lease or its useful life
j. Field equipment:
Field equipment is stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful life of the field equipment, which was determined to be 18 to 36 months. Field equipment is equipment being utilized under service agreements, and accounted for in accordance with ASC 842 on
a monthly basis as an operating lease (see Note 2(x)). The Company records a write-off provision for any excess, lost or damaged equipment when warranted based on an assessment of the equipment. Write-offs for equipment are included in cost of revenues. During the years ended December 31, 2020, 2019 and 2018, write-offs for $409, $327 and $350, respectively, were recorded (see Note 7).
k. Impairment of long-lived assets:
The Company’s long-lived assets are reviewed for impairment in accordance with ASC 360-10, "Property, Plant and Equipment," whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. During the three years ended December 31, 2020, no impairment losses have been identified.
l. Other long-term assets:
Restricted deposits and long-term lease deposits associated with office rent and vehicles under operating leases are presented in other long-term assets.
m. Revenue recognition:
Our Products are comprised of two main components: (1) an electric field generator and (2) arrays and related accessories. We retain title to the electric field generator, and the patient is provided replacement arrays and technical support for the device during the term of treatment. The electric field generator and arrays are always supplied and function together and are not sold on a standalone basis.
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-9, Revenue from Contracts with Customers (Topic 606) (ASU 2014-9), an updated standard on revenue recognition and issued subsequent amendments to the initial guidance in March 2016, April 2016, May 2016 and December 2016 within ASU 2016-8, 2016-10, 2016-12 and 2016-20, respectively (collectively, "ASC 606"). The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods and services to patients in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods and services. In addition, the new standard requires expanded disclosures. The Company has adopted the standard effective January 1, 2018 using the modified retrospective method for all contracts.
The Company uses the portfolio approach to apply the standard to portfolios of contracts with similar characteristics.
To recognize revenue under ASC 606, the Company applies the following five steps:  
1.Identify the contract with a patient. A contract with a patient exists when (i) the Company enters into an enforceable contract with a patient that defines each party’s rights regarding delivery of and payment for a Product, (ii) the contract has commercial substance and (iii) the Company determines that collection of substantially all consideration for such Product is probable based on the payer’s intent and ability to pay the promised consideration. The evidence of a contract generally consists of a prescription, a patient service agreement and the verification of the assigned payer for the contract and intention to collect.
2.Identify the performance obligations in the contract. Our contracts include the lease of the device, the supply obligation of disposable arrays and technical support for the term of treatment. To the extent a contract includes multiple promised products and/or services, the Company must apply judgment to determine whether those products and/or services are capable of being distinct in the context of the contract. If these criteria are not met the promised products and/or services are accounted for as a combined performance obligation. In the Company’s case, the device, support, and disposables are provided as one inseparable package of monthly treatment for a single monthly fee. For more information, see Note 2(x).
3.Determine the transaction price. The transaction price is determined based on the consideration to which the Company will be entitled in exchange for providing a Product to the patient. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or
the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. The Company has agreements with many payers that define explicit discounts off the gross transaction price. In addition to the explicit discounts negotiated with each payer, the Company expects to receive, in aggregate for a given portfolio, less than the gross revenue net of explicit discounts. ASC 606 requires that the Company recognize this variable consideration as an implicit discount in the billing period. The implicit discount includes both an estimate of claims that will pay at an amount less than billed and an estimate of claims that will not pay within a given time horizon. The implicit discount adjustments to the transaction price are due to concessions, not collectability concerns driven by payer credit risk.
4.Allocate the transaction price to performance obligations in the contract. If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. As discussed above, there is a combined performance obligation under the Company’s contracts and, therefore, the monthly transaction price determined for the performance obligation will be recognized over time ratably over the monthly term of the treatment.  
5.Recognize revenue when or as the Company satisfies a performance obligation. The Company satisfies performance obligations over time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a patient. The patient consumes the benefits of treatment on a daily basis over the monthly term. As this criterion is met, the revenues will be recognized over the monthly term. For more information, see Note 2(x).
Revenues are presented net of indirect taxes.
Net revenues in the years ended December 31, 2020, 2019 and 2018 also include amounts recognized pursuant to the Zai Agreement. For additional information, see Note 12.
n. Charitable care:
The Company provides treatment at no charge to patients who meet certain criteria under its charitable care policy. Because the Company does not pursue collection of amounts determined to qualify as charity, they are not reported as revenue. The Company's costs of care provided under charitable care were $3,653, $2,847 and $2,762 for the years ended December 31, 2020, 2019 and 2018, respectively. These amounts were determined by applying charitable care as a percentage of gross billings to total cost of goods sold.
o. Shipping and handling costs:
The Company does not separately bill its customers for shipping and handling costs associated with shipping Products to its customers. These direct shipping and handling costs of $3,224, $2,688 and $2,936 for the years ended December 31, 2020, 2019 and 2018, respectively, are included in Sales and Marketing costs.
p. Accounting for share-based compensation:
The Company accounts for share-based compensation in accordance with ASC 718, "Compensation—Stock Compensation." ASC 718 requires companies to estimate the fair value of share-based compensation awards on the date of grant using an option-pricing model. The value of the award is recognized as an expense over the requisite service periods in the Company’s consolidated statements of operations. The Company's policy is to account for forfeitures as they occur.
The Company recognizes compensation costs for the value of awards granted using the accelerated method over the requisite service period of the award, which is generally the restricted share unit vesting term of three years and option vesting term of four years, respectively.
The Company applies the Black-Scholes model as it believes it is the most appropriate fair value method for all equity awards and for the Employee Share Purchase Plan (the "ESPP"). For market condition awards, the Company also applies the Monte-Carlo simulation model. The Black-Scholes model requires a number of assumptions, of which the most significant are the share price, expected volatility and the expected award term.
The computation of expected volatility is based on actual historical share price volatility of comparable companies when there is not sufficient historical information for the Company. Expected term of options granted is calculated
using the average between the vesting period and the contractual term to the expected term of the options in effect at the time of grant. The Company has historically not paid dividends and has no foreseeable plans to pay dividends and, therefore, uses an expected dividend yield of zero in the option pricing model. The risk-free interest rate is based on the yield of U.S. treasury bonds with equivalent terms.
q. Fair value of financial instruments:
The carrying amounts of cash and cash equivalents, short-term investments, restricted cash, receivables and prepaid expenses, trade receivables, trade payables and other accounts payable and accrued expenses approximate their fair value due to the short-term maturity of such instruments.
The Company accounts for certain assets and liabilities at fair value under ASC 820, "Fair Value Measurements and Disclosures." Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. The Company categorizes each of its fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.
The three levels of inputs that may be used to measure fair value are as follows:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets;
Level 2 - Includes other inputs that are directly or indirectly observable in the marketplace, other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets with insufficient volume or infrequent transactions, or other inputs that are observable (model-derived valuations in which significant inputs are observable), or can be derived principally from or corroborated by observable market data; and
Level 3 - Unobservable inputs which are supported by little or no market activity.
