Part I Business NovoCure is an oncology company focused on its TTFields platform for GBM and MPM, with a robust pipeline and pending FDA decision for NSCLC Overview and Technology NovoCure's TTFields technology uses electric fields to disrupt cancer cell division, delivered via portable devices - The company's proprietary TTFields technology disrupts cancer cell mitosis by applying specific frequency electric fields, a mechanism believed to be broadly applicable to solid tumors222332 - Key commercial products are Optune Gio (for GBM) and Optune Lua (for MPM), delivered via a portable device. The company is actively developing next-generation arrays and a third-generation device to optimize therapy223537 - In December 2023, NovoCure filed a PMA application with the FDA for TTFields therapy in non-small cell lung cancer (NSCLC), which was accepted in January 2024, with a decision anticipated in the second half of 202424 Commercial Business and Reimbursement Commercial operations focus on Optune Gio and Optune Lua, with direct-to-patient distribution and established reimbursement Estimated Annual Addressable Patient Population for Optune Gio (GBM) | Region | Diagnosed with GBM (or progressing tumors) | Candidates for Optune Gio Treatment | | :--- | :--- | :--- | | U.S. | ~15,000 | ~8,200 | | Germany | ~4,600 | ~2,500 | | Japan | ~2,200 | ~1,200 | - The company operates a direct-to-patient distribution model (except in Japan) and employs 126 sales force colleagues globally as of December 31, 20235657 - As of December 31, 2023, national reimbursement for Optune Gio is secured in seven countries, and in the U.S., a substantial majority of private health insurance plans and the Medicare fee-for-service program provide coverage for newly diagnosed GBM6162 Development Pipeline The development pipeline expands TTFields therapy to solid tumors, with key late-stage trials in NSCLC, pancreatic cancer, and GBM Key Phase 3 Clinical Trial Status and Anticipated Data | Trial Name | Indication | Status | Anticipated Top-Line Data | | :--- | :--- | :--- | :--- | | LUNAR | 2nd Line NSCLC | Positive results presented | N/A (PMA submitted) | | METIS | Brain Metastases from NSCLC | Final patient enrolled (Mar 2023) | Q1 2024 | | PANOVA-3 | Pancreatic Cancer | Final patient enrolled (Feb 2023) | Q4 2024 | | TRIDENT | Newly Diagnosed GBM | Final patient enrolled (Jan 2024) | 2026 | - The Phase 3 LUNAR study in NSCLC met its primary endpoint, showing a statistically significant 3-month improvement in median overall survival (13.2 months vs. 9.9 months) for patients receiving TTFields plus standard therapies76 - The Phase 3 INNOVATE-3 trial for platinum-resistant ovarian cancer did not meet its primary endpoint of overall survival, with results announced in August 202399 Operations and Human Capital NovoCure outsources manufacturing, maintains a robust IP portfolio, and reduced its workforce by 13% to optimize operations - The company outsources all manufacturing and is developing second sources for critical components to mitigate supply chain risk101102 - The intellectual property portfolio includes hundreds of issued patents with expected U.S. expiration dates between 2024 and 2041103 - In November 2023, the company reduced its headcount by approximately 200 employees (13%) to strengthen and optimize business operations for future growth151 Risk Factors The company faces risks from product reliance, market acceptance, reimbursement, operating losses, supply chain, competition, regulation, and IP - The business heavily depends on Optune Gio (for GBM) and Optune Lua (for MPM), and its prospects will be materially harmed if it cannot increase sales or successfully commercialize products for additional indications157158 - The company has a history of substantial operating losses and may not achieve sustainable profitability, as expenses for commercialization and R&D are expected to increase162 - Failure to secure and maintain adequate coverage and reimbursement from third-party payers, including Medicare, could adversely affect product acceptance and revenues175187 - Dependence on single-source suppliers for some components creates risk of shipment delays and business disruption if these suppliers fail to deliver196 - Several early patents began expiring in 2021, which could adversely affect the company's ability to protect its products and may allow competitors to develop competing therapies271272 Cybersecurity NovoCure manages cybersecurity risks through technology, ISO certifications, Board oversight, and compliance with HIPAA and GDPR - The company's cybersecurity risk management is overseen by the Board's Audit Committee, which receives updates at least quarterly297 - NovoCure holds ISO 13485 (quality management for medical devices) and ISO 27001 (information security) certifications, which require annual independent audits296 - The company complies with major data privacy laws in its operating jurisdictions, including HIPAA in the U.S. and GDPR in the EU298 Properties NovoCure's primary facilities are leased in Switzerland, the U.S., and Israel, with a new U.S. flagship under construction - The company's main global facilities in Switzerland, the U.S., and Israel are leased299 - A property was acquired in Portsmouth, New Hampshire, in December 2021, with construction for a new U.S. flagship location expected to be completed in 2024300 Legal Proceedings A class action lawsuit was filed in June 2023 against NovoCure and executives regarding LUNAR trial results, which the company will defend - A putative class action lawsuit was filed in June 2023 against the company and its executives concerning public statements about the phase 3 LUNAR clinical trial results301 - The company believes the action is without merit and plans to defend the lawsuit vigorously301 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities NovoCure's ordinary shares trade on NASDAQ under 'NVCR'; no dividends have been paid, and equity compensation plan data is provided - The