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NOVOCURE LIMITED

(NVCR)
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NOVOCURE LTD Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

07/28/2022 | 07:04am EDT
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is intended to provide information to assist you in better
understanding and evaluating our financial condition and results of operations.
We encourage you to read this MD&A in conjunction with our unaudited
consolidated financial statements and the notes thereto for the period ended
June 30, 2022 included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
This discussion contains forward-looking statements that involve risks and
uncertainties. Please refer to the information under the heading "Cautionary
Note Regarding Forward-Looking Statements" elsewhere in this report. References
to the words "we," "our," "us," and the "Company" in this report refer to
NovoCure Limited, including its consolidated subsidiaries.

Critical Accounting Policies and Estimates


In accordance with U.S. generally accepted accounting principles ("GAAP"), in
preparing our financial statements, we must make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of net revenues and expenses during the reporting period.
We develop and periodically change these estimates and assumptions based on
historical experience and on various other factors that we believe are
reasonable under the circumstances. Actual results may differ from these
estimates.

The critical accounting policies requiring estimates, assumptions and judgments
that we believe have the most significant impact on our consolidated financial
statements can be found in our 2021 10-K. For additional information, see Note 1
to our unaudited consolidated financial statements in Part I, Item 1 of this
Quarterly Report. There were no other material changes to our critical
accounting policies and estimates as compared to the critical accounting
policies and estimates described in our 2021 10-K.

Overview


We are a global oncology company with a proprietary platform technology called
Tumor Treating Fields ("TTFields"), which are electric fields tuned to specific
frequencies that disrupt cancer cell division. Our key priorities are to drive
commercial adoption of Optune and Optune Lua, our commercial TTFields devices,
and to advance clinical and product development programs intended to extend
overall survival in some of the most aggressive forms of cancer.

Optune is approved by the U.S. Food and Drug Administration ("FDA") under the
Premarket Approval ("PMA") pathway for the treatment of adult patients with
newly diagnosed glioblastoma ("GBM") together with temozolomide, a chemotherapy
drug, and for adult patients with GBM following confirmed recurrence after
chemotherapy as monotherapy treatment. We also have a CE certificate to market
Optune for the treatment of GBM in the European Union ("EU"), as well as
approval or local registration in the United Kingdom ("UK"), Japan and certain
other countries. Optune Lua is approved by the FDA under the Humanitarian Device
Exemption ("HDE") pathway for the treatment of adult patients with malignant
pleural mesothelioma ("MPM") together with standard chemotherapies. We have also
received CE certification in the EU and approval or local registration to market
Optune Lua in certain other countries. We market Optune and Optune Lua in
multiple countries around the globe with the majority of our revenues coming
from the use of Optune in the U.S., Germany and Japan. We are actively
evaluating opportunities to expand our international footprint.

We believe the physical mechanism of action behind TTFields therapy may be
broadly applicable to solid tumor cancers. Currently, we are conducting phase 3
pivotal studies evaluating the use of TTFields in non-small cell lung cancer
("NSCLC"), ovarian cancer, brain metastases from NSCLC, and pancreatic cancer.
In 2021, we completed patient enrollment in our phase 3 pivotal NSCLC and
ovarian cancer studies. Additionally, we have multiple ongoing or recently
completed phase 2 pilot studies evaluating the use of TTFields. These studies
are in gastric cancer and stage 3 NSCLC, as well as testing the potential
incremental survival benefit of TTFields delivered using high-intensity arrays
versus standard arrays. We are also currently conducting a global phase 4
post-marketing study testing the potential survival benefit of initiating Optune
concurrent with radiation therapy versus following radiation therapy in patients
with newly diagnosed GBM. We anticipate expanding our clinical pipeline over
time to study the safety and efficacy of TTFields for additional solid tumor
indications and combinations with other cancer treatment modalities.

We completed enrollment of the phase 3 pivotal LUNAR trial in November 2021,
which began the final patient's 12-month follow-up period and our clinical
operations and data collection efforts remain on track. Given feedback we
received from all interested parties, we recognized a pivotal data release the
final week of the year is not ideal for
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investigators, clinicians, investors, or potential patients. For that reason, we are moving the top-line data announcement to early Q1 2023.


