NOVOCURE LTD, 10-Q filed on 10/26/2017
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2017
Oct. 19, 2017
Document Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2017 
 
Document Fiscal Year Focus
2017 
 
Document Fiscal Period Focus
Q3 
 
Trading Symbol
NVCR 
 
Entity Registrant Name
Novocure Ltd 
 
Entity Central Index Key
0001645113 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
89,363,835 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
CURRENT ASSETS:
 
 
Cash and cash equivalents
$ 82,104 
$ 99,780 
Short-term investments
104,453 
119,854 
Restricted cash
2,129 
267 
Trade receivables
23,000 
6,339 
Receivables and prepaid expenses
5,559 
10,084 
Inventories
24,642 
25,549 
Total current assets
241,887 
261,873 
LONG-TERM ASSETS:
 
 
Property and equipment, net
9,361 
9,812 
Field equipment, net
8,948 
8,808 
Severance pay fund
104 
88 
Other long-term assets
1,978 
1,500 
Total long-term assets
20,391 
20,208 
TOTAL ASSETS
262,278 
282,081 
CURRENT LIABILITIES:
 
 
Trade payables
14,143 
18,356 
Other payables and accrued expenses
26,842 
18,526 
Total current liabilities
40,985 
36,882 
LONG-TERM LIABILITIES:
 
 
Long-term loan, net of discount and issuance costs
97,049 
96,231 
Employee benefit liabilities
2,489 
2,590 
Other long-term liabilities
5,070 
4,033 
Total long-term liabilities
104,608 
102,854 
TOTAL LIABILITIES
145,593 
139,736 
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
 
 
Ordinary shares no par value, unlimited shares authorized; issued and outstanding: 89,355,679 shares and 87,066,446 shares at September 30, 2017 (unaudited) and December 31, 2016, respectively
Additional paid-in capital
689,460 
664,154 
Accumulated other comprehensive loss
(1,462)
(1,883)
Accumulated deficit
(571,313)
(519,926)
Total shareholders' equity
116,685 
142,345 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 262,278 
$ 282,081 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Statement Of Financial Position [Abstract]
 
 
Common stock, par value
   
   
Common stock, shares authorized
Unlimited 
Unlimited 
Common stock, shares issued
89,355,679 
87,066,446 
Common stock, shares outstanding
89,355,679 
87,066,446 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Income Statement [Abstract]
 
 
 
 
 
Net revenues
$ 50,109 
$ 21,674 
$ 123,365 
$ 52,646 
$ 82,888 
Cost of revenues
15,153 
11,118 
39,969 
28,897 
39,870 
Impairment of field equipment
 
 
 
6,412 
6,412 
Gross profit
34,956 
10,556 
83,396 
17,337 
36,606 
Operating costs and expenses:
 
 
 
 
 
Research, development and clinical trials
9,273 
10,233 
28,055 
32,996 
41,467 
Sales and marketing
16,387 
15,865 
47,503 
43,771 
59,449 
General and administrative
15,215 
12,723 
42,660 
38,010 
51,007 
Total operating costs and expenses
40,875 
38,821 
118,218 
114,777 
151,923 
Operating loss
(5,919)
(28,265)
(34,822)
(97,440)
(115,317)
Financial expenses, net
2,156 
2,189 
6,785 
3,293 
6,147 
Loss before income tax expense
(8,075)
(30,454)
(41,607)
(100,733)
(121,464)
Income tax expense
3,423 
3,174 
9,110 
8,944 
10,381 
Net loss
$ (11,498)
$ (33,628)
$ (50,717)
$ (109,677)
$ (131,845)
Basic and diluted net loss per ordinary share
$ (0.13)
$ (0.39)
$ (0.57)
$ (1.29)
$ (1.54)
Weighted average number of ordinary shares used in computing basic and diluted net loss per share
89,125,646 
85,774,874 
88,265,835 
85,153,644 
85,558,448 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
 
 
Net loss
$ (11,498)
$ (33,628)
$ (50,717)
$ (109,677)
$ (131,845)
Other comprehensive income (loss), net of tax :
 
 
 
 
 
Change in foreign currency translation adjustments
(2)
64 
10 
Pension benefit plan
279 
(409)
413 
(644)
(388)
Total comprehensive loss
$ (11,221)
$ (34,029)
$ (50,296)
$ (110,257)
$ (132,223)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (USD $)
In Thousands, except Share data
Total
USD ($)
Ordinary Shares
Additional Paid-in Capital
USD ($)
Accumulated Other Comprehensive Loss
USD ($)
Accumulated Deficit
USD ($)
Balance at Dec. 31, 2015
$ 250,820 
 
