Summary
NVCR is a commercial stage cancer treatment company, set to price its IPO on Thursday.
The underwriters for the IPO include Deutsche Bank, JPMorgan Chase, Wells Fargo, JMP Securities, Evercore ISI and Wedbush PacGrow.
The company plans to use the proceeds for research and large-scale clinical trials.
We like the firm's growing revenues and commercial stage, and oncology focus.
We suggest buying in.
NovoCure (NASDAQ: NVCR) is a commercial stage cancer treatment company set for an IPO offering 12.5 million shares of common stock with a price target of $26-$29 per share. The company scheduled a $344 million from the IPO with an estimated market cap of $2.4 billion.
The underwriters for the IPO include Deutsche Bank, JPMorgan Chase, Wells Fargo, JMP Securities, Evercore ISI and Wedbush PacGrow.
The company develops treatments for solid tumor cancers using a proprietary therapy called tumor treating fields. The company plans to use the proceedsfor research and large-scale clinical trials.
Business Overview and Oncology Focus
The company's first TT Fields delivery system that received FDA approval was Optune. This was awarded in 2011. Optune is a monotherapy treatment for patients with glioblastoma brain cancer.
Following Optune's success, Novocure built its commercial organization around Optune and launched the treatment in the United States, Japan, Switzerland and Germany. These are still its active markets.
See Novocure's full pipeline here.
Novocure hopes to generate approximately $188.9 million from the IPO after commissions and discounts. The primary purpose of the funds is for advanced and large-scale clinical trials using tumor treating fields. The company will use an additional $60 million for its continued commercialization of Optune in the United States, Germany, Japan, and Switzerland.
Investment Risk Factors At An Early Stage
At this point, Optune is still the only product that Novocure possesses for commercial-stage development; therefore, the company is dependent heavily on its success. In addition, the FDA only approved Optune for the treatment of glioblastoma brain cancer. According to NovoCure, material harm to the business model will occur if it cannot increase global sales.
The company incurred a net loss of $52,630,000 in the six months ending June 30, 2015. The company has not generated a profit in any of the last four quarters and states it does not anticipate generating a net profit anytime in the future.
This is typical of an early stage biopharma firm, even in the early years of being commercially viable; and should not be taken as indication of future success or failure.
Top-Level Management With Experience in Finance, Medicine
William Doyle is the chairman of NovoCure, a position he has held since 2009. Since 2004, Mr. Doyle has served as a member or the board of directors. Mr. Doyle is also the founder and managing director of WFD Ventures, a venture capital firm established in 2002.
Asaf Danziger is the chief executive officer of NovoCure. Mr. Danziger has held the position since 2002 and serves as a member of the board of directors. Mr. Danziger was the chief executive officer of Cybro Medical prior to NovoCure from 1998 to 2002. Mr. Danziger holds a Bachelor of Science in material engineering from Ben Gurion University in Israel.
Conclusion: Buy In
NVCR is our IPO pick of the week. As a commercial-stage oncology firm, Novocure sets itself apart from more unpredictable, clinical stage firms.
Oncology deals often generate a good deal of interest (and we are already hearing the deal is oversubscribed).
Healthcare IPOs still lead the way over other sectors YTD; with 64 total offerings bringing 18.5% first-day returns on average.
With a billion+ market cap and increasing revenues, we see this as not only a good trade but a longer-term investment, following the catalyst of FDA approval.
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