Investing in up-and-coming mid-cap stocks can be a great way to net a huge return. It's more probable to find a 10-bagger that way than it is by investing in larger, more established businesses that are already worth tens of billions of dollars.
One mid-cap stock that could have significant upside is healthcare company NovoCure (NVCR 3.31%), which makes tumor treating fields (TTF) devices. There are some exciting ongoing studies in the company's pipeline that could make it a hot growth stock for years to come.
Can you expect this investment to make you a millionaire? Let's look closer.
NovoCure could be on the cusp of some huge growth opportunities
A big reason NovoCure could have millionaire-making potential is its focus on some hard-to-treat, aggressive forms of cancer. It uses TTF therapy, which involves patients wearing a device on their heads that uses electrical fields to help kill brain tumor cells.
NovoCure's Optune device uses TTF therapy and is approved for use in treating glioblastoma, a type of brain cancer with a five-year survival rate no higher than 10% and 15,000 new cases each year in the U.S.
In June, the company announced that its TTF therapy for non-small cell lung cancer demonstrated a statistically significant extension in overall survival versus the standard of care. With the TTF therapy, it extended the median survival by three months.
The company is now working on a pre-market approval submission to the Food and Drug Administration (FDA) for the treatment, which it plans to complete before the end of the year.
But there could be much more growth ahead for the business. NovoCure estimates that its late-stage pipeline -- which include trials for treating pancreatic cancer, ovarian cancer, and brain metastasis -- possesses opportunities that could be 14 times higher than for glioblastoma.
Last year, the company incurred a loss of $92.5 million on revenue of $537.8 million. Obtaining approval for more treatments could help it stay out of the red.
NovoCure expects to have phase 3 data from a clinical trial relating to ovarian cancer available before the end of this year. And data from other phase 3 trials for brain metastasis and pancreatic cancer will be available next year.
A growing number of investors expect NovoCure to fail
Year to date, shares of NovoCure are down around 60%. The growth stock thrived a few years ago as meme stocks and risky investments were hot buys. But now, in a more-challenging economy with investors becoming more selective about what they put into their portfolios, the company hasn't been nearly as attractive an investment.
Not only are investors concerned, but many are also betting against the stock: Short interest has been rising significantly in recent years.
NVCR percent of float short, data by YCharts.
If data from NovoCure's trials are encouraging, there could be the potential for a short squeeze, which could quickly make the healthcare stock a hot buy again.
The risk, however, is evident because NovoCure is unprofitable, and it has burned through more than $39 million just from its day-to-day operations over the past six months. That doesn't appear to be sustainable. But with around $940 million in cash and short-term investments, running out of money isn't a huge concern right now.
Can NovoCure make you a millionaire?
If you invest $25,000 into a stock, which is a lot for a risky one like this, you would effectively need it to be a 40-bagger to make you a millionaire. And the less you invest, the higher that return needs to be. If NovoCure were to eventually grow to 40 times its current size, it would be worth close to $130 billion.
When you're talking about the long term -- an investing period that could span 20 years or more -- it's not an unfathomable valuation. But that's likely only going to happen if NovoCure has at least a couple of its treatments obtain approval from the FDA, and they generate billions in revenue. But it still seems unlikely. For context, there are currently just nine biotech or pharmaceutical companies with a market capitalization greater than $130 billion.
Another way to view this figure is to see which companies currently have market caps in the $130 billion range -- Amgen, Sanofi, and Bristol-Myers Squibb. All three are well-known giants in their space.
There's plenty of potential for NovoCure if TTF therapies prove to be effective in battling other forms of cancer, but the data isn't overly convincing at this point, and so I understand the high short interest. The stock could soar if it obtains more approvals, but this isn't a company I would expect to make you a millionaire.
NovoCure can still be a good investment if you're comfortable with the risk. But for more investors, there are much safer growth stocks that could be better options in the long run.