In March 2022, we announced that an independent data monitoring committee
("DMC") conducted a pre-specified interim analysis for the phase 3 pivotal
INNOVATE-3 study for the treatment of platinum-resistant ovarian cancer. As part
of the interim analysis, the DMC reviewed the safety data for all enrolled
patients and completed an analysis of overall survival on the first 540 patients
randomized in the study. The interim analysis did not indicate a need to
increase the patient sample size and the DMC recommended that the study should
continue to final analysis as planned. The INNOVATE-3 study accrued 540 patients
as of October 2021 and data will be reviewed in 2023, following an 18 month
follow-up period.

In May 2022, we entered into a clinical trial collaboration agreement with MSD,
a tradename of Merck & Co., Inc., ("MSD") to conduct a double-blind,
placebo-controlled study of TTFields concomitant with pembrolizumab and
maintenance temozolomide for the treatment of newly diagnosed GBM. We intend to
engage the FDA in pre-submission discussions in the near-term regarding the
parameters of the KEYNOTE D58 trial protocol design.

In June 2022, we announced results of the phase 2 pilot EF-31 study evaluating
the use of TTFields together with standard-of-care (chemotherapy alone or in
combination with trastuzumab for HER2-positive patients) as first-line treatment
for gastric cancer. Initial analysis was conducted with a median follow-up
period of 8.6 months. The primary endpoint, confirmed objective response rate,
was 50%. Median progression-free survival was 7.8 months. Duration of response
was 10.3 months. Median overall survival had not yet been reached with a
one-year survival rate of 72%. We look forward to further exploration of these
potential benefits as we look ahead to a randomized phase 3 clinical study.

In June 2022, we announced the first patient has been enrolled in the phase 2
pilot KEYNOTE B36 study, conducted in collaboration with MSD. KEYNOTE B36 is
designed to evaluate the safety and effectiveness of TTFields together with
pembrolizumab for the treatment of locally advanced or metastatic intrathoracic
NSCLC that expresses PD-L1.

In June 2022, by mutual agreement with GT Medical Technologies, Inc., we
suspended indefinitely our joint plans to conduct a phase 2 pilot study to test
the safety and effectiveness of neo-adjuvant TTFields followed by resection,
GammaTile Therapy, and adjuvant TTFields for recurrent GBM.

The table below presents the current status of the ongoing clinical studies in our oncology pipeline and anticipated timing of data readout.

[[Image Removed: nvcr-20220630_g1.jpg]]


Our therapy is delivered through a medical device and we continue to advance our
Products with the intention to extend survival and maintain quality of life for
patients. We have several product development programs underway that are
designed to optimize TTFields delivery to the target tumor and enhance patient
ease of use. Our intellectual
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property portfolio contains hundreds of issued patents and numerous patent
applications pending worldwide. We believe we possess global commercialization
rights to our Products in oncology and are well-positioned to extend those
rights into the future as we continue to find innovative ways to improve our
Products.

In 2018, we granted Zai Lab (Shanghai) Co., Ltd. ("Zai") a license to
commercialize Optune in China, Hong Kong, Macau and Taiwan ("Greater China")
under a License and Collaboration Agreement (the "Zai Agreement"). The Zai
Agreement also establishes a development partnership intended to accelerate the
development of TTFields in multiple solid tumor cancer indications. For
additional information, see Note 12 to the Consolidated Financial Statements in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2021 (the "2021 10-K").

We view our operations and manage our business in one operating segment. For the
three and six months ended June 30, 2022, our net revenues were $140.9 million
and $278.4 million, respectively. Our net loss for the three and six months
ended June 30, 2022 were $24.0 million and $28.7 million, respectively. As of
June 30, 2022, we had an accumulated deficit of $714.6 million. Our net loss
resulted primarily from net revenue growth which was more than offset by
increasing investments in research, development and clinical trial initiatives
and sales and marketing initiatives that support our ongoing exploration of the
benefits of TTFields across numerous cancer indications, as well as geographic
expansion and pre-commercial activities associated with potential future
indication launches.