The availability of observable inputs can vary from instrument to instrument and is affected by a wide variety of factors, including, for example, the type of instrument, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment and the instrument is categorized as Level 3.
r. Basic and diluted net loss per share:
Basic net income (loss) per share is computed based on the weighted average number of ordinary shares outstanding during each period. Diluted net income per share is computed based on the weighted average number of ordinary shares outstanding during the period, plus potential dilutive shares considered outstanding during the period, in accordance with ASC 260-10, as determined under the treasury stock method.
s. Income taxes:
The Company accounts for income taxes in accordance with ASC 740-10, "Income Taxes." ASC 740-10 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, to reduce deferred tax assets to their estimated realizable value, if needed.
The Company established reserves for uncertain tax positions based on the evaluation of whether or not the Company’s uncertain tax position is "more likely than not" to be sustained upon examination. The Company records interest and penalties pertaining to its uncertain tax positions in the financial statements as income tax expense.
t. Concentration of risks:
Our cash, cash equivalents, short-term investments and trade receivables are potentially subject to a concentration of risk. Cash, cash equivalents and short-term investments are invested at top tier financial institutions globally. As
such, these investments may be in excess of insured limitations or not insured in certain jurisdictions. Generally, these investments may be redeemed upon demand and therefore, bear minimal risk.
The Company has no off-balance sheet concentrations of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
u. Retirement, pension and severance plans:
The Company has a 401(k) retirement savings plan for its U.S. employees. Each eligible employee may elect to contribute a portion of the employee’s compensation to the plan. Company contributions to the plan are at the sole discretion of the Company's Board of Directors. Currently, the Company provides a matching contribution of 50% of the employee's contributions, up to a maximum of three percent (3%) of the employee's annual salary. The Company began making matching contributions as of January 1, 2019. For the years ended December 31, 2020 and 2019, the Company had made matching contributions in the amount of $1,589 and $978, respectively, pursuant to the plan.
The Company sponsors a defined benefit plan (the "Swiss Plan") for all its employees in Switzerland for retirement benefits, as well as benefits on death or long-term disability, whereby the employee and the Company contribute a portion of the employee's compensation to the plan. The Swiss Plan is part of a collective pension foundation “Asga Pensionskasse.” Asga is an autonomous pension foundation, meaning that the underlying investment risk and all biometrical risks (disability, death, longevity) are born by the pension foundation itself. Notwithstanding, the Company and its employees bear the risk of having to pay recovery contributions in a financial distress situation. The Company accounts for this risk in accordance with ASC 715, "Compensation – Retirement Benefits" (see Note 9). The pension expense for the years ended December 31, 2020, 2019 and 2018 was $1,588, $984 and $882, respectively.
Israeli law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. The Company contributes to employee pension plans to fund its severance liabilities. According to Section 14 of Israel Severance Pay Law, the Company makes deposits on behalf of its employees with respect to the Company’s severance liability and therefore no obligation is provided for in the financial statements. Severance pay liabilities with respect to employees who are not subject to Section 14, are provided for in the financial statements based upon the number of years of service and the latest monthly salary and the related deposits are recorded as an asset based on the cash surrender value. Contributions pursuant to these obligations for the years ended December 31, 2020, 2019 and 2018 amounted to $1,130, $784 and $526, respectively.
v. Contingent liabilities:
The Company accounts for its contingent liabilities in accordance with ASC 450, "Contingencies." A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter.
w. Other comprehensive income (loss):
The Company accounts for comprehensive income (loss) in accordance with ASC 220, "Comprehensive Income." ASC 220 establishes standards for the reporting and display of comprehensive income (loss) and its components. Comprehensive income (loss) generally represents all changes in shareholders' equity during the period except those resulting from investments by, or distributions to, shareholders. The accumulated other comprehensive income (loss), net of taxes, relates to a pension liability and foreign currency translation adjustments.
x. Leases:
1.Lessee accounting:
On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (ASC 842). The Company determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic
benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use of the asset. The Company elected to not recognize a lease liability or right-of-use ("ROU") asset for leases with a term of twelve months or less. The Company also elected the practical expedient to not separate lease and non-lease components for its leases.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make minimum lease payments arising from the lease. ROU assets are initially measured at amounts, which represents the discounted present value of the lease payments over the lease, plus any initial direct costs incurred. The ROU assets are reviewed for impairment. The lease liability is initially measured at lease commencement date based on the discounted present value of minimum lease payments over the lease term. The implicit rate within the operating leases are generally not determinable; therefore, the Company uses the Incremental Borrowing Rate ("IBR") based on the information available at commencement date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest rate on similar terms and payments and in economic environments where the leased asset is located.
Certain leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option. An option to terminate is considered unless it is reasonably certain that the Company will not exercise the option.
2. Lessor accounting - Operating leases:
ASC 842 provides lessors with an optional practical expedient, by class of underlying asset, not to separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (ASC 606) and both of the following criteria are met:
a. The timing and pattern of transfer of the lease component and the non-lease component(s) are the same; and
b. The lease component would be classified as an operating lease if it were accounted for separately.
The Company's product supply agreements include the right to use the device (lease component), the supply obligation of disposable arrays and technical support for the term of treatment (non-lease component).
If the lease component is the predominant component, the Company accounts for all revenues under such lease as a single component in accordance with the new lease accounting standard. Conversely, if the non-lease component is the predominant component, all revenues under such lease are accounted for in accordance with the revenue recognition accounting standard. The Company's operating leases qualify for the single component accounting, and the non-lease component in each of the Company's leases is predominant. Therefore, The Company accounts for all revenues from its operating leases in accordance with the revenue recognition accounting standard.
y. Convertible note:
The Company accounts for its convertible senior notes in accordance with ASC 470-20 "Debt with Conversion and Other Options". Pursuant to ASC Subtopic 470-20, issuers of certain convertible debt instruments, such as the convertible senior notes, that have a net settlement feature and may be settled wholly or partially in cash upon conversion are required to separately account for the liability (debt) and equity (conversion option) components of the instrument. The Company allocated the proceeds from issuance between the liability component and the embedded conversion option, or equity component. The liability component at issuance is recognized at fair value, based on the fair value of a similar instrument of similar credit rating and maturity that does not have a conversion feature. The equity component is based on the excess of the principal amount of the convertible senior notes over the fair value of the liability component and is recorded in additional paid-in capital. The equity component, net of issuance costs is presented within additional paid-in-capital and is not remeasured as long as it continues to meet the conditions for equity classification. The Company allocated the total issuance costs incurred to the liability and equity components of the convertible senior notes based on the same proportions as the proceeds from the notes.
z. Recently adopted accounting pronouncements:
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
(“ASU 2016-13”). ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses, with an effective date for the first quarter of fiscal year 2020. The Company adopted the standard effective as of January 1, 2020 and the adoption of this standard did not have an impact on the Company's consolidated financial statements.
In August 2018, FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The implementation costs incurred in a hosting arrangement that is a service contract should be presented as a prepaid asset in the balance sheet and expensed over the term of the hosting arrangement to the same line item in the statement of income as the costs related to the hosting fees. The Company adopted the standard effective as of January 1, 2020 and the adoption of this standard did not have an impact on the Company's consolidated financial statements.
aa. Recently issued accounting pronouncements:
In August 2020, the FASB issued 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 ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities as it relates to the Company’s convertible senior notes. 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. See Note 20 for the impact of this adoption.