$ 640,406 
$ (1,505)
$ (388,081)
Balance (in shares) at Dec. 31, 2015
 
83,778,581 
 
 
 
Share-based compensation to employees
21,441 
 
21,441 
 
 
Exercise of options and warrants
993 
 
993 
 
 
Exercise of options and warrants (in shares)
 
3,195,477 
 
 
 
Issuance of shares in connection with employee stock purchase plan
616 
 
616 
 
 
Issuance of shares in connection with employee stock purchase plan(in shares)
 
92,388 
 
 
 
Tax benefit from share-based award activity
698 
 
698 
 
 
Other comprehensive income (loss), net of tax benefit of $38 and $57 for the years December 2016 and September 2017
(378)
 
 
(378)
 
Net loss
(131,845)
 
 
 
(131,845)
Balance at Dec. 31, 2016
142,345 
 
664,154 
(1,883)
(519,926)
Balance (in shares) at Dec. 31, 2016
 
87,066,446 
 
 
 
Share-based compensation to employees
20,760 
 
20,760 
 
 
Exercise of options and warrants
3,095 
 
3,095 
 
 
Exercise of options and warrants (in shares)
 
2,172,266 
 
 
 
Cumulative effect adjustment resulting from ASU2016-09 adoption (see Note 1)
 
 
670 
 
(670)
Issuance of shares in connection with employee stock purchase plan
781 
 
781 
 
 
Issuance of shares in connection with employee stock purchase plan(in shares)
 
116,967 
 
 
 
Other comprehensive income (loss), net of tax benefit of $38 and $57 for the years December 2016 and September 2017
421 
 
 
421 
 
Net loss
(50,717)
 
 
 
(50,717)
Balance at Sep. 30, 2017
$ 116,685 
 
$ 689,460 
$ (1,462)
$ (571,313)
Balance (in shares) at Sep. 30, 2017
 
89,355,679 
 
 
 
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Statement Of Stockholders Equity [Abstract]
 
 
Other comprehensive income (loss), tax benefit
$ 57 
$ 38 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Cash flows from operating activities:
 
 
 
 
 
Net loss
$ (11,498)
$ (33,628)
$ (50,717)
$ (109,677)
$ (131,845)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
Depreciation and amortization
2,053 
1,553 
5,524 
4,063 
5,652 
Asset write-downs and impairment of field equipment
72 
10 
206 
6,440 
6,446 
Increase in accrued interest expense
 
222 
 
222 
 
Share-based compensation to employees
8,629 
5,626 
20,760 
16,719 
22,139 
Excess tax benefits from share-based award activity
 
 
 
 
(698)
Increase in trade receivables
(9,112)
 
(16,661)
 
(6,339)
Amortization of discount
17 
81 
226 
25 
155 
Decrease (increase) in receivables and prepaid expenses
5,986 
694 
4,525 
(1,514)
243 
Decrease (increase) in inventories
504 
(2,757)
907 
(10,378)
(11,955)
Increase in other long-term assets
(238)
(526)
(532)
(804)
(692)
Increase (decrease) in trade payables
983 
(6,765)
(4,213)
(2,621)
1,601 
Increase in other payables and accrued expenses
4,830 
1,651 
8,308 
2,407 
6,647 
Increase in employee benefit liabilities, net
113 
80 
352 
350 
97 
Increase in other long-term liabilities
208 
263 
1,079 
901 
957 
Net cash provided by (used in) operating activities
2,547 
(33,496)
(30,236)
(93,867)
(107,592)
Cash flows from investing activities:
 
 
 
 
 
Purchase of property and equipment
(544)
(1,715)
(1,951)
(5,055)
(5,674)
Purchase of field equipment
(1,208)
(3,113)
(3,469)
(9,213)
(11,990)
Decrease (increase) in restricted cash
(592)
27 
(1,861)
15 
(180)
Proceeds from maturity of short-term investments
 
120,000 
120,000 
270,000 
270,000 
Purchase of short-term investments
 
(119,613)
(104,006)
(239,341)
(239,341)
Net cash provided by (used in) investing activities
(2,344)
(4,414)
8,713 
16,406 
12,815 
Cash flows from financing activities:
 
 
 
 
 