Impact of COVID-19


In March 2020, the World Health Organization ("WHO") declared COVID-19 a global
pandemic. Since the pandemic began, we have been following the guidance of the
WHO, the U.S. Centers for Disease Control and Prevention, and local health
authorities in all of our active markets and we have adjusted the way we conduct
business to adapt to the evolving situation. The COVID-19 pandemic did not have
a material impact on our financial results through the second quarter of 2022.
The pandemic has had and is having an impact on our day-to-day operations, which
varies by region based on factors such as geographical spread, stage of
containment and recurrence of the pandemic in each region. We believe the
prolonged disruption caused by COVID-19 is resulting in increased volatility
across global health care systems, such as fluctuations in patient volumes and
changes in patterns of care in certain regions, which is currently impacting and
might continue to impact our business and clinical studies in the future. For
example, outside the U.S., localized lockdowns are causing disruptions in the
ability to monitor clinical studies. TTFields is an emerging modality in cancer
care and requires significant educational effort to drive awareness and
acceptance of our therapy. We have relied heavily on virtual engagement to
manage these educational efforts since the onset of the pandemic, which poses
challenges to our ability to effectively communicate and engage with our
customers and partners around the world.

Given the aggressive nature of the cancers that we treat, we believe that the
fundamental value proposition of the TTFields platform remains unchanged. We
continue to evaluate and plan for the potential effects of COVID-19 on our
business moving forward. The extent to which the COVID-19 pandemic may impact
our business and clinical studies in the future will depend on further
developments, which are highly uncertain and cannot be predicted with
confidence. The COVID-19 pandemic may also have the effect of heightening many
of the other risks described in our risk factors disclosed in our 2021 10-K.

Commentary on Results of Operations


Net revenues. Our revenues are primarily derived from patients using our
Products in our active markets. We charge for treatment with our Products on a
monthly basis. Our potential net revenues per patient are determined by our
ability to secure payment, the monthly fee we collect and the number of months
that the patient remains on therapy.

We also receive revenues pursuant to the Zai Agreement. For additional information regarding the Zai Agreement, see Note 12 to the Consolidated Financial Statements in our 2021 10-K.

Cost of revenues. We contract with third parties to manufacture our Products. Our cost of revenues is primarily comprised of the following:

•disposable arrays;

•depreciation expense for the field equipment, including the electric field generator used by patients; and

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•personnel and overhead costs such as facilities, freight and depreciation of
property, plant and equipment associated with managing our inventory,
warehousing and order fulfillment functions.

Operating expenses. Our operating expenses consist of research, development and
clinical studies, sales and marketing and general and administrative expenses.
Personnel costs are a significant component for each category of operating
expenses and consist of wages, benefits and bonuses. Personnel costs also
include share-based compensation.

Financial expenses, net. Financial expenses, net primarily consists of debt
issuance costs, interest income from cash balances and short-term investments
and gains (losses) from foreign currency transactions. Our reporting currency is
the U.S. dollar. We have historically held substantially all of our cash
balances in U.S. dollar denominated accounts to minimize the risk of
translational currency exposure.

Results of Operations


The following discussion provides an analysis of our results of operations and
reasons for material changes therein for the three and six months ended June 30,
2022 as compared to the three and six months ended June 30, 2021. The tables
contained in this section report U.S. dollars in thousands (except share,
patient, and prescription data).

The following table sets forth our consolidated statements of operations data:

                                                     Three months ended June 30,                     Six months ended June 30,
                                                     2022                    2021                   2022                    2021
                                                              Unaudited                                      Unaudited
Net revenues                                   $      140,866          $     133,517          $      278,413          $     268,212
Cost of revenues                                       28,503                 28,599                  56,230                 54,984
Gross profit                                          112,363                104,918                 222,183                213,228

Operating costs and expenses:
Research, development and clinical studies             57,075                 50,315                  99,309                 96,231
Sales and marketing                                    44,750                 34,138                  82,634                 65,495
General and administrative                             31,666                 32,760                  62,174                 63,885
Total operating costs and expenses                    133,491                117,213                 244,117                225,611

Operating income (loss)                               (21,128)               (12,295)                (21,934)               (12,383)
Financial expenses (income), net                        2,228                    940                   3,937                  3,586

Income (loss) before income taxes                     (23,356)               (13,235)                (25,871)               (15,969)
Income taxes                                              652                  1,406                   2,784                  2,800
Net income (loss)                              $      (24,008)         $     (14,641)         $      (28,655)         $     (18,769)

Basic net income (loss) per ordinary share $ (0.23) $

    (0.14)         $        (0.27)         $       (0.18)
Weighted average number of ordinary shares
used in computing basic net income (loss) per
share                                             104,627,789            103,484,866             104,408,164            103,061,557

