NOVOCURE LTD, 10-Q filed on 10/31/2019
Quarterly Report
v3.19.3
Cover - shares
9 Months Ended
Sep. 30, 2019
Oct. 23, 2019
Cover page.    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2019  
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  
City Area Code 44 (0) 15  
Local Phone Number 3475 6700  
Title of 12(b) Security Ordinary Shares, no par value  
Trading Symbol NVCR  
Security Exchange Name NASDAQ  
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  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   98,968,534
Amendment Flag false  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Entity Central Index Key 0001645113  
Current Fiscal Year End Date --12-31  
v3.19.3
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
CURRENT ASSETS:    
Cash and cash equivalents $ 208,034 $ 140,622
Short-term investments 104,565 105,256
Restricted cash 2,134 2,134
Trade receivables 49,904 36,523
Receivables and prepaid expenses 17,917 14,279
Inventories 24,388 22,555
Total current assets 406,942 321,369
LONG-TERM ASSETS:    
Property and equipment, net 8,425 8,442
Field equipment, net 8,139 6,924
Right-of-use assets, net 14,635 0
Other long-term assets 5,717 3,058
Total long-term assets 36,916 18,424
TOTAL ASSETS 443,858 339,793
CURRENT LIABILITIES:    
Trade payables 31,998 26,708
Other payables, lease liabilities and accrued expenses 48,407 37,852
Total current liabilities 80,405 64,560
LONG-TERM LIABILITIES:    
Long-term loan, net of discount and issuance costs 149,384 149,268
Deferred revenue 8,341 9,929
Employee benefits 3,701 2,683
Long-term leases 11,367 0
Other long-term liabilities 295 1,094
Total long-term liabilities 173,088 162,974
TOTAL LIABILITIES 253,493 227,534
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:    
Ordinary shares no par value, unlimited shares authorized; issued and outstanding: 98,948,935 shares and 93,254,185 shares at September 30, 2019 (unaudited) and December 31, 2018, respectively 0 0
Additional paid-in capital 848,151 757,314
Accumulated other comprehensive income (loss) (2,641) (1,400)
Retained earnings (accumulated deficit) (655,145) (643,655)
TOTAL SHAREHOLDERS' EQUITY 190,365 112,259
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 443,858 $ 339,793
v3.19.3
CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares
Sep. 30, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Common stock, shares issued 98,948,935 93,254,185
Common stock, shares outstanding 98,948,935 93,254,185
v3.19.3
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Dec. 31, 2018
Income Statement [Abstract]          
Net revenues $ 92,062 $ 64,756 $ 252,084 $ 178,395 $ 248,069
Cost of revenues 22,900 18,949 63,820 57,020 80,048
Gross profit 69,162 45,807 188,264 121,375 168,021
Operating costs and expenses:          
Research, development and clinical trials 18,766 13,074 55,262 35,540 50,574
Sales and marketing 23,830 19,124 69,871 56,455 77,663
General and administrative 22,711 18,855 64,198 54,388 73,456
Total operating costs and expenses 65,307 51,053 189,331 146,383 201,693
Operating income (loss) 3,855 (5,246) (1,067) (25,008) (33,672)
Financial expenses (income), net 2,555 2,397 6,165 10,110 12,270
Income (loss) before income taxes 1,300 (7,643) (7,232) (35,118) (45,942)
Income taxes (630) 4,051 4,258 12,810 17,617
Net income (loss) $ 1,930 $ (11,694) $ (11,490) $ (47,928) $ (63,559)
Basic net income (loss) per ordinary share (in usd per share) $ 0.02 $ (0.13) $ (0.12) $ (0.52) $ (0.69)
Weighted average number of ordinary shares used in computing basic net income (loss) per share (in shares) 98,485,519 92,911,375 96,551,041 91,409,619 91,828,043
Diluted net income (loss) per ordinary share (in usd per share) $ 0.02 $ (0.13) $ (0.12) $ (0.52) $ (0.69)
Weighted average number of ordinary shares used in computing diluted net income (loss) per share (in shares) 107,604,578 92,911,375 96,551,041 91,409,619 91,828,043
v3.19.3
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Dec. 31, 2018
Statement of Comprehensive Income [Abstract]          
Net income (loss) $ 1,930 $ (11,694) $ (11,490) $ (47,928) $ (63,559)
Other comprehensive income (loss), net of tax:          
Change in foreign currency translation adjustments (216) (2) (430) 19 27
Pension benefit plan (68) 147 (811) 197 (84)
Total comprehensive income (loss) $ 1,646 $ (11,549) $ (12,731) $ (47,712) $ (63,616)
v3.19.3
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($)
$ in Thousands
Total
Ordinary shares
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings (accumulated deficit)
Beginning balance at Dec. 31, 2017 $ 113,564   $ 697,165 $ (1,343) $ (582,258)