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). This guidance will be effective for the Company in the first quarter of 2021 on a prospective basis, and early adoption is permitted. As of December 31, 2020 the Company had not early adopted ASU 2019-12. The Company is evaluating the potential effect of the new guidance and believes there will be no material impact to the consolidated financial statements.
v3.20.4
Cash and Cash Equivalents and Short-Term Investments
12 Months Ended
Dec. 31, 2020
Cash, Cash Equivalents, and Short-term Investments [Abstract]  
Cash and Cash equivalents and Short-term investments Cash and Cash equivalents and Short-term investments
a.Cash and cash equivalents:
Cash equivalents include items almost as liquid as cash, such as certificates of deposit and time deposits with maturity periods of three months or less when purchased.
December 31,
20202019
Cash$20,339 $18,377 
Money market funds214,335 158,944 
Total cash and cash equivalents$234,674 $177,321 
b.    Short-term investments
The Company invests in marketable U.S. Treasury Bills ("T-bills") that are classified as held-to-maturity securities. The amortized cost and recorded basis of the T-bills are presented as short-term investments.
December 31,
20202019
Short-term investments$607,902 $148,769 
Quoted market prices were applied to determine the fair value of cash equivalents and short-term investments, therefore they are categorized as Level 1 in accordance with ASC 820, "Fair Value Measurements and Disclosures." The estimated fair value of our short-term investments as of December 31, 2020 and 2019 was $607,905 and $148,738, respectively.
v3.20.4
Receivables and Prepaid Expenses
12 Months Ended
Dec. 31, 2020
Receivables And Prepaid Expenses [Abstract]  
Receivables and Prepaid Expenses Receivables and prepaid expenses
The following table sets forth the Company’s receivables and prepaid expenses:
December 31,
20202019
Advances to and receivables from suppliers$3,768 $5,097 
Government authorities13,358 21,382 
Prepaid expenses3,963 2,251 
Others156 471 
 $21,245 $29,202 
v3.20.4
Inventories
12 Months Ended
Dec. 31, 2020
Inventory Disclosure [Abstract]  
Inventories Inventories
Inventories are stated at the lower of cost or net realizable value. The weighted average methodology is applied to determine cost. The following table sets forth the Company’s inventories:
 December 31,
 20202019
Raw materials$5,175 $3,912 
Work in process4,896 6,482 
Finished goods17,351 13,308 
 $27,422 $23,701 
v3.20.4
Property and Equipment, Net
12 Months Ended
Dec. 31, 2020
Property, Plant and Equipment [Abstract]  
Property and Equipment, Net Property and equipment, net
The following table sets forth the Company’s property and equipment, net:
December 31,
20202019
Cost:
Computers and laboratory equipment$18,821 $15,448 
Office furniture2,871 2,486 
Production equipment1,628 1,237 
Leasehold improvements6,501 4,818 
Total cost$29,821 $23,988 
Accumulated depreciation and amortization(18,426)(14,647)
Depreciated cost$11,395 $9,342 
The Company capitalized software costs according to FASB's ASC 350-40, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." Cumulative capitalization as of December 31, 2020 and 2019 was $9,219 and $7,199, respectively. Amortization of capitalized software costs for the years ended December 31, 2020, 2019 and 2018 was $1,398, $1,682 and $1,486, respectively.
Depreciation expense was $2,635, $2,080 and $1,967 for the years ended December 31, 2020, 2019 and 2018, respectively.
v3.20.4
Field Equipment, Net
12 Months Ended
Dec. 31, 2020
Field Equipment [Abstract]  
Field Equipment, Net Field equipment, net
The following table sets forth the Company’s field equipment, net:
December 31,
20202019
Field equipment$27,876 $21,075 
Accumulated depreciation(16,646)(13,391)
Field equipment, net$11,230 $7,684 
Depreciation expense was $5,117, $4,631 and $5,553 for the years ended December 31, 2020, 2019 and 2018, respectively. Write downs of $409, $327 and $350 were identified for the years ended December 31, 2020, 2019 and 2018, respectively.
v3.20.4
Other Payables and Accrued Expenses
12 Months Ended
Dec. 31, 2020
Payables and Accruals [Abstract]  
Other Payables and Accrued Expenses Other payables and accrued expenses
The following table sets forth the Company’s other payables and accrued expenses: 
December 31,
 20202019
Employees and payroll accruals$30,316 $20,904 
Government authorities5,340 12,011 
Deferred revenues17,765 11,773 
Other6,544 4,699 
 $59,965 $49,386 
v3.20.4
Employee Benefit Obligations
12 Months Ended
Dec. 31, 2020
Retirement Benefits [Abstract]  
Employee Benefit Obligations Employee benefit obligationsThe Company's liability in respect of the Swiss Plan (see Note 2(u)) is the projected benefit obligation calculated using the projected unit credit method. The projected benefit obligation as of December 31, 2020 represents the
actuarial present value of the estimated future payments required to settle the obligation that is attributable to employee service rendered before that date. Swiss Plan assets are recorded at fair value. Pension expense is presented in the payroll expenses in the various functions in which the employees are engaged. Actuarial gains and losses arising from differences between the actual and the expected return on the Swiss Plan assets are recognized in accumulated other comprehensive income (loss) and amortized over the requisite service period. The Swiss Plan is part of a collective pension foundation of pooled investments managed by a top tier insurance company. The Company and the employees pay retirement contributions, which are defined as a percentage of the employees’ covered salaries. Interest is credited to the employees’ account at the minimum rate provided in the Swiss Plan, which represents the Swiss Plan’s primary asset. The targeted allocation for these funds is as follows:
Asset Allocation by Category as of September 30, 2020:
Asset
allocation (%)
Asset Category:
Debt Securities34%
Real Estate25%
Equity Securities35%
Others6%
Total100%
The following table sets forth the Swiss Plan’s funded status and amounts recognized in the consolidated financial statements for the year ended December 31, 2020 and 2019:
December 31,
 20202019
Change in Benefit Obligation
Projected benefit obligation at beginning of year$15,685 $12,249 
Interest cost37 114 
Company service cost1,483 932 
Employee contributions870 599 
Prior service cost— — 
Benefits paid1,612 (109)
Actuarial loss3,066 1,900 
Projected benefit obligation at end of year$22,753 $15,685 
Change in Plan Assets
Fair value of plan assets at beginning of year$12,356 $9,936 
Actual return on plan assets1,938 1,031 
Employer contributions1,306 899 
Employee contributions870 599 
Benefits paid1,612 (109)
Fair value of plan assets at end of year$18,082 $12,356 
Funded Status at End of year
Excess of obligation over assets$4,671 $3,329 
Change in Accrued Benefit Liability
Accrued benefit liability at beginning of year$(3,329)$(2,313)
Company contributions made during year1,306 899 
Net periodic benefit cost for year(1,909)(1,024)
Net decrease (increase) in accumulated other comprehensive loss(739)(891)
Accrued benefit liability at end of year$(4,671)$(3,329)
December 31,
 20202019
Non-current plan assets$18,083 $12,357 
Non-current liability22,754 15,686 
Accrued benefit liability at end of year$(4,671)$(3,329)
Projected Benefit Payments
Projected year 1$1,804 $270 
Projected year 2394 1,434 
Projected year 3400 255 
Projected year 4788 260 
Projected year 5405 571 
Projected years 6-103,445 2,109 
The fair value of the plan assets is the estimated cash surrender value of the insurance contract at December 31, 2019. The level of inputs used to measure fair value was Level 2.