Diluted net income (loss) per ordinary share $ (0.23) $

    (0.14)         $        (0.27)         $       (0.18)
Weighted average number of ordinary shares
used in computing diluted net income (loss)
per share                                         104,627,789            103,484,866             104,408,164            103,061,557


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The following table details the share-based compensation expense included in costs and expenses:

                                                   Three months ended June 30,               Six months ended June 30,
                                                     2022                 2021                 2022                2021
                                                            Unaudited                                Unaudited
Cost of revenues                               $        1,029          $    827          $       1,981          $  1,560
Research, development and clinical studies              7,624             8,505                 14,425            13,629
Sales and marketing                                     6,802             6,429                 13,457            10,900
General and administrative                             10,368            12,120                 21,005            20,655

Total share-based compensation expense $ 25,823 $ 27,881 $ 50,868 $ 46,744

Key performance indicators


We believe certain commercial operating statistics are useful to investors in
evaluating our commercial business as they help our management team and
investors evaluate and compare the adoption of our Products from period to
period. The number of active patients on therapy is our principal revenue
driver. An "active patient" is a patient who is receiving treatment under a
commercial prescription order as of the measurement date, including patients who
may be on a temporary break from treatment and who plan to resume treatment in
less than 60 days. Prescriptions are a leading indicator of demand. A
"prescription received" is a commercial order for Optune or Optune Lua that is
received from a physician certified to treat patients with our Products for a
patient not previously on Optune or Optune Lua. Orders to renew or extend
treatment are not included in this total.

The following table includes certain commercial operating statistics for and as of the end of the periods presented.

                                         June 30,
Operating statistics               2022            2021
Active patients at period end
North America (1)                 2,229           2,206
EMEA:
Germany                             458             571
Other EMEA                          421             419
Japan                               346             291
Total                             3,454           3,487


                                                            Three months ended June 30,                          Six months ended June 30,
                                                         2022                          2021                   2022                        2021
Prescriptions received in period
North America (1)                                           954                          967                  1,889                       1,884
EMEA:
Germany                                                     216                          237                    436                         485
Other EMEA                                                  118                          138                    245                         272
Japan                                                        95                          108                    197                         211
Total                                                     1,383                        1,450                  2,767                       2,852

(1) North America includes data for the United States and Canada for 2022 and the United States only for 2021.

There were 8 active MPM patients on therapy as of June 30, 2022 and 11 MPM prescriptions were received in the three months ended June 30, 2022.

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Three and six months ended June 30, 2022 compared to three and six months ended
June 30, 2021

                                              Three months ended June 30,                                         Six months ended June 30,
                                     2022                  2021              % Change                   2022                    2021              % Change
Net revenues                   $      140,866          $ 133,517                     6  %       $     278,413               $ 268,212                     4  %


Net revenues. Net revenues increased 6% to $140.9 million for the three month
period ending June 30, 2022 from $133.5 million for the same period in 2021, and
increased 4% to $278.4 million for the six month period ended June 30, 2022 from
$268.2 million for the same period in 2021. The increase resulted primarily from
an increase in active patients in the U.S. and Japan and increased collections
for previously denied and appealed claims in the U.S. The increase was partially
offset by a reduction in German active patient numbers and approval rates as a
result of updated coverage criteria, and the impact of foreign exchange rate
fluctuations.

We continue to actively appeal and pursue previously denied claims, but the cadence and size of these collections are impossible to predict.

                                                  Three months ended June 30,                                     Six months ended June 30,
                                         2022                 2021              % Change                 2022                2021              % Change
Cost of revenues                   $       28,503          $ 28,599                     -  %       $      56,230          $ 54,984                     2  %


Cost of revenues. Our cost of revenues for the three month period ended June 30,
2022 was $28.5 million, virtually unchanged from $28.6 million for the same
period in 2021. Cost of revenues for the six months ended June 30, 2022
increased by 2% to $56.2 million from $55.0 million for the same period in 2021.
For the six month period ended June 30, 2022, the increase in cost of revenues
was primarily driven by increased shipments to Zai and the cost of shipping
arrays to a higher average volume of commercial patients, offset by lower
manufacturing costs per array. We continue to focus on opportunities to increase
efficiencies and scale within our supply chain. This includes evaluating new
materials, manufacturers, and processes that could lead to lower costs.

