Will Novocure Stock Sink or Soar in 2023?

Novocure (NVCR -3.16%) announced good news earlier this month from a late-stage study evaluating its Tumor-Treating Fields (TTFields) therapy in treating non-small cell lung cancer (NSCLC). Its shares skyrocketed.

But just a few days later, the company provided a sneak peek at its 2022 fourth-quarter and full-year results. The numbers weren't all that great. In addition, a top analyst raised questions about how positive Novocure's NSCLC results actually were. The stock quickly gave up some of its earlier gains.

The battle between the Novocure bulls and bears will likely continue to play out throughout this year. Will Novocure stock sink or soar in 2023?

Behind the negativity

There's no question that Novocure's sales growth is slowing. The company expects full-year 2022 revenue will increase by only 1% year over year. Q4 revenue will decline by 3.6% based on the preliminary numbers provided by Novocure.

Some investors focus more on the current stagnant picture than on Novocure's potential opportunity in treating NSCLC. They know that the company will be able to enter the new market in 2024 at the earliest. And they realize that it's going to take time for TTFields to pick up commercial momentum.

Others are even more pessimistic about Novocure. Evercore ISI analyst Vijay Kumar set a 12-month price target for the healthcare stock that's less than half the current share price. 

Kumar suspects that the U.S. Food and Drug Administration (FDA) could have issues with Novocure's trial design for the NSCLC study. Even if TTFields secures an FDA green light for the new indication, he predicts that the therapy will achieve peak sales of less than $700 million in the NSCLC market.

Reasons for optimism

Novocure bulls shrug off these concerns. The company's sluggish growth is old news. What's more important, in their view, is that NSCLC presents a market that's 14 times larger than Novocure's current market opportunity, which is primarily focused on glioblastoma.

But what about the worry that the FDA won't approve TTFields in the NSCLC indication? That's always a possibility with any new therapy or medical device. However, based on what is known at this point about Novocure's study results, such fears don't appear to be warranted.

Kumar raised questions about why Novocure shortened the NSCLC study and reduced the number of patients enrolled. Those changes were made based on a recommendation from the study's independent data-monitoring committee (DMC). The DMC even said at the time that "it is likely unnecessary and possibly unethical" to add the initial numbers of patients to the control arm with 18 months follow-up. Obviously, Novocure (which was still blinded to the data) had no reason to oppose the DMC's recommendation.

As for TTFields achieving peak sales in NSCLC of less than $700 million, that's definitely not the consensus view. Any therapy that significantly improves overall survival compared to immunotherapies in the most common type of lung cancer (as Novocure says is the case) would likely make a lot more money than that. 

Novocure supporters would also note that there's potentially more good news on the way. The company expects to report results from a pivotal study targeting ovarian cancer later this year. Data from two other late-stage studies in brain metastases and pancreatic cancer should be on the way in 2024. 

Sink or soar?

So will Novocure stock sink or soar this year? Probably the best answer is...it depends.

The company hasn't released the full data from its phase 3 study of TTFields in treating NSCLC yet. That data should either put the concerns to bed or sow more doubts. Novocure's announcement of results from its late-stage study targeting ovarian cancer will also likely play a big role in determining how the stock performs.

I shouted from the hilltops last year that Novocure looked like a good stock to buy before the company announced its NSCLC results. What about now? Even with the recent pullback, the stock is still up quite a bit. My view is to wait on the full data from the NSCLC study, which will be presented sometime this year at a major medical conference. If the news is still as positive as it seems to be right now, it won't be too late to jump aboard.