Year ended
December 31,
 20202019
Net Periodic Benefit Cost  
Service cost$1,483 $932 
Interest cost (income)37 114 
Expected return on plan assets(31)(97)
Amortization of transition obligation120 54 
Amortization of prior service costs(21)(19)
Total net periodic benefit cost$1,588 $984 
Weighted average assumptions:
Discount rate as of December 310.20 %0.20 %
Expected long-term rate of return on assets0.20 %0.20 %
Rate of compensation increase1.00%1.00%
Mortality and disability assumptions   (*)
BVG 2015 GTBVG 2015 GT
(*)    Mortality data used for actuarial calculation.
v3.20.4
Long-term Debt, Net
12 Months Ended
Dec. 31, 2020
Debt Disclosure [Abstract]  
Long-term Debt, Net Long-term debt, net
The following table sets forth the Company’s long-term debt, net:
December 31,
 20202019
 0% Convertible Senior Notes (a)
$429,905 $— 
Credit facility (b)
— 149,424 
 $429,905 $149,424 

a.Convertible note
On November 5, 2020, the Company issued $575,000 aggregate principal amount of 0% Convertible Senior Notes due 2025 (the “Notes”). The net proceeds from the offering were approximately $558,400.
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.
The Notes are convertible into cash, the Company’s ordinary shares or a combination of cash and the Company’s ordinary shares at the Company’s election at an initial conversion rate of 5.9439 ordinary shares per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $168.24 per ordinary share. For additional information see note 20.
The Notes are not redeemable prior to November 6, 2023, except in the event of certain tax law changes. The Company may redeem for cash all or any portion of the Notes, at the Company’s option, on or after November 6, 2023 if the last reported sale price of the Company’s ordinary shares has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date. No sinking fund is provided for the Notes.
Prior to the close of business on the business day immediately preceding August 1, 2025, the Notes are convertible at the option of the holders only upon the satisfaction of certain conditions and during certain periods as described below and if the Company exercises its right to redeem the Notes as permitted or required by the Indenture as described below. On or after August 1, 2025 until the close of the business on the business day immediately preceding the maturity date, holders may convert all or any portion of their Notes at the conversion rate at any time irrespective of the foregoing conditions.
If holders of at least $3,000 aggregate principal amount of the Notes provide the Company with reasonable evidence that the trading price per $1,000 principal amount of Notes (the “Note Trading Price”) on any trading day would be less than 98% of the product of the last reported sale price of the Ordinary Shares on such trading day and the conversion rate on such trading day (the “Trigger Note Price”), the Company shall follow the process for obtaining the Note Trading Price as provided in the Indenture on a daily basis until the Note Trading Price exceeds the Trigger Notice Price. During this time, if during any five consecutive trading day period (the “Measurement Period”) the Note Trading Price is less than 98% of the Trigger Notice Price, the Company must notify the holders and the trustee of such an event and the holders may convert their Notes into Ordinary Shares at any time during the five business day period immediately after.
If the Company intends to (i) issue warrants/rights/options to existing shareholders with an exercise price less than the ten-day trailing last trading price average or (ii) distribute to shareholders assets, securities or rights with a value per share greater than 10% of the last reported trading price, then the Company must give holders of the Notes thirty-five (35) trading days’ notice of such event, at which time a holder may convert their Notes during such 35 trading day period (or until the Company revokes its decision to issue/distribute the securities, whichever comes sooner).
In addition, upon the occurrence of a fundamental change (as defined in the indenture), holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event or notice of redemption, as the case may be.
During the year ended December 31, 2020, the conditions allowing holders of the Notes to convert were not met. The Notes are therefore not convertible as of December 31, 2020 and are classified as long-term liability.
The net carrying amount of the liability and equity components of the Convertible Notes as of December 31, 2020 is as follows:
December 31,
2020
Liability component, net:
Principal amount$575,000 
Unamortized discount(132,797)
Unamortized issuance costs(12,298)
Net carrying amount of liability component (1)$429,905 
Equity component, net:
Conversion feature$136,401 
Issuance costs
(3,928)
Net carrying amount of equity component$132,473 


(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 December 31, 2020 was $450,437.

Finance expense related to the Convertible Notes was as follows:
Year ended December 31,
2020
Amortization of debt discount
$3,604 
Amortization of debt issuance costs
334 
Total finance expense recognized
$3,938 

b. Loan and Security Agreement
On February 7, 2018, the Company and certain of its subsidiaries entered into a Loan and Security Agreement ("2018 Loan Agreement") with BioPharma Credit PLC pursuant to which such lender made a term loan to the Company in the principal amount of $150,000 (the "2018 Credit Facility"). The term loan, which was drawn in full upon execution of the 2018 Loan Agreement, bore interest at 9.0% per annum, payable quarterly in arrears.
On August 18, 2020, the Company terminated the 2018 Credit Facility. The prepayment included $150,000 in principal repayment and $3,000 in prepayment premium, plus accrued and unpaid interest and expenses payable through the payoff date. The un-amortized issuance costs in the amount of $478 that were fully amortized upon the repayment and the prepayment premium were reported in the Company’s finance expenses.
v3.20.4
Other Long-term Liabilities
12 Months Ended
Dec. 31, 2020
Other Liabilities Disclosure [Abstract]  
Other Long-term Liabilities Other long-term liabilities
December 31,
 20202019
Deferred rent liability$— $40 
Leasehold improvements financing and other40 66 
Unrecognized tax benefits (Note 13(e))297 116 
 $337 $222 
v3.20.4
Commitments and Contingent Liabilities
12 Months Ended
Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingent Liabilities Commitments and contingent liabilities
a.Operating leases
The facilities of the Company are leased under various operating lease agreements for periods ending no later than 2030. The Company also has the option to extend the term of certain facility lease agreements and these are included in the calculation of right-of-use assets. The Company also leases motor vehicles under various operating leases, which expire on various dates, the latest of which is in 2024.
Under ASC 842, all leases with durations greater than 12 months, including non-cancelable operating leases, are recognized on the balance sheet. The aggregated present value of lease agreements, net of deferred rent, is recorded as a long-term asset titled right-of-use assets. The corresponding lease liabilities are split between other payables and long-term lease liabilities.
Upon implementation of ASC 842, effective January 1, 2019, the Company recorded an increase in right-of-use assets obtained in exchange for lease obligations of $15,733 on our opening balance sheet. Future minimum lease payments under non-cancelable operating leases as of December 31, 2020, are as follows:
December 31,
2020
Future minimum lease payments:
2021$6,856 
20225,760 
20233,450 
20242,525 
20251,456 
Thereafter3,990 
Total future minimum lease payments$24,037 
Less imputed interest(3,261)
Net present value of future minimum lease payments$20,776 
Current year end
Short-term lease liabilities$6,483 
Long-term lease liabilities14,293 
Net present value of future minimum lease payments$20,776 
Weighted average of remaining operating lease term (years)4.97
Weighted average of operating lease discount rate6.64 %
Lease and rental expense for the years ended December 31, 2020, 2019 and 2018 was $5,950, $5,410, and $4,033, respectively.
b.    Bank guarantee and pledges
As of December 31, 2020 and 2019 the Company pledged bank deposits of $1,438 and $1,390, respectively, to cover bank guarantees in respect of its leases of operating facilities and obtained guarantees by the bank for the fulfillment of the Company’s lease commitments of $1,687 and $1,557, respectively.
c.     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. The Company may, subject to certain conditions and limitations, increase the revolving credit commitments outstanding under the revolving credit facility or incur new incremental term loans in an aggregate principal amount not to exceed an additional $100,000.