Proceeds from issuance of shares, net
 
 
781 
 
616 
Proceeds from long-term loan, net
 
72,870 
19 
72,887 
72,887 
Excess tax benefits from share-based award activity
 
 
 
 
698 
Repayment of other long-term loan
(19)
(17)
(56)
(52)
(70)
Exercise of options and warrants
1,732 
 
3,095 
961 
993 
Net cash provided by financing activities
1,713 
72,853 
3,839 
73,796 
75,124 
Effect of exchange rate changes on cash and cash equivalents
(2)
64 
10 
Increase (decrease) in cash and cash equivalents
1,914 
34,951 
(17,676)
(3,601)
(19,643)
Cash and cash equivalents at the beginning of the period
80,190 
80,871 
99,780 
119,423 
119,423 
Cash and cash equivalents at the end of the period
82,104 
115,822 
82,104 
115,822 
99,780 
Cash paid during the period for:
 
 
 
 
 
Income taxes
2,335 
4,624 
7,237 
7,793 
9,447 
Interest
$ 2,561 
$ 1,880 
$ 7,603 
$ 3,813 
$ 6,595 
Organization and Basis of Presentation
Organization and Basis of Presentation

NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION

Organization.  NovoCure Limited (including its consolidated subsidiaries, the “Company”) was incorporated in the Bailiwick of Jersey and is principally engaged in the development, manufacture and commercialization of Tumor Treating Fields (“TTFields”) for the treatment of solid tumors. The Company has regulatory approvals and clearances in certain countries for Optune, its first TTFields delivery system, to treat adult patients with glioblastoma (“GBM”).   

Financial statement preparation. The accompanying consolidated financial statements include the accounts of the Company and its consolidated subsidiaries, 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. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. These consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “2016 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2017.

The significant accounting policies applied in the audited annual consolidated financial statements of the Company as disclosed in the 2016 10-K are applied consistently in these unaudited interim consolidated financial statements, except as noted below:

Recently Adopted Accounting Pronouncements. In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in ASU 2016-09 affect all entities that issue share-based payment awards to their employees and involve multiple aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  The Company adopted ASU 2016-09 during the quarter ended March 31, 2017, at which time it changed its accounting policy to account for forfeitures as they occur. The change was applied on a modified retrospective basis with a cumulative effect adjustment to accumulated deficit of $670 as of January 1, 2017. In addition, excess tax benefits for share-based payments are now presented as an operating activity in the statements of cash flows rather than financing activity. The changes have been applied prospectively in accordance with the ASU and prior periods have not been adjusted.

Recent Accounting Pronouncements. In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The Company is currently evaluating the requirements of the new standard to insure that it has processes, systems and internal controls in place to collect the necessary information to implement the standard, which will be effective as of January 1, 2018.  Currently, the Company anticipates using a portfolio approach to apply the standard to portfolios of contracts with similar characteristics and anticipates that it will apply the cumulative catch-up transition method which requires the application of the provisions of the new standard as of the date of adoption with the cumulative effect of the retrospective application of the provisions as an adjustment through retained earnings. While the Company is still in the process of completing its assessment on the impact this guidance will have on its consolidated financial statements and related disclosures, the Company does not anticipate that the adoption of this standard will have a material impact on its financial position, results of operations or cash flows.

In April 2016, FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. ASU 2016-10 covers two specific topics: performance obligations and licensing. This amendment includes guidance on immaterial promised goods or services, shipping or handling activities, separately identifiable performance obligations, functional or symbolic intellectual property licenses, sales-based and usage-based royalties, license restrictions (time, use, geographical) and licensing renewals. In addition, in May 2016, FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company is currently evaluating the impact of the adoption of both revenue standards on its consolidated financial statements.

In February 2016, FASB issued ASU 2016-02-Leases (ASC 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASC 842 supersedes the previous leases standard, ASC 840. The standard is effective on January 1, 2019, with early adoption permitted. The Company currently anticipates adopting the new standard effective January 1, 2019 and is evaluating the impact of the adoption of this standard on its consolidated financial statements.

In May 2017, FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting. ASU 2017-09 provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. The Company is evaluating the impact of ASU 2017-09.

Short-Term Investments
Short-Term Investments

NOTE 2: 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 in the amount of $104,453 and $119,854 as of September 30, 2017 and December 31, 2016, respectively, and their estimated fair value as of September 30, 2017 and December 31, 2016 was $104,419 and $119,825, respectively.

