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Why Novocure Tanked on Thursday

By Eric Volkman – Jul 29, 2021 at 5:18PM

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Investors are seeing red in the company's latest earnings report.

What happened

Quarterly earnings aren't providing much of a cure for Novocure (NVCR -2.99%). The company, which concentrates on novel cancer-fighting solutions, saw its stock dive by almost 10% on Thursday following the publication of its latest set of results.

So what

In Q2, Novocure took in $133.5 million in revenue, 15% higher than in the same quarter last year. On the bottom line, however, it flipped to a loss of $14.6 million ($0.14) from the $1.7 million net profit of Q2 2020.

Cancer cells attacking an organism.

Image source: Getty Images.

Unfortunately, prognosticators tracking Novocure stock were modeling nearly $141.9 million in revenue and a per-share net profit of $0.01.

The top-line improvements were due largely to sales increases in key company geographies. Greater China was a particularly lively market for Novocure, even though it remains relatively small. Sales to the country more than doubled to hit $4.9 million for the quarter. In the Europe, Middle East, and Africa super region, that increase was 29% to almost $33 million.

A 68% rise in research and development spending, meanwhile, was a key factor in that unexpected dive into the red on the bottom line.

Now what

No investor likes a surprise plunge into negative numbers, hence Novocure's Thursday swoon. Yet the healthcare company, whose devices utilize a type of electric field to disrupt the division of cancer cells, should publish the results of mid- and late-stage clinical trials for a raft of cancer-treatment solutions between Q3 of 2021 and throughout next year. If successful, any one of these could easily send the stock northwards again.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Novocure. The Motley Fool has a disclosure policy.

Stocks Mentioned

NovoCure Stock Quote
NovoCure
NVCR
$77.65 (-2.99%) $-2.39

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