NVCR

I looked through history a little, and I don’t see much posted on this company in the last year. This is another MED/TECH company that has done very well recently and I think it’s just entering the big up-slope of it’s “s” curve.

https://www.youtube.com/watch?v=td5Ld3nURAI - This is a TED talk the CEO did in 2012 that gives a great overview of the technology they are qualifying. If you know nothing about the company, start with this.

https://www.fool.com/premium/coverage/4056/coverage/2020/05/… - If you have access, this is a great recent interview with the CEO done by Motley Fool. You need to skip to the 4:00 mark in the video - that is where the interview starts.

https://3sj0u94bgxp33grbz1fkt62h-wpengine.netdna-ssl.com/wp-… - this is the most recent corporate presentation

Qtr End - - Revenue - - YOY Growth - - Gross Margin
2Q20 --------- $116 ---------- 34% ---------- 78%
1Q20 --------- $102 ---------- 39% ---------- 76%
4Q19 --------- $99 ----------- 42% ---------- 75%
3Q19 --------- $92 ----------- 42% ---------- 75%
2Q19 --------- $87 ----------- 66% ---------- 76%
1Q19 --------- $73 ----------- 37% ---------- 73%

*NOTE - These solid financial results are with ONLY 1 approved cancer indication (GBM - a type of brain cancer). They are expected to complete trials in the next several years on 4 additional cancer types - all of which have much higher numbers of potential patients compared to GBM. So, if they are achieving the above results with only one small indication, the growth could be explosive as other indications are approved. Phase 2 data was solid for all 4, and they are now in phase 3 testing for all of them. (They are also in Phase 2 testing for a couple additional cancers.)

  • They are cash flow positive, and expected to remain so.
  • They have at least 6 ongoing clinical trials that are all being funded by cash flow from operations (meaning - no additional dilution needed).
  • It is an additive therapy – meaning it can be combined with other treatments. So, even if other cancer treatments are developed, this should still be a strong technology because it can slow down the cancer progression and will not interfere with other treatments like surgery, radiation, or chemo.
  • In all of NVCR’s testing, there is not a single type of cancer that is “immune” to its effects. So, it has very broad application.
    It has 4 ongoing phase 3 trials in other cancers – and some of these are for cancers that are much more prevalent than GBM. (I’ll include more details on this farther below)
  • It is fully qualified and approved for Medicare reimbursement for GBM. It is being sold for GBM in the US and several other countries. It is starting to be used in China this year (China has a higher # of GBM diagnoses than any other country, so the opportunity is large there - but many may not be able to afford it.)
  • No competitors. Novocure has a portfolio of over 140 patents on its devices and TTF therapy, which management believes could provide protection as far out as 2037.
  • NO SIDE EFFECTS — no pain, no infections, no nausea, diarrhea, fatigue, etc. This is a HUGE advantage over traditional forms of cancer treatment. Quote from one of their ERs - "we’ve never seen a safety issue of course in 20 years of work with this therapy”
  • Last year, the National Comprehensive Cancer Network, a consortium of leading cancer networks that establishes best practices, made Optune a Category 1 treatment for newly diagnosed GBM — meaning that there is “uniform NCCN consensus” that the therapy is appropriate “based upon high-level evidence.”
  • There are many research schools and hospitals that are now doing their own testing of the Novocure devices in combination with many other treatments. Last year there was an industry conference where there were over 40 presentations. “43 Presentations on Tumor Treating Fields at 24th Annual Meeting of the Society for Neuro-Oncology”
  • To date, they have treated over 10,000 GBM patients and have had 16 quarters of active patient growth.
  • It is a recurring revenue model. Once a patient is on it, they stay on it for the rest of their life and pay a monthly rental fee.
  • They have a Research and Development day coming up on November 12.

In regard to TAM and additional ongoing trials:

TAM:

GBM - this is the cancer they are currently approved for:
o 15,000 people will be diagnosed with GBM or tumors that typically progress to GBM in the U.S. Of this population, we estimate that approximately 11,200 patients are candidates for treatment with Optune based upon the rate of disease progression and medical eligibility. We estimate that approximately 8,200 of eligible patients will actively seek treatment.
o 4,600 in active markets outside US.

  • 45,000 people diagnosed in China

MSM - I believe this is also approved, but it’s a small market
o In 2020, we estimate that approximately 3,000 people are diagnosed with MPM in the U.S. each year. Of this population, we estimate that approximately 2,400 patients are candidates for treatment with NovoTTF-100L based upon the rate of disease progression and medical eligibility.

