Please ensure Javascript is enabled for purposes of website accessibility

Here's Why NovoCure Fell 36.8% in October

By Maxx Chatsko – Updated Nov 7, 2018 at 11:23AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The biopharma stock had more than doubled from the beginning of 2018 to the end of September. Why are investors suddenly pessimistic?

What happened

Shares of oncology medical device leader NovoCure (NVCR -0.76%) declined nearly 37% last month, according to data provided by S&P Global Market Intelligence. The stock entered October with year-to-date gains over 150%, but a combination of market volatility and company-specific updates nudged investors to take some profits off the table. It's worth noting that the stock is still up more than 65% for the year through the first week of November.

Nonetheless, investors thought NovoCure delivered unimpressive third-quarter 2018 results, which came just one day after the company announced notable changes to its board of directors. The company's founder, Professor Yoram Palti, retired from the board, although he will continue as the chief technology officer. Louis J. Lavigne Jr., the chairman of the audit committee, also retired from the board, which will be reduced to 10 seats.

A chart showing a steady positive trajectory and then a sudden decline.

Image source: Getty Images.

So what

NovoCure reported third-quarter 2018 revenue of $64.8 million, which represented year-over-year growth of 29% but fell just shy of Wall Street expectations. That figure also lagged the 34% growth in active patients reported, indicating selling prices are receding just a bit as the company expands in international markets. The business reported a net loss of $11.7 million for the quarter, but that was slightly better than the average analyst estimate.

Meanwhile, the reshuffling of the board of directors might simply be chalked up as normal business affairs. Both Palti and Lavigne were directors for a significant length of time and helped NovoCure to transition into a commercial-stage company. But rightly or wrongly, investors might have been wondering if the news was a sign of internal conflict.

Now what

Mr. Market still thinks highly enough of NovoCure to hand the company a market valuation exceeding $3 billion. That's a healthy premium relative to current operations, which shows confidence in the business' trajectory. As third-quarter 2018 operating performance demonstrates, however, there may be a few bumps in the road as the company works to deliver profitable growth.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Novocure Stock Quote
$84.40 (-0.76%) $0.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.