Beginning balance (in shares) at Dec. 31, 2017   89,478,032      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Share-based compensation to employees 8,520   8,520    
Exercise of options and warrants and vested RSUs 2,581   2,581    
Exercise of options and warrants and vested RSUs (in shares)   920,869      
Cumulative effect adjustment on retained earnings [1] 2,162       2,162
Other comprehensive income (loss), net of tax benefit 15     15  
Net income (loss) (20,724)       (20,724)
Ending balance at Mar. 31, 2018 106,118   708,266 (1,328) (600,820)
Ending balance (in shares) at Mar. 31, 2018   90,398,901      
Beginning balance at Dec. 31, 2017 113,564   697,165 (1,343) (582,258)
Beginning balance (in shares) at Dec. 31, 2017   89,478,032      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) (47,928)        
Ending balance at Sep. 30, 2018 114,936   744,087 (1,127) (628,024)
Ending balance (in shares) at Sep. 30, 2018   93,007,844      
Beginning balance at Dec. 31, 2017 113,564   697,165 (1,343) (582,258)
Beginning balance (in shares) at Dec. 31, 2017   89,478,032      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) (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      
Beginning balance at Mar. 31, 2018 106,118   708,266 (1,328) (600,820)
Beginning balance (in shares) at Mar. 31, 2018   90,398,901      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Share-based compensation to employees 10,206   10,206    
Proceeds from issuance of shares 938   938    
Proceeds from issuance of shares (in shares)   54,386      
Exercise of options and warrants and vested RSUs 10,274   10,274    
Exercise of options and warrants and vested RSUs (in shares)   2,049,986      
Other comprehensive income (loss), net of tax benefit 55     55  
Net income (loss) (15,510)       (15,510)
Ending balance at Jun. 30, 2018 112,081   729,684 (1,273) (616,330)
Ending balance (in shares) at Jun. 30, 2018   92,503,273      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Share-based compensation to employees 10,479   10,479    
Exercise of options and warrants and vested RSUs 3,924   3,924    
Exercise of options and warrants and vested RSUs (in shares)   504,571      
Other comprehensive income (loss), net of tax benefit 146     146  
Net income (loss) (11,694)       (11,694)
Ending balance at Sep. 30, 2018 114,936   744,087 (1,127) (628,024)
Ending balance (in shares) at Sep. 30, 2018   93,007,844      
Beginning balance at Dec. 31, 2018 112,259   757,314 (1,400) (643,655)
Beginning balance (in shares) at Dec. 31, 2018   93,254,185      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Share-based compensation to employees 9,649   9,649    
Exercise of options and warrants and vested RSUs 16,978   16,978    
Exercise of options and warrants and vested RSUs (in shares)   2,438,612      
Other comprehensive income (loss), net of tax benefit (342)     (342)  
Net income (loss) (12,150)       (12,150)
Ending balance at Mar. 31, 2019 126,394   783,941 (1,742) (655,805)
Ending balance (in shares) at Mar. 31, 2019   95,692,797      
Beginning balance at Dec. 31, 2018 112,259   757,314 (1,400) (643,655)
Beginning balance (in shares) at Dec. 31, 2018   93,254,185      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) (11,490)        
Ending balance at Sep. 30, 2019 190,365   848,151 (2,641) (655,145)
Ending balance (in shares) at Sep. 30, 2019   98,948,935      
Beginning balance at Mar. 31, 2019 126,394   783,941 (1,742) (655,805)
Beginning balance (in shares) at Mar. 31, 2019   95,692,797      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Share-based compensation to employees 13,732   13,732    
Proceeds from issuance of shares 1,208   1,208    
Proceeds from issuance of shares (in shares)   43,421      
Exercise of options and warrants and vested RSUs 19,457   19,457    
Exercise of options and warrants and vested RSUs (in shares)   2,122,658      
Other comprehensive income (loss), net of tax benefit (615)     (615)  
Net income (loss) (1,270)       (1,270)
Ending balance at Jun. 30, 2019 158,906   818,338 (2,357) (657,075)
Ending balance (in shares) at Jun. 30, 2019   97,858,876      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Share-based compensation to employees 14,338   14,338    
Exercise of options and warrants and vested RSUs 15,475   15,475    
Exercise of options and warrants and vested RSUs (in shares)   1,090,059      
Other comprehensive income (loss), net of tax benefit (284)     (284)  
Net income (loss) 1,930       1,930
Ending balance at Sep. 30, 2019 $ 190,365   $ 848,151 $ (2,641) $ (655,145)
Ending balance (in shares) at Sep. 30, 2019   98,948,935      
[1] Resulting from the adoption of ASC 606.