Inventories
Inventories

NOTE 3: INVENTORIES

Inventories are stated at the lower of cost or market. The weighted average methodology is applied to determine cost. As of September 30, 2017 and December 31, 2016, the Company’s inventories were composed of:

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

Unaudited

 

 

Audited

 

Raw materials

 

$

5,936

 

 

$

5,243

 

Work in progress

 

 

10,621

 

 

 

8,292

 

Finished products

 

 

8,085

 

 

 

12,014

 

Total

 

$

24,642

 

 

$

25,549

 

 

Commitments and Contingent Liabilities
Commitments and Contingent Liabilities

NOTE 4: COMMITMENTS AND CONTINGENT LIABILITIES

The facilities of the Company are leased under various operating lease agreements for periods ending no later than 2024. The Company also leases motor vehicles under various operating leases, which expire on various dates, the latest of which is in 2020.

As of September 30, 2017 and December 31, 2016, the Company pledged bank deposits of $1,051 and $807, 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 and other contractual commitments of $1,212 and $955, respectively.

In January 2017, two putative class action lawsuits were filed against the Company, its directors and certain of its officers, as well as the underwriters in the Company’s October 2015 initial public offering.  The complaints, which purport to be brought on behalf of a class of persons and/or entities who purchased or otherwise acquired ordinary shares of the Company pursuant and/or traceable to the registration statement and prospectus issued in connection with the Company’s initial public offering, allege material misstatements and/or omissions in the Company’s initial public offering materials in alleged violation of the federal securities laws and seek compensatory damages, among other remedies.  The two actions have been consolidated and the plaintiffs filed a consolidated amended complaint on May 31, 2017.  The court granted the defendants’ motion to bifurcate the motion to dismiss into two stages: a threshold motion to dismiss for lack of personal jurisdiction, lack of subject matter jurisdiction, and insufficient process and service of process; and, if the matter is not dismissed following that threshold motion, a subsequent merits motion to dismiss regarding whether the allegations in the amended complaint state a claim under the securities laws. The defendants filed the threshold motion to dismiss on July 31, 2017, and the plaintiffs filed an opposition to the threshold motion to dismiss on September 29, 2017.  The Company believes that the amended complaint is without merit and plans to defend the consolidated lawsuits vigorously. The Company has not accrued any amounts in respect of these lawsuits, as a liability is not probable and the amount of any potential liability cannot be reasonably estimated.

Share Capital
Share Capital

NOTE 5: SHARE CAPITAL

For the nine months ended September 30, 2017, warrants to purchase 1,418,711 ordinary shares with an exercise price of $3.59 per share were cashlessly exercised, resulting in the issuance of 803,138 ordinary shares.  Also, warrants to purchase 6,498 ordinary shares with an exercise price of $3.59 per share were exercised for cash. For the nine months ended September 30, 2017, options to purchase 1,370,810 ordinary shares were exercised, resulting in the issuance of 1,364,645 ordinary shares.  

Equity Incentive Plans
Equity Incentive Plans

NOTE 6: EQUITY INCENTIVE PLANS

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 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.  As of September 30, 2017, 9,563,985 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, 2017 and changes during the period then ended is presented below: 

 

 

 

Nine months ended September 30, 2017

 

 

 

Unaudited

 

 

 

Number

of options

 

 

Weighted

average

exercise

price

 

Outstanding at beginning of year

 

 

11,377,354

 

 

$

9.76

 

Granted

 

 

5,117,088

 

 

 

9.96

 

Exercised

 

 

(1,370,810

)

 

 

2.31

 

Forfeited and cancelled

 

 

(310,693

)

 

 

12.39

 

Outstanding as of September 30, 2017

 

 

14,812,939

 

 

 

10.46

 

 

 

 

 

 

 

 

 

 

Exercisable options

 

 

6,119,710

 

 

 

8.17

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest

 

 

14,812,939

 

 

$

10.46

 

 

A summary of the status of the Company’s RSUs as of September 30, 2017 and changes during the period then ended is presented below: 

 

 

 

Nine months ended September 30, 2017

 

 

 

Unaudited

 

 

 

Number

of RSUs

 

 

Weighted

average

grant date fair value

price

 

Unvested at beginning of year

 

 

-

 

 

$

-

 

Granted

 

 

1,661,619

 

 

 

9.64

 

Vested

 

 

-

 

 

 

-

 

Forfeited and cancelled

 

 

(10,400

)

 

 

7.15

 

Unvested as of September 30, 2017

 

 

1,651,219

 

 

$

9.66

 

 

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 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. As of September 30, 2017, 2,328,171 ordinary shares were available to be purchased by eligible employees under the ESPP and 209,355 shares had been issued under the ESPP.