Gross margin was 80% for the three months ended June 30, 2022 compared to 79%
for the three months ended June 30, 2021.Gross margin was 80% for the six months
ended June 30, 2022 and 79% for the six months ended June 30, 2021. Excluding
sales to Zai, cost of revenues per active patient per month was $2,391 for the
three months ended June 30, 2022, a decrease of 5% from $2,520 for the same
period in 2021, with increasing supply chain optimization and cost reduction
initiatives more than offsetting the impact of broader economic challenges. Cost
of revenues per active patient is calculated by dividing the cost of revenues
for the quarter less equipment sales to Zai for the quarter by the average of
the active patients at the end of the prior quarter and the ending active
patients in the current quarter. This quarterly figure is then divided by three
to estimate the monthly cost of revenues per active patient. Sales to Zai are
deducted because they are sold at cost and in anticipation of future royalties
from Zai, and Zai patient counts are not included in our active patient
population. Product sales to Zai totaled $3.4 million and $5.3 million for the
three and six months ended June 30, 2022 compared to $2.4 million and $3.9
million for the three and six months ended June 30, 2021.

Operating Expenses.

                                               Three months ended June 30,                                         Six months ended June 30,
                                      2022                  2021              % Change                   2022                    2021              % Change
Research, development and
clinical studies                $       57,075          $  50,315                    13  %       $      99,309               $  96,231                     3  %
Sales and marketing                     44,750             34,138                    31  %              82,634                  65,495                    26  %
General and administrative              31,666             32,760                    (3) %              62,174                  63,885                    (3) %
Total operating expenses        $      133,491          $ 117,213                    14  %       $     244,117               $ 225,611                  

8 %



Research, development and clinical study expenses. Research, development and
clinical study expenses increased 13% to $57.1 million for the three month
period ended June 30, 2022 from $50.3 million for the same period in 2021, and
increased 3% to $99.3 million for the six month period ended June 30, 2022 from
$96.2 million in the same period in 2021, primarily driven by an increase in
direct clinical study costs for both the three and six month
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periods. Direct clinical study costs can fluctuate quarter-to-quarter, dependent
on the amount of clinical research organization services delivered and clinical
materials procured within a given quarter.

Sales and marketing expenses. Sales and marketing expenses increased 31% to
$44.7 million for the three months ended June 30, 2022 from $34.1 million for
the same period in 2021, and increased 26% to $82.6 million for the six month
period ended June 30, 2022 from $65.5 million for the same period in 2021. For
the three and six month period ended June 30, 2022, the change was primarily due
to an increase in market research and strategic planning activities intended to
enhance our commercial capabilities in anticipation of potential future
approvals in new indications, including NSCLC and ovarian cancer. Additionally,
we are investing in market access capabilities in order to evaluate
opportunities, identify optimal access pathways, and successfully gain
reimbursement in new geographies.

General and administrative expenses. General and administrative expenses
decreased 3% to $31.7 million for the three months ended June 30, 2022 from
$32.8 million for the same period in 2021, and decreased 3% to $62.2 million for
the six months ended June 30, 2022 from $63.9 million for the same period in
2021. For the three and six month periods, the change was primarily due to a
decrease in personnel costs.

                                          Three months ended June 30,                                   Six months ended June 30,
                                 2022               2021              % Change                2022                2021              % Change
Financial expenses (income),
net                          $    2,228          $    940                   137  %       $      3,937          $  3,586                    10  %


Financial expenses, net. Financial expenses increased 137% to $2.2 million for
the three months ended June 30, 2022 from $0.9 million for the same period in
2021, and increased 10% to $3.9 for the six months ended June 30, 2022 from $3.6
for the same period in 2021. For the three and six month periods, the increase
was primarily due to increased foreign exchange rate fluctuations offset by
interest income. Foreign exchange rate expenses increased to $3.4 million for
the three months ended June 30, 2022 from income of $0.3 million for the same
period in 2021, and increased 166% to $4.8 million for the six months ended
June 30, 2022 from $1.8 million for the same period in 2021.

                                             Three months ended June 30,                                    Six months ended June 30,
                                    2022                2021              % Change                2022                2021              % Change
Income taxes                   $        652          $  1,406                   (54) %       $      2,784          $  2,800                    (1) %


Income taxes. Income taxes decreased 54% to $0.7 million for the three months
ended June 30, 2022 from $1.4 million for the same period in 2021, and was
unchanged at $2.8 million for the six months ended June 30, 2022 compared to the
same period in 2021. For the three months ended June 30, 2022 the increase
reflects a change in the mix of applicable statutory tax rates in active
jurisdictions.