v3.19.3
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]            
Other comprehensive income (loss), tax $ (11) $ (69) $ (11) $ (11) $ (3) $ (5)
v3.19.3
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Dec. 31, 2018
Cash flows from operating activities:          
Net income (loss) $ 1,930 $ (11,694) $ (11,490) $ (47,928) $ (63,559)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:          
Depreciation and amortization 1,932 2,311 5,993 6,801 9,006
Asset write-downs and impairment of field equipment 78 178 239 320 407
Amortization of discount (premium) (547) (555) (1,712) 1,502 1,022
Share-based compensation to employees 14,338 10,479 37,719 29,205 39,846
Decrease (increase) in accounts receivables (9,986) 3,577 (17,020) (4,805) (10,325)
Decrease (increase) in inventories 1,067 (1,735) (1,832) 385 (529)
Increase (decrease) in accounts payable and accrued expenses 6,433 2,839 10,902 (2,760) 13,713
Decrease (increase) in other long-term assets 1,069 155 1,151 (743) (949)
Increase (decrease) in other long-term liabilities (1,407) 83 (4,292) (656) 9,503
Net cash provided by (used in) operating activities 14,907 5,638 19,658 (18,679) (1,865)
Cash flows from investing activities:          
Purchase of property, equipment and field equipment (2,708) (1,353) (7,430) (4,918) (6,711)
Proceeds from maturity of short-term investments 105,000 45,000 315,661 150,000 255,000
Purchase of short-term investments (104,466) (44,652) (313,142) (148,786) (253,782)
Net cash provided by (used in) investing activities (2,174) (1,005) (4,911) (3,704) (5,493)
Cash flows from financing activities:          
Proceeds from issuance of shares, net 0 0 1,208 938 1,835
Proceeds from long-term loan, net 0 0 0 149,150 149,150
Repayment of long-term loan (7) (22) (23) (100,063) (100,084)
Exercise of options and warrants 15,475 3,924 51,910 16,779 18,468
Net cash provided by (used in) financing activities 15,468 3,902 53,095 66,804 69,369
Effect of foreign currency translation (216) (2) (430) 19 27
Increase (decrease) in cash, cash equivalents and restricted cash 27,985 8,533 67,412 44,440 62,038
Cash, cash equivalents and restricted cash at the beginning of the period 182,183 116,625 142,756 80,718 80,718
Cash, cash equivalents and restricted cash at the end of the period 210,168 125,158 210,168 125,158 142,756
Cash paid during the period for:          
Income taxes 3,040 4,145 10,431 16,159 20,350
Interest 3,453 3,454 10,247 9,879 13,334
Non-cash activities in accordance with of ASC-842:          
Right-of-use assets obtained in exchange for lease obligations $ 1,062 $ 0 $ 18,335 $ 0 $ 0
v3.19.3
Organization and Basis of Presentation
9 Months Ended
Sep. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Basis of Presentation ORGANIZATION AND BASIS OF PRESENTATION
Organization. NovoCure Limited (including its consolidated subsidiaries, the “Company”) was incorporated in the Bailiwick of Jersey and is principally engaged in the development, manufacture and commercialization of Tumor Treating Fields delivery systems, including Optune and NovoTTF-100L, for the treatment of solid tumors. The Company has received regulatory approval from the U.S. Food and Drug Administration (“FDA”) under the Premarket Approval pathway and regulatory approvals and clearances in certain other countries for Optune to treat adult patients with GBM.  The Company also has received FDA approval under the Humanitarian Device Exemption pathway to market NovoTTF-100L for unresectable, locally advanced or metastatic MPM in combination with standard chemotherapies.
Financial statement preparation. The accompanying consolidated financial statements include the accounts of the Company and intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation for the periods presented. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. These consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “2018 10-K”) filed with the Securities and Exchange Commission on February 28, 2019.
The significant accounting policies applied in the audited annual consolidated financial statements of the Company as disclosed in the 2018 10-K are applied consistently in these unaudited interim consolidated financial statements, except as noted below:
Recently Adopted Accounting Pronouncements. In 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which amends the existing standards for lease accounting, requiring lessees to recognize most leases on their balance sheets. The new standard establishes a right-of-use model that requires a lessee to recognize a right-of-use asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating. The standard is effective for interim and annual reporting periods beginning after December 15, 2018.
The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. In July 2018, the FASB issued ASU No. 2018-11, “Targeted Improvements - Leases (Topic 842)” (together with ASU 2016-02, “ASC 842”). This update provides an additional (and optional) transition method to adopt the new leases standard. Under this method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the prior comparative period’s financials will remain the same as those previously presented. The Company adopted the new standard as of January 1, 2019 and it has also elected to adopt the package of practical expedients permitted in ASC 842.
ASC 842 provides lessors with a 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 (Topic 606). Our product supply agreements include the right to use the device (lease component), the supply obligation of disposable transducer arrays and technical support for the term of treatment (non-lease component). As the non-lease component(s) associated with the lease component is the predominant component of the combined component, the Company accounts for the combined component in accordance with Topic 606.
The consolidated financial statements for the three and nine months ended September 30, 2019 are presented under the new standard, while comparative year and other periods presented are not adjusted and continue to be reported in accordance with Topic 840, Leases.
v3.19.3
Cash, Cash Equivalents and Short-Term Investments
9 Months Ended
Sep. 30, 2019
Cash, Cash Equivalents, and Short-term Investments [Abstract]  
Cash, Cash Equivalents and Short-Term investments CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
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.
September 30,
2019
December 31,
2018
UnauditedAudited
Cash$5,851  $9,197  
Money market funds202,183  131,425  
Total cash and cash equivalents$208,034  $140,622  
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.