company's ordinary shares are traded on the NASDAQ Global Select Market under the symbol NVCR315 - The company has not paid any dividends since its inception and does not plan to in the foreseeable future316 Equity Compensation Plan Information (as of Dec 31, 2023) | Plan Category | Number of Securities to be Issued Upon Exercise | Weighted Average Exercise Price | Number of Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by shareholders | 14,352,573 | $23.84 | 28,632,049 | Management's Discussion and Analysis of Financial Condition and Results of Operations In 2023, net revenues decreased 5% to $509.3 million, resulting in a $207.0 million net loss due to lower revenues and higher operating expenses Results of Operations In 2023, net revenues fell 5% to $509.3 million, gross margin declined to 75%, and operating expenses rose 20%, resulting in a $207.0 million net loss Consolidated Statements of Operations Data (in thousands) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net revenues | $509,338 | $537,840 | $535,031 | | Gross profit | $381,058 | $422,973 | $420,154 | | Total operating costs and expenses | $613,928 | $512,496 | $464,487 | | Operating income (loss) | $(232,870) | $(89,523) | $(44,333) | | Net income (loss) | $(207,043) | $(92,534) | $(58,351) | | Basic and diluted net income (loss) per share | $(1.95) | $(0.88) | $(0.56) | - Net revenues decreased by 5% in 2023, primarily due to a $48.4 million reduction in collections from denied or appealed claims in the U.S359 - Sales and marketing expenses increased by 31% to $226.8 million, largely due to costs for geographic expansion and pre-launch activities for the anticipated NSCLC indication367 Key Performance Indicators Active patients on therapy increased to 3,755 in 2023, driven by international growth, and total prescriptions rose to 6,083 Commercial Operating Statistics | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Active patients at period end | | | | | United States | 2,162 | 2,164 | 2,259 | | International markets - Total | 1,593 | 1,266 | 1,328 | | Total | 3,755 | 3,430 | 3,587 | | Prescriptions received in period | | | | | United States | 3,912 | 3,790 | 3,770 | | International markets - Total | 2,171 | 1,739 | 1,892 | | Total | 6,083 | 5,529 | 5,662 | Liquidity and Capital Resources Cash and investments totaled $910.6 million at year-end 2023, a $58.8 million decrease due to operating losses, but capital is sufficient for 12 months - The company's cash, cash equivalents, and short-term investments totaled $910.6 million at year-end 2023, down from $969.4 million at year-end 2022375 Summary of Cash Flows (in thousands) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(73,336) | $30,788 | $82,756 | | Net cash provided by (used in) investing activities | $184,148 | $(139,957) | $(144,834) | | Net cash provided by (used in) financing activities | $15,787 | $15,491 | $25,702 | - The company holds $575 million of 0% Convertible Senior Notes due in 2025. In February 2023, the company terminated its $150 million senior secured revolving credit facility, under which no balance was outstanding387392 Quantitative and Qualitative Disclosures About Market Risk Primary market risks are interest rate sensitivity on investments and foreign currency exchange risk, with no current hedging for currency exposure - The primary market risks are interest rate sensitivity on its $910.6 million investment portfolio and foreign currency exchange risk from global operations408409 - Due to the short-term nature of its investments, a hypothetical 10% change in market interest rates is not expected to materially impact financial results410 - The company does not currently hedge its foreign currency exchange risk411 Financial Statements and Supplementary Data This section presents audited consolidated financial statements and the independent auditor's unqualified opinion, with revenue recognition as a critical audit matter Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $1,146,129 | $1,191,648 | | Cash, cash equivalents & short-term investments | $910,616 | $969,425 | | Total Liabilities | $783,633 | $750,478 | | Long-term debt, net | $568,822 | $565,509 | | Total Shareholders' Equity | $362,496 | $441,170 | - The independent auditor, Kost Forer Gabbay & Kasierer, issued an unqualified opinion on the financial statements and internal controls over financial reporting414425 - The auditor identified revenue recognition, specifically the measurement of variable consideration from implicit price concessions, as a critical audit matter due to the challenging judgment and subjective management assumptions involved418420421 Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with an unqualified auditor's opinion - Management concluded that both disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2023595597 - The independent registered public accounting firm provided an unqualified attestation report on the effectiveness of the company's internal control over financial reporting598 Part III Directors, Executive Compensation, and Corporate Governance Information for Items 10-14, including directors, executive compensation, and corporate governance, is incorporated by reference from the 2024 proxy statement - Information regarding directors, executive officers, corporate governance, executive compensation, security ownership, related party transactions, and principal accountant fees is incorporated by reference from the forthcoming 2024 proxy statement605606607 Part IV Exhibits and Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed with the 10-K, including governance documents, material contracts, and certifications - This section provides a comprehensive list of all exhibits filed with the 10-K, including governance documents, material contracts (such as the Zai Lab agreement and debt indentures), and executive compensation plans621622623 - Certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act are included as exhibits624
novocure(NVCR) - 2023 Q4 - Annual Report