Non-small-cell lung cancer (NSCLC)
o approximately 193,000 new cases annually in the U.S.,
o 501,000 outside US (active areas)

Brain metastases from NSCLC
o estimated that up to 200,000 new cases are diagnosed in the U.S. each year

Pancreatic cancer
o 51,000 new cases annually in the U.S.,
o 175,000 outside US (active areas)

Ovarian cancer
o 24,500 new cases annually in the U.S.,
o 79,000 outside US (active areas)

Phase II trials:
o Liver Cancer
---- approximately 38,000 new cases annually in the U.S.,
---- 118,000 outside US
o Gastric Cancer
---- 456,000 new cases annually in China
---- 26,000 new cases annually in the U.S.
---- 133,000 new cases annually in Europe
? 116,000 new cases annually in Japan

As you can see, the patient population for the other cancers they are qualifying on is orders of magnitude larger than it is for GBM.

The 4 trials in Phase 3 are not scheduled to end until 2022 and 2023 - HOWEVER, the first GBM trail was stopped early because the results were so good they did not need to complete the rest of the trial. I’m not predicting that for the other trials, but you never know.

That’s everything I know. I hope it is helpful.

Top Positions: LVGO/TDOC 16%; FSLY 13%; CRWD 10%; NVCR 7%; TMDX 7%; GH 6%; NET 5%; DDOG 3% (plus about a dozen smaller positions).

31 Likes

Hi AnalogKid70.

When I first read about Novocure’s modality, my initial reaction was WTF? instead of TTF! (Tumor-treating fields is the latter acronym). Research since then seems to validate their science.

My understanding is that they are profitable (which is good) but barely, leading to a stratospheric PE. That isn’t a deal-breaker for me – I have some unprofitable companies in my portfolio that have been profitable for me.

One thing that bugs me is when companies incorporate in obscure places. Novocure is incorporated in the Channel Islands (think: English Channel; it is an English protectorate, but has separate sovereignty). Do you know why this is the case? Is it simply a tax-dodge?

Fool on!
Thanks, and best wishes,
TMFDatabaseBob (no NVCR position, but it is on my Watch List)
Maintenance Coverage Fool
See what a “Coverage Fool” does here: http://www.fool.com/community/community-team.aspx
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

Please note: I am not a member of any newsletter team. My opinions are my own and do not necessarily reflect those of the TMF advisers. I am a Maintenance Coverage Fool (see the above link for details). I am not an investment professional, merely an investor.

6 Likes

“Novocure is incorporated in the Channel Islands (think: English Channel; it is an English protectorate, but has separate sovereignty). Do you know why this is the case? Is it simply a tax-dodge?”

I do not know. I have never seen anyone bring it up as a concern before. I will see if I can find any info on it.

Another thing to be aware of - I believe their R&D is primarily located in Israel. Nothing against Israel, but it’s not the most stable region in the world. From what I understand, the technology was originally developed in Israel.

Thanks for posting this! One thing - I can’t find anything that suggests they have a recurring income model in any corporate reporting or elsewhere? It’s not highlighted in the annual report or most recent announcements…

It would make sense - renting the device for a monthly fee, or perhaps (like ROKU) there could be a hardware + subscription aspect?

Can you point us to anything that expands on the recurring income aspect please?

Thanks!

https://3sj0u94bgxp33grbz1fkt62h-wpengine.netdna-ssl.com/wp-…

ASC 606 Revenue Recognition is on p.84-85

" I can’t find anything that suggests they have a recurring income model in any corporate reporting or elsewhere? It’s not highlighted in the annual report or most recent announcements… Can you point us to anything that expands on the recurring income aspect please?"

https://www.sec.gov/Archives/edgar/data/1645113/000156459019….

The link is for 2018 10k - it’s just the one that came up when I did a quick search. I’m sure it’s still similar. Quote from that 10k:

“The monthly list price for Optune is $21,000 in the U.S. and we have set list prices in our other currently active markets that are approximately equivalent to this price subject to currency fluctuations.”

So per-person, per-month is $21k.
The beauty of this model is that as NVCR makes improvements to the device, if they are able to keep people alive longer, they keep getting paid longer. Classic win-win scenario.

https://seekingalpha.com/news/3650159-novocure-guides-q4-rev…

NVCR pre-announced this morning raising guidance for Q4 and full year 2020 results.

These results are with only 1 fully approved indication (glioblastoma). They do have a 2nd indication approved for commercial sales, but it’s extremely small volume. My original post in this string has more details about the company, and the upcoming clinical readouts expected in 2021. If they get approval for all the different cancers they are currently testing on, this is going to be a monster company.

Stock was at $60 in July and has risen to $170 as of last Friday.

Long NVCR 7%

Qtr End - - Revenue - - YOY Growth - - Gross Margin
4Q20 --------- $144 ---------- 45% ---------- ??
3Q20 --------- $132 ---------- 44% ---------- 79%
2Q20 --------- $116 ---------- 34% ---------- 78%
1Q20 --------- $102 ---------- 39% ---------- 76%
4Q19 --------- $99 ----------- 42% ---------- 75%
3Q19 --------- $92 ----------- 42% ---------- 75%
2Q19 --------- $87 ----------- 66% ---------- 76%
1Q19 --------- $73 ----------- 37% ---------- 73%

14 Likes