September 30,
2019
December 31,
2018
 UnauditedAudited
Short-term investments$104,565  $105,256  
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 the Company’s short-term investments as of September 30, 2019 and December 31, 2018 was $104,613 and $105,266, respectively.
v3.19.3
Inventories
9 Months Ended
Sep. 30, 2019
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. As of September 30, 2019 and December 31, 2018, the Company’s inventories were composed of:
September 30,
2019
December 31,
2018
 UnauditedAudited
Raw materials$3,077  $870  
Work in progress9,860  8,667  
Finished products11,451  13,018  
Total$24,388  $22,555  
v3.19.3
Commitments Rights of Use and Contingent Liabilities
9 Months Ended
Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments, Rights of Use and Contingent Liabilities COMMITMENTS, RIGHTS OF USE AND CONTINGENT LIABILITIES
Operating Leases and Rights of Use. The facilities of the Company are leased under various operating lease agreements for periods, including options for extensions, ending no later than 2029. The Company also leases motor vehicles under various operating leases, which expire on various dates, the latest of which is in 2022.
Under ASC 842, all leases with durations greater than 12 months, including non-cancelable operating leases, are now 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. Lease and rental payments for the nine months ended September 30, 2019, totaled $3,799. Future minimum lease payments under non-cancelable operating leases as of September 30, 2019, are as follows:
September 30,
2019
Unaudited
Future minimum lease payments:
2019 (remainder of the year)$1,146  
20204,519  
20214,193  
20223,130  
20231,933  
Thereafter3,651  
Total future minimum lease payments$18,572  
Less imputed interest(2,956) 
Net present value of future minimum lease payments$15,616  
 
Presented as of September 30, 2019:
Short-term lease liabilities$4,249  
Long-term lease liabilities11,367  
Net present value of future minimum lease payments$15,616  
Weighted average of remaining operating lease term4.85
Weighted average of operating lease discount rate7.51%  
Pledged deposits and bank guarantees. As of September 30, 2019 and December 31, 2018, the Company pledged bank deposits of $1,325 and $1,143, respectively, to cover bank guarantees in respect of its leases of operating facilities and obtained bank guarantees for the fulfillment of the Company’s lease and other contractual commitments of $1,491 and $1,299, respectively.
v3.19.3
Share Capital
9 Months Ended
Sep. 30, 2019
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract]  
Share Capital SHARE CAPITAL
In September 2015, the Company adopted the 2015 Omnibus Incentive Plan (the “2015 Plan”). Under the 2015 Plan, the Company can issue various types of equity compensation awards such as share options, restricted shares, performance shares, restricted stock units (“RSUs”), performance units, long-term cash awards and other share-based awards.
Options granted under the 2015 Plan generally have a four-year vesting period and expire ten years after the date of grant. Options granted under the 2015 Plan that are canceled or forfeited before expiration become available for future grants. RSUs granted under the 2015 Plan generally vest over a three-year period. RSUs granted under the 2015 Plan that are canceled before expiration become available for future grants. As of September 30, 2019, 11,915,754 ordinary shares were available for grant under the 2015 Plan.
A summary of the status of the Company’s option plans as of September 30, 2019 and changes during the period then ended is presented below: 
Nine months ended September 30, 2019
Unaudited
Number
of options
Weighted
average
exercise
price
Outstanding at beginning of year14,438,215  $13.56  
Granted1,496,161  49.43  
Exercised(4,914,918) 10.55  
Forfeited and canceled(144,403) 19.91  
Outstanding as of September 30, 201910,875,055  $19.77  
Exercisable options3,444,478  $14.61  
For the nine months, ended September 30, 2019, options to purchase 4,914,918 ordinary shares were exercised, resulting in the issuance of 4,914,918 ordinary shares.