The fair value of all equity-based awards was estimated using the Black-Scholes option-pricing model with the following underlying assumptions, excluding market condition awards for which fair value was estimated using the Monte Carlo option-pricing model: 

 

 

 

Nine months ended September 30,

 

 

Year ended

December 31,

 

 

2017

 

2016

 

 

2016

 

 

Unaudited

 

 

Audited

Stock Option Plans

 

 

 

 

 

 

 

 

Expected term (years)

 

5.5-6.25

 

6.25

 

 

6.25

Expected volatility

 

56.74%-59.45%

 

59.80%-61.65%

 

 

58.40%-61.70%

Risk-free interest rate

 

1.97%-2.23%

 

1.23%-1.88%

 

 

1.23%-1.88%

Dividend yield

 

0.00%

 

0.00%

 

 

0.00%

ESPP

 

 

 

 

 

 

 

 

Expected term (years)

 

0.50

 

 

0.42

 

 

0.42

Expected volatility

 

76.37%-82.00%

 

70.45%

 

 

70.45%

Risk-free interest rate

 

0.62%-1.13%

 

0.40%

 

 

0.40%

Dividend yield

 

0.00%

 

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, 2017 and 2016 and the year ended December 31, 2016 was:

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

Year ended

December 31,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2016

 

 

 

Unaudited

 

 

Unaudited

 

 

Audited

 

Cost of revenues

 

$

79

 

 

$

160

 

 

$

353

 

 

$

471

 

 

$

623

 

Research, development and clinical trials

 

 

972

 

 

 

776

 

 

 

2,645

 

 

 

2,378

 

 

 

3,155

 

Sales and marketing

 

 

1,874

 

 

 

1,249

 

 

 

4,264

 

 

 

3,888

 

 

 

5,111

 

General and administrative

 

 

5,704

 

 

 

3,441

 

 

 

13,498

 

 

 

9,982

 

 

 

12,552

 

Total share-based compensation expense

 

$

8,629

 

 

$

5,626

 

 

$

20,760

 

 

$

16,719

 

 

$

21,441

 

 

Supplemental Information
Supplemental Information

NOTE 7: SUPPLEMENTAL INFORMATION

The Company operates in a single reportable segment.

The following table presents long-lived assets by location:

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

Unaudited

 

 

Audited

 

United States

 

$

10,942

 

 

$

11,981

 

Switzerland

 

 

5,057

 

 

 

4,346

 

Israel

 

 

1,884

 

 

 

1,915

 

Others

 

426

 

 

 

378

 

Total

 

$

18,309

 

 

$

18,620

 

 

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,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2016

 

 

 

Unaudited

 

 

Unaudited

 

 

Audited

 

United States

 

$

35,300

 

 

$

18,131

 

 

$

95,826

 

 

$

46,264

 

 

$

72,771

 

EMEA (*)

 

 

14,757

 

 

 

3,519

 

 

 

27,316

 

 

 

6,296

 

 

 

10,028

 

Japan

 

 

52

 

 

 

24

 

 

 

223

 

 

 

86

 

 

 

89

 

Total

 

$

50,109

 

 

$

21,674

 

 

$

123,365

 

 

$

52,646

 

 

$

82,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(*) including Germany

 

$

14,664

 

 

$

1,766

 

 

 

26,880

 

 

 

2,659

 

 

$

9,799

 

 

Organization and Basis of Presentation (Policies)
Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements. In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in ASU 2016-09 affect all entities that issue share-based payment awards to their employees and involve multiple aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  The Company adopted ASU 2016-09 during the quarter ended March 31, 2017, at which time it changed its accounting policy to account for forfeitures as they occur. The change was applied on a modified retrospective basis with a cumulative effect adjustment to accumulated deficit of $670 as of January 1, 2017. In addition, excess tax benefits for share-based payments are now presented as an operating activity in the statements of cash flows rather than financing activity. The changes have been applied prospectively in accordance with the ASU and prior periods have not been adjusted.

