Going, going, gone? That could be the question that Novocure (NVCR -0.43%) investors are asking these days. Shares of the oncology company plunged 56% in 2021. The stock slid 2% lower last year. And so far in 2023, Novocure is down around 13%.

However, some would argue that the best days for the company lie ahead. Should you buy Novocure stock right now? Here are the cases both for and against this beaten-down cancer stock.

The case against Novocure

Let's start with the pessimistic view. When a stock falls as much as Novocure has over the last couple of years or so, there's always an underlying reason.

The main factor behind Novocure's decline is that its business isn't performing all that well. In the first several years after the company's Tumor Treating Fields (TTFields) therapy won regulatory approval in treating glioblastoma multiforme (GBM), sales soared. That's no longer the case.

In the first quarter of 2023, Novocure's total net revenue fell 11% year over year to $122 million. The COVID-19 pandemic began to negatively impact sales in 2020. However, that hasn't been the only issue for Novocure. The company took a revenue hit from payers denying claims for TTFields use, with those claims then aging. It also faced reimbursement challenges in Germany. The strong dollar hurt Novocure because of its significant international sales.

Novocure remains unprofitable. Its bottom line is also headed in the wrong direction. In Q1, the company posted a net loss of over $53 million. That reflected a significant deterioration from the net loss of $4.6 million in the prior-year period.

Not everyone is convinced that Novocure's TTFields therapy will prove to be as successful in treating new indications as the company hopes. Evercore ISI analyst Vijay Kumar thinks that the therapy will capture a market share of only around 10% in treating non-small cell lung cancer (NSCLC).

Kumar also has raised questions about Novocure's results from its phase 3 study evaluating TTFields in combination with Merck's Keytruda in treating NSCLC. Some could even attempt to read between the lines in Merck's first-quarter earnings call and see a reason to worry about that data.

While the big drugmaker highlighted several promising clinical studies of Keytruda in combination with other therapies, it didn't mention TTFields at all. It's important to note, though, that Merck didn't team up with Novocure on the study evaluating TTFields in combination with Keytruda. The company usually doesn't discuss clinical trials it didn't sponsor.

The case for Novocure

There are plenty of reasons to be upbeat about Novocure. For example, despite lower revenue in Q1, the company reported the highest-ever number of prescriptions for TTFields in the U.S.

And more good news should be on the way. In March, Novocure announced a reimbursement deal in France for TTFields in combination with the chemotherapy temozolomide in treating newly diagnosed GBM.

Most importantly, the company is making progress in expanding the indications for TTFields.

  • In June, Novocure will present highly anticipated data from its phase 3 study of TTFields in combination with Keytruda in treating NSCLC. It expects to file for U.S. and European approvals in the second half of 2023.
  • Novocure plans to report data from its late-stage study targeting recurrent ovarian cancer later this year.
  • It has top-line results from a phase 3 study of TTFields in treating brain metastases on the way in the first quarter of 2024.
  • And it anticipates data from yet another late-stage study in pancreatic cancer in the second half of next year.

The indications that Novocure is targeting in its late-stage clinical studies represent a potential market that's 14 times larger than the company's current market opportunity. If these studies are successful, the company should have tremendous growth prospects.

A smart pick?

Most Wall Street analysts believe that Novocure stock has plenty of room to run. The average 12-month price target for the stock reflects an upside potential of around 60%.

Analysts aren't always right, but I suspect they could be about Novocure. The current narrative for the stock appears to be heavily focused on the negatives. But Novocure could change that story quickly with its June presentation of the NSCLC data.

Granted, there is a risk that the full results could be underwhelming. Assuming they're as positive as Novocure's top-line results, though, I think the stock should again soar.

Risk-averse investors will probably be better off sitting on the sidelines with Novocure. My view, however, is that Novocure is a smart pick right now for aggressive investors.