A summary of the status of the Company’s RSUs as of September 30, 2019 and changes during the period then ended is presented below: 
Nine months ended September 30, 2019
Unaudited
Number
of RSUs
Weighted
average
grant date fair value
price
Unvested at beginning of year1,613,197  14.04  
Granted597,583  50.71  
Vested(736,411) 13.36  
Forfeited and cancelled(24,356) 34.32  
Unvested as of September 30, 20191,450,013  29.16  
In September 2015, the Company adopted an employee share purchase plan (“ESPP”) to encourage and enable eligible employees to acquire ownership of the Company’s ordinary shares purchased through accumulated payroll deductions on an after-tax basis. In the United States, the ESPP is intended to be an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code and the provisions of the ESPP are construed in a manner consistent with the requirements of such section. As of September 30, 2019, 3,078,989 ordinary shares were available to be purchased by eligible employees under the ESPP and 390,614 shares had been issued 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. We assessed fair value using the following underlying assumptions: 
Nine months ended September 30,Year ended December 31,
2018
20192018
UnauditedAudited
Stock Option Plans
Expected term (years)
5.50-6.50
5.50-6.25
5.50-6.25
Expected volatility
55%-61%
52%-55%
52%-55%
Risk-free interest rate
1.90%-2.40%
2.70%-2.89%
2.70%-2.99%
Dividend yield0.00 %0.00 %0.00 %
ESPP
Expected term (years)0.500.500.50
Expected volatility
44%-62%
45%-53%
45%-53%
Risk-free interest rate
2.10%-2.51%
1.61%-2.14%
1.61%-2.14%
Dividend yield0.00 %0.00 %0.00 %
The total non-cash share-based compensation expense related to all of the Company’s equity-based awards recognized for the three and nine months ended September 30, 2019 and 2018 and the year ended December 31, 2018 was:
Three months ended September 30,Nine months ended September 30,Year ended December 31,
2018
2019201820192018
UnauditedUnauditedAudited
Cost of revenues$605  $464  $1,626  $891  $1,261  
Research, development and clinical trials2,202  1,223  5,203  3,415  4,709  
Sales and marketing3,368  1,979  8,585  5,309  7,393  
General and administrative8,163  6,813  22,305  19,590  26,483  
Total share-based compensation expense$14,338  $10,479  $37,719  $29,205  $39,846  
v3.19.3
Earnings Per Share
9 Months Ended
Sep. 30, 2019
Earnings Per Share [Abstract]  
Earnings Per Share EARNINGS 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. Basic and diluted net loss per ordinary share was the same for each period presented, except for the three months ended September 30, 2019, as the inclusion of all potential dilutive shares (deriving from options, RSUs and the ESPP) outstanding would be anti-dilutive.
The calculation of diluted earnings per share includes the weighted average of potentially dilutive securities, which consists of ordinary shares underlying outstanding share options, RSUs and the ESPP. The effect of these dilutive securities under the treasury stock method was approximately 9,119,059 shares for the three months ended September 30, 2019.
The Company excluded 57,782 share options from the computation of dilutive net income per share for the three months ended September 30, 2019 because including them would had have an anti-dilutive effect.
v3.19.3
Supplemental Information
9 Months Ended
Sep. 30, 2019
Geographic Areas, Long-Lived Assets [Abstract]  
Supplemental Information SUPPLEMENTAL INFORMATION
The Company operates in a single reportable segment.
The following table presents long-lived assets by location:
September 30,
2019
December 31,
2018
 UnauditedAudited
United States$8,170  $8,289  
Switzerland3,695  2,513  
Israel2,393  2,236  
Germany778  1,054  
Others1,528  1,274  
Total$16,564  $15,366  
The Company’s revenues by geographic region, based on the customer’s location, are summarized as follows:
Three months ended September 30,Nine months ended September 30,Year ended December 31,
2018
2019201820192018
UnauditedUnauditedAudited
United States$61,399  $44,469  $166,937  $124,206  $168,414  
EMEA (*)24,482  18,295  69,507  50,692  72,485  
Japan4,779  1,992  12,334  3,497  6,351  
Greater China (1)1,402  —  3,306  —  819  
Total$92,062  $64,756  $252,084  $178,395  $248,069  

(*) including Germany$21,688  $17,536  $64,065  $48,545  $67,849  

(1) Reflects revenue recognized in accordance with a License and Collaboration Agreement between us and Zai Lab (Shanghai) Co., Ltd. (“Zai”), dated September 10, 2018, pursuant to which Zai is commercializing Optune in China, Hong Kong, Macau and Taiwan (referred to in this table as “Greater China”). For additional information, see Note 12 to the Consolidated Financial Statements in our 2018 10-K.
v3.19.3
Organization and Basis of Presentation (Policies)
9 Months Ended
Sep. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Recently Adopted Accounting Pronouncements
Recently Adopted Accounting Pronouncements. In 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which amends the existing standards for lease accounting, requiring lessees to recognize most leases on their balance sheets. The new standard establishes a right-of-use model that requires a lessee to recognize a right-of-use asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating. The standard is effective for interim and annual reporting periods beginning after December 15, 2018.
The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. In July 2018, the FASB issued ASU No. 2018-11, “Targeted Improvements - Leases (Topic 842)” (together with ASU 2016-02, “ASC 842”). This update provides an additional (and optional) transition method to adopt the new leases standard. Under this method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the prior comparative period’s financials will remain the same as those previously presented. The Company adopted the new standard as of January 1, 2019 and it has also elected to adopt the package of practical expedients permitted in ASC 842.
ASC 842 provides lessors with a 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 (Topic 606). Our product supply agreements include the right to use the device (lease component), the supply obligation of disposable transducer arrays and technical support for the term of treatment (non-lease component). As the non-lease component(s) associated with the lease component is the predominant component of the combined component, the Company accounts for the combined component in accordance with Topic 606.
The consolidated financial statements for the three and nine months ended September 30, 2019 are presented under the new standard, while comparative year and other periods presented are not adjusted and continue to be reported in accordance with Topic 840, Leases.
v3.19.3
Cash, Cash Equivalents and Short-Term Investments (Tables)
9 Months Ended
Sep. 30, 2019
Cash, Cash Equivalents, and Short-term Investments [Abstract]  
Summary of 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.
