NovoCure (NVCR -0.58%) sells a noninvasive medical device called Optune that uses electric fields to treat brain cancer. The company recently told investors that it has won approval from the Food and Drug Administration (FDA) for its device to be used to treat mesothelioma, which is an extremely rare form of cancer that is caused by exposure to asbestos.

In this episode of The Motley Fool's Industry Focus: Healthcare, host Shannon Jones and contributor Brian Feroldi discuss why investors should be so excited about this approval, even though the patient population for this indication is extremely small.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

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This video was recorded on June 5, 2019.

Shannon Jones: Brian, let's kick things off with an update from a company we spoke about earlier this year. That's device maker NovoCure, NVCR. You can say they've had a rather unorthodox approach to treating cancer, particularly when it comes to difficult-to-treat cancers -- the solid tumors, which are really the holy grail of cancer treatment today. The stock is up about 60% on the year vs. the S&P [500], which is up about 9.5%. That's even despite a pretty rocky pullback that happened in the spring. They just reported out news in May.

Brian, before we dive into the updates, can you get any new listeners up to speed by just explaining how exactly their odd-looking yet very powerful device works?

Brian Feroldi: Yeah, sure. NovoCure is a medical-device company that fights cancer with electric fields. They make this funny-looking product that goes right on a patient's head -- it looks almost like a swimming cap that has cords attached to a battery. The device actually emits low-dose electric fields that inhibit cell division in cancerous tumors. It sounds crazy, but they actually have the data to show that the device works. They've been growing very quickly for several years, as this device has grown more and more popular with people who have glioblastoma multiforme [GBM], which is a deadly form of brain cancer.

This company has done very well in its core markets, but the reason we're talking about them today is, just a few weeks ago, they announced that they won FDA approval for a second condition for their device. They now have the thumbs up from the FDA to treat a disease called mesothelioma, which is a cancer that lines the lungs, the stomach, and the heart, and it comes as a result of exposure to asbestos.

The reason that this was newsworthy isn't because it's a huge market. Thankfully, mesothelioma is a rare disease -- only about 3,000 or so diagnoses in the U.S. every year. The reason that we wanted to update our listeners on this is because it showcases that the technology does work in areas outside the brain. That opens the door down the road for this company to win FDA approval in a number of markets that are just massive: lung cancer, pancreatic cancer, brain metastases. Those indications could dwarf mesothelioma and brain cancer. So, a big positive here.

Jones: Yeah, huge positive. Again, not newsworthy because of the market with this new approval, but it's really about validation of their tech. You talked about some of the potential indications that they have on tap in their pipeline -- lung cancer, pancreatic cancer, even ovarian cancer. These are indications where nearly 300,000 Americans are diagnosed each year in the U.S. alone. That's 24 times larger than the GBM indication, the aggressive form of brain cancer that you were mentioning. So, this is really important.

I think another point to highlight is that with GBM, it is a very aggressive form of brain cancer, but it's also a very difficult-to-treat form of brain cancer. The prognosis is very, very poor for patients that have this. So, any improvement that has come because of their Optune system has been welcomed. So when you see a company like this with an innovative, odd-looking device, if you will, actually pushing the needle in huge unmet-need areas, and going after really the most aggressive form of cancer out there -- you snag approvals there, now you're also getting approvals in mesothelioma -- if anything, it's just another notch in their platform that says this technology actually works.

I think this also bodes well from a coverage standpoint. Brian, you've written about this a little bit in some of your articles, too -- Medicare historically has not been able to cover Optune. They've basically refused its $21,000-a-month price tag. They also got news in May that Medicare has a proposal out to potentially start covering this in most cases. Really, I think, not only is it the FDA approval, it's the coverage that's expanding, potentially in line with some of their commercial coverage that they're already offering.

If anything, I get more excited the more we talk about this company, even though I was a skeptic at first. I can admit that, Brian.

Feroldi: Oh, I was, too. I thought that their tech was like hocus-pocus magic when I first learned about it. But the more I've dug in, the more I've learned, the more interested I've become. I think that the medical community feels the same way. I mean, this technology is so different from everything else that's out there. But the more data that they provide, the more patients they get on, and the more FDA approvals they win, it becomes harder and harder to ignore. Lots to be excited about here.

Jones: Yeah, lots to be excited [about]. Just to close out this first half of the show, they also reported first-quarter results. Revenue shot up 41% to $73 million; gross margin expansion [rose] by 800 basis points to 73%. Still have a net loss on their most recent quarter, as most companies do at this particular stage. But it's really good to see that loss narrowing, falling 41% to $12.2 million. It'll be really interesting to see how their Q2 stats fare. We'll be getting updates in the next couple of months from them shortly on that. And, they've got four phase 3 pivotal trials right now in the pipeline. So, a lot to look forward to with this company. Of course, Brian, we'll be sure to keep all of our listeners up to date on the latest.