Non-GAAP financial measures


We also measure our performance using a non-GAAP measurement of earnings before
interest, taxes, depreciation, amortization and shared-based compensation
("Adjusted EBITDA"). We believe Adjusted EBITDA is useful to investors in
evaluating our operating performance because it helps investors evaluate and
compare the results of our operations from period to period by removing the
impact of earnings attributable to our capital structure, tax rate and material
non-cash items, specifically share-based compensation.
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We calculate Adjusted EBITDA as operating income before financial expenses and
income taxes, net of depreciation, amortization and share-based compensation.
The following table reconciles net income (loss), which is the most directly
comparable GAAP operating performance measure, to Adjusted EBITDA.

                                              Three months ended June 30,                                         Six months ended June 30,
                                     2022                  2021              % Change                   2022                    2021              % Change
Net income (loss)              $      (24,008)         $ (14,641)                   64  %       $     (28,655)              $ (18,769)                   53  %
Add: Income tax                           652              1,406                   (54) %               2,784                   2,800                    (1) %
Add: Financial expenses
(income), net                           2,228                940                   137  %               3,937                   3,586                    10  %
Add: Depreciation and
amortization                            2,654              2,480                     7  %               5,264                   4,850                     9  %
EBITDA                         $      (18,474)         $  (9,815)                   88  %       $     (16,670)              $  (7,533)                  121  %
Add: Share-based compensation          25,823             27,881                    (7) %              50,868                  46,744                     9  %
Adjusted EBITDA                $        7,349          $  18,066                   (59) %       $      34,198               $  39,211                   (13) %


Adjusted EBITDA decreased by 59% to $7.3 million for the three months ended
June 30, 2022 from $18.1 million for the same period in 2021, and decreased by
13% to $34.2 million for the six months ended June 30, 2022 from $39.2 million
for the same period in 2021. The changes in both periods were primarily due to a
decrease in net income driven by increased investment in research, development
and clinical studies and sales and marketing intended to maximize future growth
opportunities.

Liquidity and Capital Resources

We have incurred significant losses and cumulative negative cash flows from operations since our founding in 2000. As of June 30, 2022, we had an accumulated deficit of $714.6 million. To date, we have primarily financed our operations through the issuance and sale of equity and the proceeds from long-term loans.


At June 30, 2022, we had $948.5 million in cash, cash equivalents and short-term
investments, an increase of $10.8 million compared to $937.7 million at December
31, 2021. We believe our cash, cash equivalents and short-term investments as of
June 30, 2022 are sufficient for our operations for at least the next 12 months
based on our existing business plan and our ability to control the timing of
significant expense commitments. We expect that our research, development and
clinical study expenses, sales and marketing expenses and general and
administrative expenses will continue to increase over the next several years
and may outpace our gross profit. As a result, we may need to raise additional
capital to fund our operations.

The following summary of our cash flows for the periods indicated has been derived from our unaudited consolidated financial statements, which are included elsewhere in this Quarterly Report:


                                                  Six months ended June 30,
                                                   2022                  2021              Change              % Change
Net cash provided by (used in) operating
activities                                   $       12,075          $  43,952          $ (31,877)                    (73) %
Net cash provided by (used in) investing
activities                                          138,347             51,553             86,794                     168  %
Net cash provided by financing activities             7,877             19,014            (11,137)                    (59) %
Effect of exchange rate changes on cash and
cash equivalents                                       (145)              (105)               (40)                     38  %
Net increase (decrease) in cash, cash
equivalents and restricted cash              $      158,154          $ 114,414          $  43,740                      38  %


Operating activities. Net cash used in or provided by operating activities represents our net income (loss) for the periods presented, share-based compensation and depreciation and amortization. Operating cash flows are also impacted by changes in working capital.

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Net cash provided by operating activities decreased by $31.9 million from $44.0
million net cash provided by operating activities for the six months ended
June 30, 2021 to $12.1 million net cash provided by operating activities for the
six months ended June 30, 2022. This decrease was a result of net income
decreasing by $9.9 million compared to the same period in 2021, with a $24.4
million increase in working capital, including a $9.7 million decrease in
accounts payables and accrued expenses, $12.9 million increase in accounts
receivables and $5.4 million increase in inventories, partially offset by a $2.4
million change in the mix from cash to non-cash based expenses.

