Dom's Deep Dive on Novocure (NVCR)
I would like to begin by providing some context by telling you a story that will help you understand why I am doing a deep dive on Novocure. I had always been an S&P 500 index fund investor from age twenty-three to age thirty-four because I was always under the impression by many people that individual stock investing is like gambling & to play it safe by investing in the overall market. The activity of saving, living within your means, investing in index funds & maxing out your 401K match were all good advice I lived by, but the best advice I was ever given was “You can beat the market by investing in individual stocks if you are willing to do the homework, hold your stocks until the thesis breaks down, & make your portfolio reflect your best vision for our future.” I was not provided this amazing realization until I was introduced to David Gardner & The Motley Fool investing service at age thirty-four. Since then I have developed a passion and love for investing & understanding what makes a successful, sustainable, & growing business for decades to come.
Thank you, David, for this gift your company has given me & the advice you gave earlier when choosing companies to invest in, “Make your portfolio reflect your best vision for our future”. This brings us back full circle to Novocure & how they reflect my best vision for our future and hopefully your best vision as well.
What is Novocure? How Were they Founded & What is Their Mission?
Novocure is a revolutionary commercial-stage oncology company headquartered in St. Helier, Jersey with locations also in the U.S., Israel, Switzerland, Germany, and Japan. Novocure has patented tumor-treating field devices that utilize electric fields to disrupt tumor growth by interfering with cell division of cancerous cells & causing them to die off instead of multiplying. This oncology treatment & company was founded by Yoram Palti, MD., PhD. in a lab set up in his basement in 1997 & founded Novocure in 2000. I love in their investor relations presentation Novocure provides a high-level education on what, when, why, and how, making the information digestible for anyone who does not have a medical background.
What many investors and analysts forget is that when we choose to invest in a stock, one of the main things you are really choosing to invest in is people. You are choosing to invest in people who believe they have identified a problem that if solved will make the world a better place in their perspective. If the problem is large enough & the solution is impactful enough then the company could yield economic benefits to employees and shareholders. Before getting to Novocure’s mission let’s deep dive into some comments from Dr. Palti in an interview in 2007 with David Brinn of Israel21c. This interview explains how Novocure’s founder Dr. Palti aligns with “Making my portfolio reflect your best vision for our future”.
Here are some of the comments Dr. Palti provided Israel21c in his interview around his studying of electrical fields for the last 40 years & dedicating a lifetime of research to providing better treatment for cancer patients. Dr. Palti commented on how it started by saying, “In the early 1960s, I combined my MD and Ph.D. on the subject of the distribution of electrical fields in living tissues. At that time, my research had nothing to do with cancer – it was about understanding how you stimulate nerves and muscles,” he said.
“At some point, I decided that I had had enough of basic science and wanted to do something that would do some good in the world. I looked for something that would have value in the medical field and focused on cardiovascular and cancer – which of course are the two major killers,” he said.
“It took me a while to get the idea to use electrical fields to affect dividing cells. Around 10 years ago, I started with models and experimenting in my basement office. I was far closer to the electrical field side than to oncology. It developed slowly, I got a small group together, still in my basement, and eventually got to the point that we were able to move outside and start a company to develop the idea.” (Brinn, Israel21c, Pages 1-2).
Dr. Palti wanted to utilize everything he had learned over the years to make a mark on the world and leave it better than when he entered it. He identified a severe problem in the world with cancer cells multiplying so quickly causing terminal cancers like Glioblastoma & Mesothelioma ending patients’ lives on average within twelve months and under. His creation of the Tumor Treating Fields technology has allowed patients to maintain their quality of life and extend their lives longer than what chemotherapy & other cancer treatments have offered by themselves. This is exactly what their company mission statement is about and their patient forward focus states.
The summary of the Patient Forward Focus is “Patients remain at the heart of the work we do every day. Patients’ health. Patients’ lives. Patients’ families and caregivers. They are what matters most to us, guiding us forward in our goal to deliver a completely different cancer therapy that could lengthen patient lives while maintaining their quality of life.” This continued focus on improved patient care, feedback from patients, and new treatments for other cancers will continue to bear great fruit for this company.
The Tesla of Oncology Treatment? What Do You Mean?
In several videos and interviews, I have seen on Novocure, they have been referred to as the Tesla of Oncology Treatment. And you might be thinking, “What does that even mean?”
Just like Tesla was ahead of its time & catching lots of doubting feedback, so has Novocure over the years. Many medical communities had laughed and questioned the validity of treating cancer with tumor treating electrical fields. Now there are over 20 Institutions studying TTF technology for cancer treatment, 1,643 citations of Tumor Treating Fields in scientific publications in 2020 (45% YOY Growth) & 31 Active Instigator Sponsored Trials. Novocure has 3 FDA-approved treatments for both Glioblastoma and Mesothelioma which are some of the most aggressive cancers a person can get.
The medical and scientific community are believing & getting behind this type of treatment to accelerate the types of cancer Novocure can mitigate and hopefully one day cure.
Why am I So Confident in Novocure’s Future Success? And the Numbers to Support the Bull Case
Novocure is a company that is focused on the patient & their living a longer quality life. Everything Novocure does has this focus in mind and the results derive from this. They have grown from three employees in 2000 to over eight hundred in 2020, spanning locations in multiple countries, and have different collaborations on clinical trials such as the phase two trial for first-line non-small cell lung cancer with Merk. They have a current late-stage pipeline that can create a potential for substantial market expansion & other revenue streams. With 41% YoY growth in revenue, Gross Margins of 77%, Operating Margins that doubled QoQ to 11%, limited debt that they have the cash to cover with over $234M in hand, this is a company that has reached the “market fit mode” in their investing timeline. The images below from their investor presentation support this thesis in my opinion.
My Conclusion
Novocure is a company I believe will contribute to making the future a better place to live in, which is something we all should desire. It is companies like this that are impacting life as we know it & live it. They are trying to solve a disease that has impacted most humans in one way or another, whether you know someone with cancer or battled it yourself. With this type of treatment currently not directly competing with chemotherapy, radiation therapy, immunotherapy, or any other cancer treatments it is augmenting them & giving longer quality life to patients. So, there are no direct competitors for this type of treatment & Novocure has over 185 patents to protect its moat, a new direct to patient delivery model, and $843M cash on hand to reinvest in growth.
I believe the future is very bright for Novocure & them impacting their mission against cancer. I have had a position in Novocure since they had a $5B market cap and it now is $17B, so you may ask “Is it too late to invest?” No Way! Novocure is just getting started in my opinion, with over 19 other pre-clinical cancer trials showing positive impact from TTF treatment, several phases three and phase two trial studies going on currently, and they have revenue & profits growing.
**All images were from the Novocure website and investor presentation and the information in this deep dive is published in good faith and for general info purposes only. All comments should not be taken as investment advice or consultation just personal opinion. I am not a medical expert or financial advisor, so I encourage investors to get personal advice from your professional advisor. I do have a position in Novocure (ticker: NVCR) and plan on making it one of my core portfolio holdings in the future.