September 30,
2019
December 31,
2018
UnauditedAudited
Cash$5,851  $9,197  
Money market funds202,183  131,425  
Total cash and cash equivalents$208,034  $140,622  
Summary of Amortized Cost and Recorded Basis of T-bills in 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.
September 30,
2019
December 31,
2018
 UnauditedAudited
Short-term investments$104,565  $105,256  
v3.19.3
Inventories (Tables)
9 Months Ended
Sep. 30, 2019
Inventory Disclosure [Abstract]  
Schedule of Inventories
Inventories are stated at the lower of cost or net realizable value. The weighted average methodology is applied to determine cost. As of September 30, 2019 and December 31, 2018, the Company’s inventories were composed of:
September 30,
2019
December 31,
2018
 UnauditedAudited
Raw materials$3,077  $870  
Work in progress9,860  8,667  
Finished products11,451  13,018  
Total$24,388  $22,555  
v3.19.3
Commitments Rights of Use and Contingent Liabilities (Tables)
9 Months Ended
Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Schedule of Future Minimum Lease Payments under Non-Cancelable Operating Lease Future minimum lease payments under non-cancelable operating leases as of September 30, 2019, are as follows:
September 30,
2019
Unaudited
Future minimum lease payments:
2019 (remainder of the year)$1,146  
20204,519  
20214,193  
20223,130  
20231,933  
Thereafter3,651  
Total future minimum lease payments$18,572  
Less imputed interest(2,956) 
Net present value of future minimum lease payments$15,616  
 
Presented as of September 30, 2019:
Short-term lease liabilities$4,249  
Long-term lease liabilities11,367  
Net present value of future minimum lease payments$15,616  
Weighted average of remaining operating lease term4.85
Weighted average of operating lease discount rate7.51%  
v3.19.3
Share Capital (Tables)
9 Months Ended
Sep. 30, 2019
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract]  
Schedule of Stock Option Plans
A summary of the status of the Company’s option plans as of September 30, 2019 and changes during the period then ended is presented below: 
Nine months ended September 30, 2019
Unaudited
Number
of options
Weighted
average
exercise
price
Outstanding at beginning of year14,438,215  $13.56  
Granted1,496,161  49.43  
Exercised(4,914,918) 10.55  
Forfeited and canceled(144,403) 19.91  
Outstanding as of September 30, 201910,875,055  $19.77  
Exercisable options3,444,478  $14.61  
Schedule of RSU's
A summary of the status of the Company’s RSUs as of September 30, 2019 and changes during the period then ended is presented below: 
Nine months ended September 30, 2019
Unaudited
Number
of RSUs
Weighted
average
grant date fair value
price
Unvested at beginning of year1,613,197  14.04  
Granted597,583  50.71  
Vested(736,411) 13.36  
Forfeited and cancelled(24,356) 34.32  
Unvested as of September 30, 20191,450,013  29.16  
Schedule of Fair Value Assumptions Used for All Equity Based Awards Estimated Using Black-Scholes Option Pricing Model
The fair value of share-based awards was estimated using the Black-Scholes model for all equity grants. For market condition awards, the Company also applied the Monte-Carlo simulation model. We assessed fair value using the following underlying assumptions: 
Nine months ended September 30,Year ended December 31,
2018
20192018
UnauditedAudited
Stock Option Plans
Expected term (years)
5.50-6.50
5.50-6.25
5.50-6.25
Expected volatility
55%-61%
52%-55%
52%-55%
Risk-free interest rate
1.90%-2.40%
2.70%-2.89%
2.70%-2.99%
Dividend yield0.00 %0.00 %0.00 %
ESPP
Expected term (years)0.500.500.50
Expected volatility
44%-62%
45%-53%
45%-53%
Risk-free interest rate
2.10%-2.51%
1.61%-2.14%
1.61%-2.14%
Dividend yield0.00 %0.00 %0.00 %
Schedule of Non-cash Share-based Compensation Expense Related to Company's Equity-Based Awards
The total non-cash share-based compensation expense related to all of the Company’s equity-based awards recognized for the three and nine months ended September 30, 2019 and 2018 and the year ended December 31, 2018 was:
Three months ended September 30,Nine months ended September 30,Year ended December 31,
2018
2019201820192018
UnauditedUnauditedAudited
Cost of revenues$605  $464  $1,626  $891  $1,261  
Research, development and clinical trials2,202  1,223  5,203  3,415  4,709  
Sales and marketing3,368  1,979  8,585  5,309  7,393  
General and administrative8,163  6,813  22,305  19,590  26,483  
Total share-based compensation expense$14,338  $10,479  $37,719  $29,205  $39,846  
v3.19.3
Supplemental Information (Tables)
9 Months Ended
Sep. 30, 2019
Geographic Areas, Long-Lived Assets [Abstract]  
Schedule of Long-Lived Assets by Location The following table presents long-lived assets by location:
September 30,
2019
December 31,
2018
 UnauditedAudited
United States$8,170  $8,289  
Switzerland3,695  2,513  
Israel2,393  2,236  
Germany778  1,054  
Others1,528  1,274  
Total$16,564  $15,366  
Schedule of Revenues by Geographic Region
The Company’s revenues by geographic region, based on the customer’s location, are summarized as follows:
Three months ended September 30,Nine months ended September 30,Year ended December 31,
2018
2019201820192018
UnauditedUnauditedAudited
United States$61,399  $44,469  $166,937  $124,206  $168,414  
EMEA (*)24,482  18,295  69,507  50,692  72,485  
Japan4,779  1,992  12,334  3,497  6,351  
Greater China (1)1,402  —  3,306  —  819  
Total$92,062  $64,756  $252,084  $178,395  $248,069  

(*) including Germany$21,688  $17,536  $64,065  $48,545  $67,849  

(1) Reflects revenue recognized in accordance with a License and Collaboration Agreement between us and Zai Lab (Shanghai) Co., Ltd. (“Zai”), dated September 10, 2018, pursuant to which Zai is commercializing Optune in China, Hong Kong, Macau and Taiwan (referred to in this table as “Greater China”). For additional information, see Note 12 to the Consolidated Financial Statements in our 2018 10-K.