Recent Accounting Pronouncements. In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The Company is currently evaluating the requirements of the new standard to insure that it has processes, systems and internal controls in place to collect the necessary information to implement the standard, which will be effective as of January 1, 2018.  Currently, the Company anticipates using a portfolio approach to apply the standard to portfolios of contracts with similar characteristics and anticipates that it will apply the cumulative catch-up transition method which requires the application of the provisions of the new standard as of the date of adoption with the cumulative effect of the retrospective application of the provisions as an adjustment through retained earnings. While the Company is still in the process of completing its assessment on the impact this guidance will have on its consolidated financial statements and related disclosures, the Company does not anticipate that the adoption of this standard will have a material impact on its financial position, results of operations or cash flows.

In April 2016, FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. ASU 2016-10 covers two specific topics: performance obligations and licensing. This amendment includes guidance on immaterial promised goods or services, shipping or handling activities, separately identifiable performance obligations, functional or symbolic intellectual property licenses, sales-based and usage-based royalties, license restrictions (time, use, geographical) and licensing renewals. In addition, in May 2016, FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company is currently evaluating the impact of the adoption of both revenue standards on its consolidated financial statements.

In February 2016, FASB issued ASU 2016-02-Leases (ASC 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASC 842 supersedes the previous leases standard, ASC 840. The standard is effective on January 1, 2019, with early adoption permitted. The Company currently anticipates adopting the new standard effective January 1, 2019 and is evaluating the impact of the adoption of this standard on its consolidated financial statements.

In May 2017, FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting. ASU 2017-09 provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. The Company is evaluating the impact of ASU 2017-09.

Inventories (Tables)
Schedule of Inventories

Inventories are stated at the lower of cost or market. The weighted average methodology is applied to determine cost. As of September 30, 2017 and December 31, 2016, the Company’s inventories were composed of:

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

Unaudited

 

 

Audited

 

Raw materials

 

$

5,936

 

 

$

5,243

 

Work in progress

 

 

10,621

 

 

 

8,292

 

Finished products

 

 

8,085

 

 

 

12,014

 

Total

 

$

24,642

 

 

$

25,549

 

 

Equity Incentive Plans (Tables)

A summary of the status of the Company’s option plans as of September 30, 2017 and changes during the period then ended is presented below: 

 

 

 

Nine months ended September 30, 2017

 

 

 

Unaudited

 

 

 

Number

of options

 

 

Weighted

average

exercise

price

 

Outstanding at beginning of year

 

 

11,377,354

 

 

$

9.76

 

Granted

 

 

5,117,088

 

 

 

9.96

 

Exercised

 

 

(1,370,810

)

 

 

2.31

 

Forfeited and cancelled

 

 

(310,693

)

 

 

12.39

 

Outstanding as of September 30, 2017

 

 

14,812,939

 

 

 

10.46

 

 

 

 

 

 

 

 

 

 

Exercisable options

 

 

6,119,710

 

 

 

8.17

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest

 

 

14,812,939

 

 

$

10.46

 

 

A summary of the status of the Company’s RSUs as of September 30, 2017 and changes during the period then ended is presented below: 

 

 

 

Nine months ended September 30, 2017

 

 

 

Unaudited

 

 

 

Number

of RSUs

 

 

Weighted

average

grant date fair value

price

 

Unvested at beginning of year

 

 

-

 

 

$

-

 

Granted

 

 

1,661,619

 

 

 

9.64

 

Vested

 

 

-

 

 

 

-

 

Forfeited and cancelled

 

 

(10,400

)

 

 

7.15

 

Unvested as of September 30, 2017

 

 

1,651,219

 

 

$

9.66

 

 

The fair value of all equity-based awards was estimated using the Black-Scholes option-pricing model with the following underlying assumptions, excluding market condition awards for which fair value was estimated using the Monte Carlo option-pricing model: 

 

 

 

Nine months ended September 30,

 

 

Year ended

December 31,

 

 

2017

 

2016

 

 

2016

 

 

Unaudited

 

 

Audited

Stock Option Plans

 

 

 

 

 

 

 

 

Expected term (years)

 

5.5-6.25

 

6.25

 

 

6.25

Expected volatility

 

56.74%-59.45%

 

59.80%-61.65%

 

 

58.40%-61.70%

Risk-free interest rate

 

1.97%-2.23%

 

1.23%-1.88%

 

 

1.23%-1.88%

Dividend yield

 

0.00%

 

0.00%

 

 

0.00%

ESPP

 

 

 

 

 

 

 

 

Expected term (years)

 

0.50

 

 

0.42

 

 

0.42

Expected volatility

 

76.37%-82.00%

 

70.45%

 

 

70.45%

Risk-free interest rate

 

0.62%-1.13%

 

0.40%

 