Investing activities. Our investing activities consist primarily of investments in and redemptions of our short-term investments as well as investments in property and equipment.


Net cash provided by investing activities was $138.3 million for the six months
ended June 30, 2022, compared to $51.6 million provided by investing activities
for the six months ended June 30, 2021. The net cash provided by investing
activities for the six months ended June 30, 2022 was primarily attributable to
$147.6 million of net proceeds from maturity of short-term investments, offset
by the purchase of $9.2 million of property and equipment. The net cash provided
by investing activities for the six months ended June 30, 2021 was primarily
attributable to $58.2 million of net proceeds from maturity of short-term
investments, partially offset by the purchase of $6.6 million of property and
equipment.

Financing activities. To date, our primary financing activities have been the
sale of equity and the proceeds from long-term loans. Net cash provided by
financing activities was $7.9 million for the six months ended June 30, 2022, as
compared to $19.0 million provided by financing activities for the six months
ended June 30, 2021. The net cash provided by financing activities for the six
months ended June 30, 2022 and June 30, 2021 included proceeds from the issuance
of shares as well as proceeds from the exercise of options under the Company's
employee stock purchase plan and stock option plan.

Convertible Notes


On November 5, 2020, we issued $575.0 million aggregate principal amount of 0%
Convertible Senior Notes due 2025 (the "Notes"). The Notes are senior unsecured
obligations. The Notes do not bear regular interest, and the principal amount of
the Notes will not accrete. The Notes are convertible at an initial conversion
rate of 5.9439 ordinary shares per $1,000 principal amount of the Notes, which
is equivalent to an initial conversion price of approximately $168.24 per
ordinary share. The Notes are convertible at the option of the holders upon the
satisfaction of certain other conditions and during certain periods, and if the
Company exercises its right to redeem the Notes as permitted or required by the
indenture. On or after August 1, 2025 until the close of the business on the
business day immediately preceding the maturity date, holders may convert all or
any portion of their Notes at the conversion rate at any time irrespective of
the foregoing conditions.

In January 2021, we irrevocably elected to settle all conversions of Notes by a
combination of cash and our ordinary shares and that the cash portion per $1,000
principal amount of Notes for all conversion settlements shall be $1,000.
Accordingly, from and after the date of the election, upon conversion of any
Notes, holders of Notes will receive, with respect to each $1,000 principal
amount of Notes converted, cash in an amount up to $1,000 and the balance of the
conversion value, if any, in our ordinary shares

For more information, see Note 10a. to the Consolidated Financial Statements in the 2021 10-K.


Term loan credit facility

On November 6, 2020, we entered into a new three-year $150.0 million senior
secured revolving credit facility with a syndicate of relationship banks (the
"2020 Credit Facility"). We may, subject to certain conditions and limitations,
increase the revolving credit commitments outstanding under the 2020 Credit
Facility or incur new incremental term loans in an aggregate principal amount
not to exceed an additional $100.0 million.

The commitments under the 2020 Credit Facility are guaranteed by certain of our
subsidiaries and secured by a first lien on our and certain of our subsidiaries'
assets. Outstanding loans bear interest per annum at a sliding scale based on
the our secured leverage ratio from 2.75% to 3.25% above the applicable
interbank borrowing reference rate for the currency in which the loan is
denominated. Additionally, the 2020 Credit Facility contains a fee for the
unused revolving credit commitments at a sliding scale based on our secured
leverage ratio from 0.35% to 0.45%. The 2020 Credit Facility contains financial
covenants requiring maintenance of a minimum fixed charge coverage
                                       25

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Table of Contents


ratio and specifying a maximum senior secured net leverage ratio, as well as
customary events of default which include a change of control. As of June 30,
2022, we were in compliance with such covenants.

As of June 30, 2022, we had no outstanding balance borrowed under the 2020 Credit Facility.

Contractual Obligations and Commitments

There have been no material changes from the information disclosed in our 2021 10-K.

Off-Balance Sheet Arrangements


We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements as defined under U.S. Securities and Exchange
Commission ("SEC") rules.

© Edgar Online, source Glimpses

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