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This Explains Why NovoCure Is Surging Today

By Brian Feroldi – Apr 26, 2018 at 3:53PM

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Shares jumped even though the company reported worse-than-expected results. What's going on?

What happened

After the company reported first-quarter results, shares of NovoCure (NVCR -1.53%), a medical device company focused on cancer, jumped as much as 10% in afternoon trading on Thursday. Shares closed the day up more than 9%.

So what

Here's an overview of the key takeaways from the first-quarter report:

  • Revenue jumped 49% to $52.1 million. That was behind the $56.7 million that Wall Street had expected.
  • Net loss was $20.7 million, or $0.23 per share. That was worse than the $0.13 net loss that analysts had expected.
  • Cash balance at quarter-end was $216 million.

Normally, you'd expect that a high-flying stock like Novocure would plunge after the company reported slower-than-expected growth. However, Wall Street greeted this report with optimism for a few reasons:

  • The number of prescriptions received during the period jumped 41%, which shows that demand for Optune remains strong.
  • The National Comprehensive Cancer Network (NCCN) recently updated its guidelines to include tumor treating fields as a category 1 form of treatment for newly diagnosed brain cancer. This update should help drive increased demand for Optune, especially among doctors who are still skeptical about the technology.
  • In Japan, 30 prescriptions were received during the quarter, and 20 patients were on Optune at quarter-end. Since Japan is one of the biggest medical device markets in the world, this should be a great new growth avenue for the company.
  • Management announced on its conference call with investors that the company will seek approval from the Food and Drug Administration for Optune in mesothelioma before the end of the year. This marks the first indication outside of the brain for which Novocure will pursue regulatory approval.

In other words, investors have plenty of reasons to believe that Novocure is primed for fast growth for the foreseeable future.

Coins and bills stacked to look like a rocket ship

Image source: Getty Images.

Now what

As a NovoCure investor, I'm quite pleased (and a little shocked) to see that Wall Street is greeting today's report with optimism instead of fear. However, that makes sense, since Novocure continues to produce healthy top-line growth, and is investing heavily now to ensure that growth remains strong for the foreseeable future.

All in all, I still believe that this company's growth trajectory remains on track. That's why I plan on hanging on to my shares for years to come.

Brian Feroldi owns shares of NovoCure. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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