The commitments under the revolving credit facility are guaranteed by certain of the Company's subsidiaries and secured by a first lien on the Company's and certain of the Company's subsidiaries’ assets. Outstanding loans will bear interest at a sliding scale based on the Company's secured leverage ratio from LIBOR plus 2.75% to LIBOR plus 3.25% per annum. Additionally, the facility contains a fee for the unused revolving credit commitments at a sliding scale based on the Company's secured leverage ratio from 0.35% to 0.45%. The facility contains financial covenants requiring maintenance of a minimum fixed charge coverage ratio and specifying a maximum senior secured net leverage ratio, as well as customary events of default which include a change of control.
As of December 31, 2020, the Company had no outstanding balance borrowed under the facility.
d.     Zai License and Collaboration Agreement
On September 10, 2018, the Company entered into the Zai Agreement. Under the Zai Agreement, the Company granted Zai exclusive rights to commercialize Optune in the field of oncology in China, Hong Kong, Macau and Taiwan ("Greater China"). The Zai Agreement also established a development partnership for Optune in multiple solid tumor indications. In partial consideration for the license grant to Zai for Greater China, the Company was entitled to a non-refundable, up-front license fee in the amount of $15,000 (the "License Fee"). The Zai Agreement also provides for certain development, regulatory and commercial milestone payments totaling up to $78,000. Furthermore, pursuant to the Zai Agreement, Zai will pay the Company tiered royalties at percentage rates from 10 up to the mid-teens on the net sales of the licensed products in Greater China. Zai is purchasing licensed products for commercial use exclusively from the Company at the Company’s fully burdened manufacturing cost.
The Company recognizes revenue pursuant to the License Agreement with Zai in accordance with ASC 606, "Revenue Recognition from Customers." The License Fee is deferred and recognized over related six year performance period commencing September 10, 2018 ("Zai Performance Period"). Revenue from commercial milestone payments will be recognized upon the achievement of such milestones and future clinical or regulatory milestone payments will be recognized in a straight line over the applicable performance period, in accordance with ASC 606. Revenue from royalty payments are recognized in accordance with ASC 606 in the period accrued. Revenues from sales of product or rendering services are recognized upon shipping the products or rendering the services and satisfying the performance obligation.
During the year ended December 31, 2020, the Company triggered an aggregate $10,000 of milestone payments, which, with the License Fee, are deferred and recognized over the remainder of the Zai Performance Period ending in September 2024 on a straight-line basis, resulting in revenue of $3,981 $2,115 and $767 for the years ended December 31, 2020, 2019 and 2018, respectively.
v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income taxes
a.     Tax provision:
Income (loss) before income taxes is as follows:
Year ended December 31,
 202020192018
United States (U.S.)$(15,283)$(87,925)$(114,890)
Non-U.S.33,385 79,101 68,948 
Total income (loss) before income taxes
$18,102 $(8,824)$(45,942)

The provision (benefit) for income taxes from continuing operations is comprised of:
Year ended December 31,
 202020192018
Current:   
U.S.$(11,898)$(6,143)$6,701 
Non-U.S.10,192 4,405 10,568 
Total current$(1,706)$(1,738)$17,269 
Deferred:
U.S.$— — 
Non-U.S.— 144 348 
Total deferred— 144 348 
Total income tax provision$(1,706)$(1,594)$17,617 
In accordance with the changes to the U.S. tax code enacted in response to the economic impacts of COVID-19 signed into legislation on March 27, 2020, the Company recorded a new tax benefit of $11,269 in the first quarter of 2020. The benefit results from net operating loss carry-backs in the U.S.
b.     Theoretical tax
The Company's effective tax rate is affected by the tax rates in the various jurisdictions in which the Company operates. For purposes of comparability, the Company used the notional U.S. federal income tax rate of 21% for the 2020, 2019 and 2018 tax years when presenting the Company's reconciliation of the income tax provision. A reconciliation of the provision for income taxes compared with the amounts at the notional federal statutory rate was:
Year ended December 31,
 202020192018
Income (loss) before income taxes$18,102 $(8,824)$(45,942)
U.S. statutory income tax rate21.0 %21.0 %21.0 %
Notional U.S. federal income taxes at statutory rate$3,801 $(1,853)$(9,648)
Non-deductible expenses260 357 912 
Foreign taxes rate differential4,024 (4,216)(6,000)
Change in valuation allowance (see Note 13(c))6,821 244,344 28,657 
State income taxes607 (16,679)1,957 
Change in excess tax benefit(6,190)(26,528)2,088 
Unamortized intangible assets— (189,410)— 
Research and Development Credits(5,243)(2,333)(465)
Withholding Taxes2,366 384 118 
2020 Cares Act(8,694)— — 
Other542 (5,660)(2)
Income tax$(1,706)$(1,594)$17,617 
Effective tax rate(9.4)%18.1 %(38.3)%

c.     Deferred income tax
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
December 31,
 20202019
Deferred tax assets:
Implicit discounts recognized under ASC 606 (see Note 2)$128,149 $124,255 
Net operating loss carryforwards40,314 35,267 
Share based compensation17,595 12,253 
Deferred revenue3,246 2,450 
Interest limitations6,975 4,028 
Unamortized intangible assets157,930 176,783 
Research and development9,186 800 
Other assets3,828 1,559 
Total gross deferred tax assets$367,223 $357,395 
Less: valuation allowance(364,082)(357,012)
Total deferred tax assets$3,141 $383 
Deferred tax liabilities:
Fixed assets2,185 380 
Other liabilities956 
Total gross deferred tax liabilities$3,141 $383 
Net deferred taxes assets (liability)$— $— 
d.     Carryforward loss:
As of December 31, 2020, the Company had $80,128 of U.S. federal net operating loss carryforwards ("NOLs") and $120,188 of U.S. state NOLs. The U.S. federal NOLs carry forward indefinitely. Also, approximately $21,603 in U.S. state NOLs carry forward indefinitely, with the remainder expiring from 2023 through 2040.
In addition, the Company had $131,614 of non-U.S NOLs as of December 31, 2020, which expire between 2027 and 2037.
e.     Uncertain tax benefits:
A reconciliation of the beginning and ending balances of uncertain tax benefits is as follows:
 December 31,
 202020192018
Balance at beginning of the year$116 $103 $2,827 
Additions (reductions) for taxes positions related current year— — (141)
Additions (reductions) for taxes positions related to prior years181 13 (2,583)
Balance at the end of the year$297 $116 $103 
The Company recognizes interest and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2020, 2019 and 2018, the Company accrued $21, $13 and $2, respectively, for interest and penalties expenses related to uncertain tax positions.
