Novocure (NVCR -2.49%) is the company behind TTFields, a revolutionary new and nontoxic treatment for glioblastoma that uses low-intensity, alternating electrical fields to impede cancerous cell division, and kill cancer cells.
In this Industry Focus: Healthcare segment, Motley Fool analyst Kristine Harjes and contributor Todd Campbell explain how the treatment works, why it's so incredibly exciting for patients and doctors, how much Novocure is making on the treatment already, how it might expand its addressable market in the next few years, and more.
A full transcript follows the video.
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This video was recorded on July 26, 2017.
Kristine Harjes: Let's dive in, starting with a company called Novocure, ticker NVCR. Todd, I know this is a company that you and fellow Fool.com [investor] Brian Feroldi went to visit recently.
Todd Campbell: This is a really interesting story. The stock is trading around $19 a share; it has a market cap of about $1.65 billion. Kristine, we were lucky enough to both live up in the area and be able to go and sit down and talk to the key executives about how they are reimagining treatment for cancer, specifically glioblastoma, which is the most common form of brain cancer. Listeners, if you pay attention to Washington, which, as healthcare investors, we always pay attention to Washington, you've probably heard the sad news that John McCain has been diagnosed with a type of brain cancer. Sure enough, it was glioblastoma. So, that got us thinking, what kind of treatments are available for patients with glioblastoma? And sure enough, Novocure has a relatively new approach that seems to be very effective in the indication.
Harjes: It's really interesting, because it's completely different than traditional forms of treatment. It's not a chemotherapy, it's not radiation. Instead -- and to me, this sounds like science fiction, but it's on the market, so it actually does have some clinically demonstrated effect -- what it does is use these tumor-treating fields, they're called TTFields, and they have shown that surrounding a tumor with these fields helps to stop cancerous cell division. As a result, the tumor itself is not able to grow as quickly inside the patient. The great advantage to that is, there's no systemic toxicity, which is in complete contrast to something like radiation or chemotherapy. Chemotherapy has a whole host of side effects -- nausea, constipation, fatigue, anemia, there's a ton of really terrible side effects that patients have to experience. Radiation often kills healthy cells alongside cancerous ones. But the theory here is that you can avoid that.
Campbell: Right. It's really interesting. This is going to date [me]. You probably like to go to the beach, I go to the beach. Back in the olden days, when you went to the beach and you wanted to listen to your favorite radio station, you really had to get careful with that transistor radio to get that frequency just right to get your favorite station. Somehow -- lots of research, obviously -- Novocure was able to figure out the exact, precise frequency that they could use to disrupt cell division. So, their approach is extremely different than anything doctors, including oncologists, are used to prescribing for their patients. To be able to disrupt the ability for these cancer cells to replicate, without having these off-target risks of safety and toxicity, and even the ability, so far, for there to be any kind of a buildup of resistance to this approach -- it's very different.
The machine itself, you have this TTField generating machine, it's not that big. It's maybe the size of a small laptop computer, or something like that. Then, you have these arrays that you wear on your head, kind of like a knit hat. The arrays are custom designed for every patient. A scan is done, they figure out exactly where to put these on your head. They're made just for this one patient. They send them the generator, they send them the arrays. The arrays get swapped out every two to three days. And sure enough, in trials, this has more than doubled the five-year survival rate when used alongside chemotherapy in glioblastoma patients.
Harjes: This is a cancer that has extremely poor prognosis. So, to see such a great, dramatic improvement in this gives a lot of patients a lot of hope. Especially now that this disease has become part of the national attention because of Sen. John McCain, there will be a lot of eyes looking at this company to see, will it continue to perform as well? Right now, there are about 1,200 patients that are actively using Optune. That figure has been steadily rising over time. The company is exploring it in other forms of cancer as well, including lung, ovarian and pancreatic cancer, which could really, really expand to the addressable market for this company.
Campbell: Glioblastoma, I think, is only 12,500 cases per year in the U.S., maybe another 5,000 if you add together Japan and Germany, where Optune is also available. So, it's a relatively small market compared to, say, pancreatic cancer, which is 50,000-plus, or non-small lung cancer, which is, of course, even more. The trials they're conducting now, the data won't be available for a while on that. But what's interesting to me about this is, in speaking to management and talking to them, they think they can achieve breakeven and potentially profitability just on the glioblastoma approvals alone. You mentioned they're treating about 1,200 patients now. That's up substantially from 225 patients in 2014. Revenue was $83 million last year, that's up 150% year over year. And costs are growing much slower than that, because they've built up all this infrastructure to commercialize, and now they're able to leverage more sales against those fixed costs to get themselves closer and closer to profitability. There's no timeline for profitability, but if you look at the first-quarter results, it seems like they continue to make solid headway. 2017 looks like it's shaping up to be a year that's even better than last year.