 

0.40%

Dividend yield

 

0.00%

 

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, 2017 and 2016 and the year ended December 31, 2016 was:

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

Year ended

December 31,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2016

 

 

 

Unaudited

 

 

Unaudited

 

 

Audited

 

Cost of revenues

 

$

79

 

 

$

160

 

 

$

353

 

 

$

471

 

 

$

623

 

Research, development and clinical trials

 

 

972

 

 

 

776

 

 

 

2,645

 

 

 

2,378

 

 

 

3,155

 

Sales and marketing

 

 

1,874

 

 

 

1,249

 

 

 

4,264

 

 

 

3,888

 

 

 

5,111

 

General and administrative

 

 

5,704

 

 

 

3,441

 

 

 

13,498

 

 

 

9,982

 

 

 

12,552

 

Total share-based compensation expense

 

$

8,629

 

 

$

5,626

 

 

$

20,760

 

 

$

16,719

 

 

$

21,441

 

 

Supplemental Information (Tables)

The following table presents long-lived assets by location:

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

Unaudited

 

 

Audited

 

United States

 

$

10,942

 

 

$

11,981

 

Switzerland

 

 

5,057

 

 

 

4,346

 

Israel

 

 

1,884

 

 

 

1,915

 

Others

 

426

 

 

 

378

 

Total

 

$

18,309

 

 

$

18,620

 

 

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,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2016

 

 

 

Unaudited

 

 

Unaudited

 

 

Audited

 

United States

 

$

35,300

 

 

$

18,131

 

 

$

95,826

 

 

$

46,264

 

 

$

72,771

 

EMEA (*)

 

 

14,757

 

 

 

3,519

 

 

 

27,316

 

 

 

6,296

 

 

 

10,028

 

Japan

 

 

52

 

 

 

24

 

 

 

223

 

 

 

86

 

 

 

89

 

Total

 

$

50,109

 

 

$

21,674

 

 

$

123,365

 

 

$

52,646

 

 

$

82,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(*) including Germany

 

$

14,664

 

 

$

1,766

 

 

 

26,880

 

 

 

2,659

 

 

$

9,799

 

 

Organization and Basis of Presentation - Additional Information (Detail) (Accounting Standards Update 2016-09 [Member], USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
Accounting Standards Update 2016-09 [Member]
 
Organization and Basis of Presentation [Line Items]
 
Cumulative deficit effect adjustment resulting from ASU 2016-09 adoption
$ (670)
Short-Term Investments - Additional Information (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Investments Debt And Equity Securities [Abstract]
 
 
Short-term investments
$ 104,453 
$ 119,854 
Estimated fair value of short-term investments
$ 104,419 
$ 119,825 
Inventories - Schedule of Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Inventory Disclosure [Abstract]
 
 
Raw materials
$ 5,936 
$ 5,243 
Work in progress
10,621 
8,292 
Finished products
8,085 
12,014 
Total
$ 24,642 
$ 25,549 
Commitments and Contingent Liabilities - Additional Information (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Loss Contingencies [Line Items]
 
 
Operating lease expiration description
The facilities of the Company are leased under various operating lease agreements for periods ending no later than 2024. 
 
Pledged bank deposits
$ 1,051 
$ 807 
Operating lease and other contractual commitments
$ 1,212 
$ 955 
Motor Vehicles
 
 
Loss Contingencies [Line Items]
 
 
Operating lease expiration description
The Company also leases motor vehicles under various operating leases, which expire on various dates, the latest of which is in 2020. 
 
Maximum
 
 
Loss Contingencies [Line Items]
 
 
Operating lease agreements, expiration year
2024 
 
Maximum |
Motor Vehicles
 
 
Loss Contingencies [Line Items]
 
 
Operating lease agreements, expiration year
2020 
 
Share Capital - Additional Information (Details) (USD $)
9 Months Ended
Sep. 30, 2017
Share Capital [Line Items]
 
The Number of ordinary shares that originally could be purchased by exercise of warrants
1,418,711 
Warrants exercise price
$ 3.59 
Options exercised
1,370,810 
Ordinary shares issued upon option exercise
1,364,645 
Warrant
 
Share Capital [Line Items]
 
The Number of ordinary shares that originally could be purchased by exercise of warrants in cash
6,498 
Warrant |
Warrants Not Settleable in Cash
 
Share Capital [Line Items]
 