We file income tax returns in the U.S. and various state and foreign jurisdictions. We are currently not under examination by the Internal Revenue Service, and any state, local or foreign taxing jurisdictions. Additional tax years within the period 2015 to 2019 remain subject to examination by the U.S. Internal Revenue Service. Furthermore, tax years 2014 to 2019 remain subject to examination in other U.S. state and municipal jurisdictions, as well as foreign jurisdictions.
v3.20.4
Share Capital
12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Abstract]  
Share Capital Share capital
Share capital is composed as follows:
Issued and outstanding
Number of shares
December 31,
 20202019
Ordinary shares no par value102,334,276 99,528,435 
a.     Warrants:
As part of the Series D and E Convertible Preferred share investment agreements, the investors received warrants to purchase ordinary shares. The Company accounted for these warrants as equity instruments based on the guidance of ASC 815, "Derivatives and Hedging," ASC 480-10, "Distinguishing Liabilities from Equity," its related FASB staff positions, ASC 815-40 "Contracts in Entity’s Own Stock" and the AICPA Technical Practice Aid for accounting for preferred shares and warrants, including the roadmap for accounting for freestanding financial instruments indexed to, and potentially settled in, a company’s own stock.
In the year ended December 31, 2018, warrants to purchase 504,225 ordinary shares were cashlessly exercised, resulting in the issuance of 437,081 ordinary shares. Also, in the year ended December 31, 2018, warrants to purchase 3,879 ordinary shares, with an exercise price of $3.59 per share were exercised for cash. No warrants were outstanding as of December 31, 2020 and 2019.
b.     Share option plans and ESPP:
Until the IPO in October 2015, the Company maintained and granted option awards under the 2003 Share Option Plan (the "2003 Plan") and the 2013 Equity Incentive Share Option Plan (the "2013 Plan") for the Company’s officers, directors, employees and advisors. The 2003 Plan and the 2013 Plan terminated as of the IPO as to future awards, but they continue to govern option awards previously granted thereunder.
In September 2015, the Company adopted the 2015 Omnibus Incentive Plan (the "2015 Plan"). The Company’s shareholders approved the 2015 Plan in September 2015. Under the 2015 Plan, the Company can issue various types of equity compensation awards such as restricted shares, performance shares, restricted stock units ("RSUs"), performance units ("PSUs"), long-term cash award 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 cancelled or forfeited before expiration become available for future grants. RSUs granted under the 2015 Plan vest in equal installments over a three-year period.
On December 31, 2020, in accordance with the terms of the 2015 Plan, the number of shares available for issuance under the 2015 Plan automatically increased by 4% of the Company’s outstanding ordinary shares as of December 30, 2020. As a result, the number of shares available for issuance under the 2015 Plan increased from 31,015,695 shares to 35,107,569 shares. As of December 31, 2020, 15,331,694 ordinary shares are available for grant under the 2015 Plan.
In September 2015, the Company adopted an 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. The ESPP is intended to be an "employee stock purchase plan" within the meaning of Section 423 of the Code and the provisions of the ESPP will be construed in a manner consistent with the requirements of such section. The Company began its offerings under the ESPP on August 1, 2016. The Company issued 66,691 ordinary shares for the plan period from January 1, 2020 through December 31, 2020.
On December 31, 2020, in accordance with the terms of the ESPP, the number of shares available for purchase by eligible employees who participate in the ESPP automatically increased by 1% of the Company’s outstanding ordinary shares outstanding on December 30, 2020. As of December 31, 2020, 5,006,367 ordinary shares are available for offering under the ESPP.
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, with the following underlying assumptions:
Year ended December 31,
 202020192018
Stock Option Plans
Expected term (years)
5.50-6.00
5.50-6.00
5.50-6.25
Expected volatility
54%-56%
55%-61%
52%-55%
Risk-free interest rate
0.30%-0.86%
1.73%-2.40%
2.70%-2.99%
Dividend yield0.00 %0.00 %0.00 %
ESPP
Expected term (years)0.500.500.50
Expected volatility
47%-66%
44%-62%
45%-53%
Risk-free interest rate
0.17%-1.57%
2.10%-2.51%
1.61%-2.14%
Dividend yield0.00 %0.00 %0.00 %
A summary of the status of the Company’s options to purchase ordinary shares as of December 31, 2020 and changes during the year ended on that date is presented below:
Year ended December 31, 2020
 
Number of
options
Weighted
average
exercise
price
Aggregate
intrinsic
value
Outstanding at beginning of year10,350,810 $20.40 
Granted887,188 71.87 
Exercised(1,816,851)15.72 
Forfeited and cancelled(200,821)22.98 
Outstanding at end of year9,220,326 $26.21 $1,353,785 
Exercisable options4,434,360 $16.77 $692,946 
A summary of the status of the Company’s RSUs as of December 31, 2020 and changes during the year ended on that date is presented below:
 
Year ended December 31, 2020
 Number of
RSUs/PSUs
Weighted
average
grant date
fair value
price
Aggregate
intrinsic
value
Unvested at beginning of year1,474,395 $30.26 
Granted3,951,760 55.49 
Vested(922,299)22.09 
Forfeited and cancelled(37,705)54.88 
Unvested at end of year (1)4,466,151 $54.06 $772,822 
(1) Includes PSUs that have a mix of service, market and other milestone performance vesting conditions which are vested upon achievements of market performance which are not probable, as of December 31, 2020, in accordance with ASC 718 as follows:

December 31, 2020
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 
2,829,677 $139,217 

These PSUs will be expensed over the performance period when the vesting conditions become probable in accordance with ASC 718.
The total equity-based compensation expense related to all of the Company’s equity-based awards recognized for the years ended December 31, 2020, 2019 and 2018, was comprised as follows:
Year ended December 31,
 202020192018
Cost of revenues$2,221 $2,231 $1,261 
Research, development and clinical trials18,125 7,570 4,709 
Sales and marketing17,672 11,897 7,393 
General and administrative37,703 30,718 26,483 
Total share-based compensation expense$75,721 $52,416 $39,846 
As of December 31, 2020, unamortized share-based compensation costs amounted to $96,346 and are expected to be recognized over a weighted average period of approximately 2.92 years.
The weighted average grant date exercise price of the Company’s options granted during the years ended December 31, 2020, 2019 and 2018 were $71.87, $50.45 and $23.73 per share, respectively.
The weighted average grant date fair values of the Company’s options forfeited and cancelled during the years ended December 31, 2020, 2019 and 2018 were $22.98, $22.11 and $15.09, respectively.
The aggregate intrinsic values for the options exercised during the years ended December 31, 2020, 2019 and 2018 were $156,910, $266,626 and $57,813, respectively. The aggregate intrinsic value is calculated as the difference between the per share exercise price and the deemed fair value of the Company’s ordinary shares for each share subject to an option multiplied by the number of shares subject to options at the date of exercise. The Company deemed the fair value of the Company’s ordinary shares to be $173.04, $84.27 and $33.48 per share as of December 31, 2020, 2019, and 2018, respectively.