v3.19.3
Cash, Cash Equivalents and Short-Term Investments - Summary of Cash and Cash Equivalents (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Cash, Cash Equivalents, and Short-term Investments [Abstract]    
Cash $ 5,851 $ 9,197
Money market funds 202,183 131,425
Total cash and cash equivalents $ 208,034 $ 140,622
v3.19.3
Cash, Cash Equivalents and Short-Term Investments - Summary of Amortized Cost And Recorded Basis of T-bills in Short Term Investments (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Cash, Cash Equivalents, and Short-term Investments [Abstract]    
Short-term investments $ 104,565 $ 105,256
v3.19.3
Cash, Cash Equivalents and Short-Term Investments - Additional Information (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Cash, Cash Equivalents, and Short-term Investments [Abstract]    
Estimated fair value of short-term investments $ 104,613 $ 105,266
v3.19.3
Inventories - Schedule of Inventories (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Inventory Disclosure [Abstract]    
Raw materials $ 3,077 $ 870
Work in progress 9,860 8,667
Finished products 11,451 13,018
Total $ 24,388 $ 22,555
v3.19.3
Commitments, Rights of Use and Contingent Liabilities - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Jan. 01, 2019
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]            
Increase in right-of-use assets obtained in exchange for lease obligations $ 15,733 $ 1,062 $ 0 $ 18,335 $ 0 $ 0
Lease and rental payments       3,799    
Operating lease and other contractual commitments   1,491   1,491   1,299
Pledged bank deposits   $ 1,325   $ 1,325   $ 1,143
v3.19.3
Commitments, Rights of Use and Contingent Liabilities - Schedule of Future Minimum Lease Payments under Non-Cancelable Operating Lease (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Future minimum lease payments:    
2019 (remainder of the year) $ 1,146  
2020 4,519  
2021 4,193  
2022 3,130  
2023 1,933  
Thereafter 3,651  
Total future minimum lease payments 18,572  
Less imputed interest (2,956)  
Net present value of future minimum lease payments 15,616  
Short-term lease liabilities 4,249  
Long-term lease liabilities 11,367 $ 0
Net present value of future minimum lease payments $ 15,616  
Weighted average of remaining operating lease term (in years) 4 years 10 months 6 days  
Weighted average of operating lease discount rate (in percentage) 7.51%  
v3.19.3
Share Capital - Additional Information (Details)
9 Months Ended
Sep. 30, 2019
shares
Share Capital [Line Items]  
Options exercised (in shares) 4,914,918
Ordinary shares issued upon option exercise (in shares) 4,914,918
ESPP  
Share Capital [Line Items]  
Ordinary shares available for grants (in shares) 3,078,989
Shares issued under plan (in shares) 390,614
2015 Plan  
Share Capital [Line Items]  
Ordinary shares available for grants (in shares) 11,915,754
2015 Plan | Option  
Share Capital [Line Items]  
Stock awards granted, vesting period (years) 4 years
Stock awards granted, expiration period (years) 10 years
2015 Plan | RSUs  
Share Capital [Line Items]  
Stock awards granted, vesting period (years) 3 years
v3.19.3
Share Capital - Schedule of Stock Option Plan (Details)
9 Months Ended
Sep. 30, 2019
$ / shares
shares
Number of options  
Number of options, beginning outstanding (in shares) | shares 14,438,215
Number of options, granted (in shares) | shares 1,496,161
Number of options, exercised (in shares) | shares (4,914,918)
Number of options, forfeited and canceled (in shares) | shares (144,403)
Number of options, ending outstanding (in shares) | shares 10,875,055
Number of options, exercisable options (in shares) | shares 3,444,478
Weighted average exercise price  
Weighted average exercise price, beginning outstanding (in usd per share) | $ / shares $ 13.56
Weighted average exercise price, granted (in usd per share) | $ / shares 49.43
Weighted average exercise price, exercised (in usd per share) | $ / shares 10.55
Weighted average exercise price, forfeited and canceled (in usd per share) | $ / shares 19.91
Weighted average exercise price, ending outstanding (in usd per share) | $ / shares 19.77
Weighted average exercise price, exercisable options (in usd per share) | $ / shares $ 14.61
v3.19.3
Share Capital - Schedule of RSU's (Details) - RSUs
9 Months Ended
Sep. 30, 2019
$ / shares
shares
Number of RSUs  
Number of RSUs, beginning unvested (in shares) | shares 1,613,197
Number of RSUs, granted (in shares) | shares 597,583
Number of RSUs, vested (in shares) | shares (736,411)
Number of RSUs, forfeited and cancelled (in shares) | shares (24,356)
Number of RSUs, ending unvested (in shares) | shares 1,450,013
Weighted average grant date fair value price  