Number of shares issued upon the exercise of warrants
803,138 
Equity Incentive Plans - Additional Information (Details)
9 Months Ended
Sep. 30, 2017
ESPP
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
Ordinary shares available for grants
2,328,171 
Shares issued under plan
209,355 
2015 Plan
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
Ordinary shares available for grants
9,563,985 
2015 Plan |
Options
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
Stock awards granted, vesting period
4 years 
Stock awards granted, expiration period
10 years 
2015 Plan |
RSUs
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
Stock awards granted, vesting period
3 years 
Equity Incentive Plans - Schedule of Stock Option Plan (Details) (USD $)
9 Months Ended
Sep. 30, 2017
Number of options
 
Number of options, Outstanding at beginning of year
11,377,354 
Number of options, Granted
5,117,088 
Number of options, Exercised
(1,370,810)
Number of options, Forfeited and cancelled
(310,693)
Number of options, Outstanding at ending of year
14,812,939 
Number of options, Exercisable options
6,119,710 
Number of options, Vested and expected to vest
14,812,939 
Weighted average exercise price
 
Weighted average exercise price, Outstanding at beginning of year
$ 9.76 
Weighted average exercise price, Granted
$ 9.96 
Weighted average exercise price, Exercised
$ 2.31 
Weighted average exercise price, Forfeited and cancelled
$ 12.39 
Weighted average exercise price, Outstanding at end of year
$ 10.46 
Weighted average exercise price, Exercisable options
$ 8.17 
Weighted average exercise price, Vested and expected to vest
$ 10.46 
Equity Incentive Plans - Schedule of RSU's (Details) (RSUs, USD $)
9 Months Ended
Sep. 30, 2017
RSUs
 
Number of RSUs
 
Number of RSUs, granted
1,661,619 
Number of RSUs, forfeited and cancelled
(10,400)
Number of RSUs, unvested at ending of year
1,651,219 
Weighted average grant date fair value price
 
Weighted average grant date date fair value price, granted
$ 9.64 
Weighted average grant date date fair value price, forfeited and cancelled
$ 7.15 
Weighted average grant date date fair value price, unvested at ending of year
$ 9.66 
Equity Incentive Plans - 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, 2017
Sep. 30, 2016
Dec. 31, 2016
Options
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected term (years)
 
6 years 3 months 
6 years 3 months 
Expected volatility, minimum
56.74% 
59.80% 
58.40% 
Expected volatility, maximum
59.45% 
61.65% 
61.70% 
Risk-free interest rate, minimum
1.97% 
1.23% 
1.23% 
Risk-free interest rate, maximum
2.23% 
1.88% 
1.88% 
Dividend yield
0.00% 
0.00% 
0.00% 
Options |
Minimum [Member]
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected term (years)
5 years 6 months 
 
 
Options |
Maximum
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected term (years)
6 years 3 months 
 
 
ESPP
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected term (years)
6 months 
5 months 1 day 
5 months 1 day 
Expected volatility, minimum
76.37% 
 
 
Expected volatility, maximum
82.00% 
 
 
Expected volatility
 
70.45% 
70.45% 
Risk-free interest rate
 
0.40% 
0.40% 
Risk-free interest rate, minimum
0.62% 
 
 
Risk-free interest rate, maximum
1.13% 
 
 
Dividend yield
0.00% 
0.00% 
0.00% 
Supplemental Information - Schedule of Long-Lived Assets by Location (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
$ 18,309 
$ 18,620 
United States
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
10,942 
11,981 
Switzerland
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
5,057 
4,346 
Israel
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
1,884 
1,915 
Others
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
$ 426 
$ 378 
Supplemental Information - Schedule of Revenues by Geographic Region (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
 
 
Net revenues
$ 50,109 
$ 21,674 
$ 123,365 
$ 52,646 
$ 82,888 
United States
 
 
 
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
 
 
Net revenues
35,300 
18,131 
95,826 
46,264 
72,771 
EMEA
 
 
 
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
 
 
Net revenues
14,757 
3,519 
27,316 
6,296 
10,028 
Japan
 
 
 
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
 
 
Net revenues
$ 52 
$ 24 
$ 223 
$ 86 
$ 89 
Supplemental Information - Schedule of Revenues by Geographic Region (Parenthetical) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
 
 
Net revenues
$ 50,109 
$ 21,674 
$ 123,365 
$ 52,646 
$ 82,888 
Germany
 
 
 
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
 
 
Net revenues
$ 14,664 
$ 1,766 
$ 26,880 
$ 2,659 
$ 9,799