The options outstanding as of December 31, 2020 are as follows:
Exercise price
Number
of options
outstanding
Weighted
average
remaining
contractual
term
Number
of options
exercisable
Weighted
average
remaining
contractual
term
$ (years) (years)
0.23 - 10.00
1,494,509 5.53947,966 5.17
10.01 - 20.00
2,874,622 5.881,872,530 5.63
20.01 - 30.00
2,144,352 6.61,192,174 6.13
30.01 - 40.00
367,127 7.57198,976 7.53
40.01 - 60.00
1,337,470 8.29193,221 8.26
60.01 - 100.00
976,609 9.1729,493 8.40
100.01 - 160.00
25,637 9.84— 0.00
 9,220,326 7.284,434,360 5.94
v3.20.4
Financial Expenses, Net
12 Months Ended
Dec. 31, 2020
Interest and Debt Expense [Abstract]  
Financial Expenses, Net Financial expenses, net
The following table sets forth the Company’s total financial expenses, net:
Year ended December 31,
 202020192018
Financial expenses:
Interest expense$(13,147)$(13,718)$(13,491)
Amortization of discount and issuance costs(4,514)(156)(2,777)
Foreign currency transaction losses— (431)(398)
Others(389)(338)(242)
 $(18,050)$(14,643)$(16,908)
Financial income:
Amortization of treasury bills premium$1,316 $2,331 $1,986 
Foreign currency transaction gains2,648 — — 
Interest income1,787 4,402 2,652 
 $5,751 $6,733 $4,638 
Total financial expenses, net$(12,299)$(7,910)$(12,270)
v3.20.4
Basic and Diluted Net Income (Loss) Per Share
12 Months Ended
Dec. 31, 2020
Earnings Per Share [Abstract]  
Basic and Diluted Net Income (Loss) Per Share Basic and diluted net income (loss) per shareBasic 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 treasury stock method.
The following table sets forth the computation of the Company’s basic and diluted net loss per ordinary share:
 Year ended December 31,
 202020192018
Net income (loss) attributable to ordinary shares as reported$19,808 $(7,230)$(63,559)
Net income (loss) used in computing basic net income (loss) per share$19,808 $(7,230)$(63,559)
Adjustment needed in calculating diluted net income (loss) per share— — — 
Net income (loss) used in computing diluted net income (loss) per share$19,808 $(7,230)$(63,559)
Weighted average number of ordinary shares used in computing basic net income (loss) per share100,930,866 97,237,549 91,828,043 
Potentially dilutive shares that were excluded from the computation of basic net income (loss) per share:
Options6,967,554 — — 
Restricted share units945,612 — — 
ESPP33,616 — — 
Weighted average number of ordinary shares used in computing diluted net income (loss) per share108,877,648 97,237,549 91,828,043 
Weighted anti-dilutive shares outstanding which were not included in the diluted calculation1,307,762 10,230,982 9,341,735 
Basic net income (loss) per ordinary share$0.20 $(0.07)$(0.69)
Diluted net income (loss) per ordinary share$0.18 $(0.07)$(0.69)
v3.20.4
Subcontractor
12 Months Ended
Dec. 31, 2020
Subcontractor [Abstract]  
Subcontractor SubcontractorIn certain markets and for certain key components, the Company is currently dependent upon sole source suppliers used in its delivery systems. The Company’s management believes that in most cases other suppliers could provide similar components at comparable terms. A change of suppliers which requires FDA or other regulatory approval, however, could cause a material delay in manufacturing and a possible loss of sales, which could adversely affect the Company’s operating results and financial position.
v3.20.4
Supplemental Information
12 Months Ended
Dec. 31, 2020
Geographic Areas, Long-Lived Assets [Abstract]  
Supplemental Information Supplemental information
The following table presents long-lived assets by location:
December 31,
 202020192018
United States$11,868 $8,896 $8,289 
Switzerland2,849 3,067 2,513 
Israel4,370 2,753 2,236 
Japan1,230 999 632 
Germany1,075 729 1,054 
Others1,233 582 642 
Total long-lived assets $22,625 $17,026 $15,366 
The Company’s net revenues by geographic region, based on the patient’s location are summarized as follows:
Year ended December 31,
 202020192018
United States$340,782 $232,805 $168,414 
EMEA:
Germany93,264 86,564 67,849 
Other EMEA18,654 8,782 4,653 
Japan29,076 17,912 6,351 
Greater China (1)12,590 5,255 802 
Total net revenues$494,366 $351,318 $248,069 

(1)     For additional information, see Note 12.
v3.20.4
Selected Quarterly Financial Information (Unaudited)
12 Months Ended
Dec. 31, 2020
Selected Quarterly Financial Information [Abstract]  
Selected Quarterly Financial Information (Unaudited) Selected quarterly financial information (Unaudited)
The following table sets forth selected financial information for the Company:
 2020
 Three months ended
 December 31September 30June 30March 31
Net revenues$143,953 $132,660 $115,925 $101,828 
Gross profit115,817 104,265 90,451 77,332 
Operating income (loss)12,092 15,022 6,668 (3,381)
Net income (loss)4,917 9,284 1,655 3,952 
Basic net income (loss) per ordinary share$0.05 $0.09 $0.02 $0.04 
Weighted average number of ordinary shares used in computing basic net income (loss) per share101,945,085 101,234,306 100,718,893 99,877,567 
Diluted net income (loss) per ordinary share$0.04 $0.09 $0.02 $0.04 
Weighted average number of ordinary shares used in computing diluted net income (loss) per share110,604,714 108,643,814 107,647,802 108,100,623 
 2019
 Three months ended
 December 31September 30June 30March 31
Net revenues$99,234 $92,062 $86,713 $73,309 
Gross profit74,448 69,162 65,607 53,495 
Operating income (loss)153 3,855 1,196 (6,118)
Net income (loss)4,260 1,930 (1,270)(12,150)
Basic net income (loss) per ordinary share$0.04 $0.02 $(0.01)$(0.13)
Weighted average number of ordinary shares used in computing basic net income (loss) per share99,226,445 98,485,519 96,356,317 94,811,282 
Diluted net income (loss) per ordinary share$0.04 $0.02 $(0.01)$(0.13)
Weighted average number of ordinary shares used in computing diluted net income (loss) per share107,911,519 107,604,578 96,356,317 94,811,282 

 2018
 Three months ended
 December 31September 30June 30March 31
Net revenues$69,674 $64,756 $61,514 $52,125 
Gross profit46,646 45,807 41,681 33,887 
Operating income (loss)(8,664)(5,246)(7,085)(12,677)
Net income (loss)(15,631)(11,694)(15,510)(20,724)
Basic and diluted net income (loss) per ordinary share$(0.17)$(0.13)$(0.17)$(0.23)
Weighted average number of ordinary shares used in computing basic and diluted net income (loss) per share93,083,298 92,911,375 91,331,862 89,985,612 
v3.20.4
Subsequent Event
12 Months Ended
Dec. 31, 2020
Subsequent Events [Abstract]  
Subsequent Event Subsequent event
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.