Weighted average grant date fair value price, beginning unvested (in usd per share) | $ / shares $ 14.04
Weighted average grant date fair value price, granted (in usd per share) | $ / shares 50.71
Weighted average grant date fair value price, vested (in usd per share) | $ / shares 13.36
Weighted average grant date fair value price, forfeited and cancelled (in usd per share) | $ / shares 34.32
Weighted average grant date fair value price, ending unvested (in usd per share) | $ / shares $ 29.16
v3.19.3
Share Capital - Schedule of Fair Value Assumptions Used Only for Equity Based Awards Estimated Using Black-Scholes Option Pricing Model (Details)
9 Months Ended 12 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Dec. 31, 2018
Stock Option Plans      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Expected volatility, minimum 55.00% 52.00% 52.00%
Expected volatility, maximum 61.00% 55.00% 55.00%
Risk-free interest rate, minimum 1.90% 2.70% 2.70%
Risk-free interest rate, maximum 2.40% 2.89% 2.99%
Dividend yield 0.00% 0.00% 0.00%
Stock Option Plans | Minimum      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Expected term (years) 5 years 6 months 5 years 6 months 5 years 6 months
Stock Option Plans | Maximum      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Expected term (years) 6 years 6 months 6 years 3 months 6 years 3 months
ESPP      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Expected term (years) 6 months 6 months 6 months
Expected volatility, minimum 44.00% 45.00% 45.00%
Expected volatility, maximum 62.00% 53.00% 53.00%
Risk-free interest rate, minimum 2.10% 1.61% 1.61%
Risk-free interest rate, maximum 2.51% 2.14% 2.14%
Dividend yield 0.00% 0.00% 0.00%
v3.19.3
Share Capital - Schedule of Non-cash Share-Based Compensation Expenses Related to Company's Equity-Based Awards (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Total share-based compensation expense $ 14,338 $ 10,479 $ 37,719 $ 29,205 $ 39,846
Cost of revenues          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Total share-based compensation expense 605 464 1,626 891 1,261
Research, development and clinical trials          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Total share-based compensation expense 2,202 1,223 5,203 3,415 4,709
Sales and marketing          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Total share-based compensation expense 3,368 1,979 8,585 5,309 7,393
General and administrative          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Total share-based compensation expense $ 8,163 $ 6,813 $ 22,305 $ 19,590 $ 26,483
v3.19.3
Earnings Per Share (Details) - Additional Information (Details)
3 Months Ended
Sep. 30, 2019
shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]  
Effect of dilutive shares (in shares) 9,119,059
Stock Option Plans  
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]  
Potentially dilutive share options (in shares) 57,782
v3.19.3
Supplemental Information - Schedule of Long-Lived Assets by Location (Details) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Revenues from External Customers and Long-Lived Assets [Line Items]    
Long-lived assets $ 16,564 $ 15,366
United States    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Long-lived assets 8,170 8,289
Switzerland    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Long-lived assets 3,695 2,513
Israel    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Long-lived assets 2,393 2,236
Germany    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Long-lived assets 778 1,054
Others    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Long-lived assets $ 1,528 $ 1,274
v3.19.3
Supplemental Information - Schedule of Revenues by Geographic Region (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Dec. 31, 2018
Revenues from External Customers and Long-Lived Assets [Line Items]          
Net revenues $ 92,062 $ 64,756 $ 252,084 $ 178,395 $ 248,069
United States          
Revenues from External Customers and Long-Lived Assets [Line Items]          
Net revenues 61,399 44,469 166,937 124,206 168,414
EMEA          
Revenues from External Customers and Long-Lived Assets [Line Items]          
Net revenues 24,482 18,295 69,507 50,692 72,485
Japan          
Revenues from External Customers and Long-Lived Assets [Line Items]          
Net revenues 4,779 1,992 12,334 3,497 6,351
Greater China          
Revenues from External Customers and Long-Lived Assets [Line Items]          
Net revenues 1,402 0 3,306 0 819
Germany          
Revenues from External Customers and Long-Lived Assets [Line Items]          
Net revenues $ 21,688 $ 17,536 $ 64,065 $ 48,545 $ 67,849