As a result of the early adoption of ASU 2020-06 on January 1, 2021, using the modified retrospective method, and the irrevocable election of the settlement method, the Company will eliminate the bifurcation of the debt and equity components of the Notes and the Notes will be presented, in their entirety, as a liability in long-term debt. The cumulative effect of reversing the discount amortization will be recognized as an adjustment to the opening balance of retained earnings and the convertible debt will not be included in the denominator when calculating diluted earnings per share.
v3.20.4
Basis of Presentation and Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Use of Estimates Use of estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, tax liabilities, useful-life of field equipment, right-of-use assets and lease liabilities, convertible notes, pension liabilities, revenue recognition, and share-based compensation costs. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting period. Actual results could differ from those estimates.
Financial Statements in U.S. Dollars Financial statements in U.S. dollars:
The accompanying financial statements have been prepared in U.S. dollars in thousands, except for share and per-share data.
The Company finances its operations in U.S. dollars and a substantial portion of its costs and revenues from its primary markets is incurred in U.S. dollars. As such, the Company’s management believes that the U.S. dollar is the currency of the primary economic environment in which NovoCure Limited and certain subsidiaries operate. The Company’s reporting currency is U.S. dollars.
Transactions and balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts maintained in currencies other than the U.S. dollar are re-measured into dollars in accordance with Accounting Standards Codification (ASC) No. 830-10, "Foreign Currency Matters." All transaction gains and losses of the re-measurement of monetary balance sheet items are reflected in the consolidated statements of operations as financial income or expenses, as applicable.
For a subsidiary whose functional currency has been determined to be its local currency, assets and liabilities are translated at year-end exchange rates and statement of operations items are translated at average exchange rates prevailing during the year. Such translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) in shareholders' equity.
Principles of Consolidation Principles of consolidation:The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances, including unrealized profits from intercompany sales, have been eliminated upon consolidation.
Cash Equivalents Cash equivalents:Cash equivalents are short-term, highly liquid investments that are readily convertible into cash with a maturity of three months or less at the date acquired.
Short-term investments 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 in marketable debt securities at the time of purchase and reevaluates such determinations at each balance sheet date. For the years ended December 31, 2020 and 2019, all securities are classified as held-to-maturity since the Company has the intent and ability to hold the securities to maturity and, accordingly, debt securities are stated at amortized cost.
The amortized cost of held-to-maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity and any other than temporary impairment losses. Such amortization and interest are included in the consolidated statement of operations as financial income or expenses, as appropriate.
Restricted cash Restricted cashThe Company has restricted cash used as security for the use of Company credit cards and cash management, presented in short-term assets. Additionally, the Company has pledged bank deposits to cover bank guarantees related to facility rental agreements, fleet lease agreements and customs payments presented in other long-term assets
Trade Receivables Trade receivables:The Company’s trade receivables balance contains billed and unbilled commercial activities. As needed, the Company records an allowance for doubtful accounts by reserving for specifically identified doubtful accounts. The Company periodically reviews its customers’ credit risk and payment history. To date, the Company has not experienced any material credit losses related to counter-party risk.
Inventories Inventories:Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. The Company regularly evaluates its ability to realize the value of inventory. If the inventories are deemed damaged, if actual demand for the Company’s delivery systems deteriorates, or if market conditions are less favorable than those projected, inventory write-offs may be required.
Property and Field Equipment Property and equipment:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following rates:
 %
Computers and laboratory equipment
15 - 33
Office furniture
6 - 33
Production equipment20
Leasehold improvementsOver the shorter of the term of the lease or its useful life
j. Field equipment:
Field equipment is stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful life of the field equipment, which was determined to be 18 to 36 months. Field equipment is equipment being utilized under service agreements, and accounted for in accordance with ASC 842 on
a monthly basis as an operating lease (see Note 2(x)). The Company records a write-off provision for any excess, lost or damaged equipment when warranted based on an assessment of the equipment. Write-offs for equipment are included in cost of revenues.
Impairment of Long-Lived Assets Impairment of long-lived assets:The Company’s long-lived assets are reviewed for impairment in accordance with ASC 360-10, "Property, Plant and Equipment," whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value.
Other Long-term Leases Other long-term assets:Restricted deposits and long-term lease deposits associated with office rent and vehicles under operating leases are presented in other long-term assets.
Revenue Recognition Revenue recognition:
Our Products are comprised of two main components: (1) an electric field generator and (2) arrays and related accessories. We retain title to the electric field generator, and the patient is provided replacement arrays and technical support for the device during the term of treatment. The electric field generator and arrays are always supplied and function together and are not sold on a standalone basis.
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-9, Revenue from Contracts with Customers (Topic 606) (ASU 2014-9), an updated standard on revenue recognition and issued subsequent amendments to the initial guidance in March 2016, April 2016, May 2016 and December 2016 within ASU 2016-8, 2016-10, 2016-12 and 2016-20, respectively (collectively, "ASC 606"). The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods and services to patients in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods and services. In addition, the new standard requires expanded disclosures. The Company has adopted the standard effective January 1, 2018 using the modified retrospective method for all contracts.
The Company uses the portfolio approach to apply the standard to portfolios of contracts with similar characteristics.
To recognize revenue under ASC 606, the Company applies the following five steps:  
1.Identify the contract with a patient. A contract with a patient exists when (i) the Company enters into an enforceable contract with a patient that defines each party’s rights regarding delivery of and payment for a Product, (ii) the contract has commercial substance and (iii) the Company determines that collection of substantially all consideration for such Product is probable based on the payer’s intent and ability to pay the promised consideration. The evidence of a contract generally consists of a prescription, a patient service agreement and the verification of the assigned payer for the contract and intention to collect.
2.Identify the performance obligations in the contract. Our contracts include the lease of the device, the supply obligation of disposable arrays and technical support for the term of treatment. To the extent a contract includes multiple promised products and/or services, the Company must apply judgment to determine whether those products and/or services are capable of being distinct in the context of the contract. If these criteria are not met the promised products and/or services are accounted for as a combined performance obligation. In the Company’s case, the device, support, and disposables are provided as one inseparable package of monthly treatment for a single monthly fee. For more information, see Note 2(x).
3.Determine the transaction price. The transaction price is determined based on the consideration to which the Company will be entitled in exchange for providing a Product to the patient. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or
the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. The Company has agreements with many payers that define explicit discounts off the gross transaction price. In addition to the explicit discounts negotiated with each payer, the Company expects to receive, in aggregate for a given portfolio, less than the gross revenue net of explicit discounts. ASC 606 requires that the Company recognize this variable consideration as an implicit discount in the billing period. The implicit discount includes both an estimate of claims that will pay at an amount less than billed and an estimate of claims that will not pay within a given time horizon. The implicit discount adjustments to the transaction price are due to concessions, not collectability concerns driven by payer credit risk.
4.Allocate the transaction price to performance obligations in the contract. If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. As discussed above, there is a combined performance obligation under the Company’s contracts and, therefore, the monthly transaction price determined for the performance obligation will be recognized over time ratably over the monthly term of the treatment.  
5.Recognize revenue when or as the Company satisfies a performance obligation. The Company satisfies performance obligations over time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a patient. The patient consumes the benefits of treatment on a daily basis over the monthly term. As this criterion is met, the revenues will be recognized over the monthly term. For more information, see Note 2(x).
Revenues are presented net of indirect taxes.
Charitable Care Charitable care:The Company provides treatment at no charge to patients who meet certain criteria under its charitable care po