IPO Premium: Novocure

| About: NovoCure (NVCR)

Summary

Commercial-stage oncology company developing a novel, proprietary therapy called TTFields for the treatment of solid tumor cancers.

Proprietary therapy for the treatment of solid tumor cancers.

FDA approved for monotherapy treatment 2011. Phase 3 trial with chemotherapy successful Nov '14.

Premarket approval & priority FDA review status, April '15.

61% top line rev growth.

Based in St. Helier, Jersey, NovoCure (NASDAQ:NVCR) scheduled a $344 million IPO on Nasdaq with a market capitalization of $2.4 billion at a price range midpoint of $27.50 for Friday, Oct. 2, 2015. Price range reduced to $23-24. Shares reduced to 7.5mm, down from 12.5mm.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Joint-managers: J.P. Morgan, Deutsche Bank Securities, Evercore ISI, Wells Fargo Securities
Co-managers: JMP Securities, Wedbush PacGrow

End of lockup (180 days): Monday, March 30, 2016
End of 10-day quiet period: Monday, October 12, 2015

Analyst report estimate: positive

Summary
NVCR is a commercial-stage oncology company developing a novel, proprietary therapy called TTFields for the treatment of solid tumor cancers.

TTFields is a low-toxicity anti-mitotic treatment that uses low-intensity, intermediate frequency, alternating electric fields to exert physical forces on key molecules inside cancer cells, disrupting the basic machinery necessary for normal cell division, leading to cancer cell death.

Valuation
Glossary
Pre-IPO grade-score summary
http://gaskinsco.com/scr-rate.htm

Accumulated deficit ($mm)

.

.

-$329

Per share dilution

.

.

-$23.48

Valuation Ratios

Mrkt Cap ($mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

NovoCure

$2,274

94.8

-21.5

6.8

6.8

15%

Conclusion
Neutral based on sector weakness

Proprietary therapy for the treatment of solid tumor cancers

FDA approved for monotherapy treatment 2011

Phase 3 trial with chemotherapy successful Nov '14

Premarket approval & priority FDA review status, April '15

61% top line rev growth

26% gross profit, -$52mm loss

6.8 price to book

P/E of -21.5 indicating moderate cash burn rate relative to market cap

40% from selling shareholders

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business
NVCR is a commercial-stage oncology company developing a novel, proprietary therapy called TTFields for the treatment of solid tumor cancers.

TTFields is a low-toxicity anti-mitotic treatment that uses low-intensity, intermediate frequency, alternating electric fields to exert physical forces on key molecules inside cancer cells, disrupting the basic machinery necessary for normal cell division, leading to cancer cell death.

Physicians have typically treated patients with solid tumors using one or a combination of three principal treatment modalities-surgery, radiation and pharmacological therapies.

Despite meaningful advancements in each of these modalities, a significant unmet need to improve survival and quality of life remains.

NVCR believes it will establish TTFields as a new treatment modality for a variety of solid tumors that increases survival without significantly increasing side effects when used in combination with other cancer treatment modalities.

FDA approval

NVCR received FDA approval for Optune, NVCR's first TTFields delivery system, in 2011 for use as a monotherapy treatment for adult patients with glioblastoma brain cancer, or GBM, following confirmed recurrence after chemotherapy.

NVCR has built a commercial organization and launched Optune in the United States, Germany, Switzerland and Japan, which NVCR refers to as its currently active markets.

Significant improvements in both progression free and overall survival
In November 2014, NVCR's Phase 3 pivotal trial of Optune in combination with chemotherapy for patients with newly diagnosed GBM met its endpoints and was halted after a protocol pre-specified interim analysis showed significant improvements in both progression free and overall survival.

Premarket approval & priority FDA review status
In April 2015, NVCR filed a premarket approval, or PMA, supplement application with the FDA for the treatment of newly diagnosed GBM based on NVCR's Phase 3 data and NVCR's application was granted priority review status.

Upon FDA approval of Optune for newly diagnosed GBM, NVCR believes TTFields will transform the standard of care for patients with newly diagnosed and recurrent GBM.

Minimal damage to healthy cells
NVCR has researched the biological effects of TTFields extensively. Because TTFields are delivered regionally, act only on mitotic cells and are tuned to target cancer cells of a specific size, there is minimal damage to healthy cells.

NVCR believes its pre-clinical and clinical research demonstrates that TTFields' mechanism of action affects fundamental aspects of cell division and can have broad applicability across a variety of solid tumors.

NVCR has demonstrated in pre-clinical studies that TTFields can offer additive or synergistic benefits in combination with radiation and chemotherapy, which may lead to greater efficacy than either modality alone, without appearing to potentiate the systemic toxicities of either radiation or chemotherapy.

Other cancer applications
In addition to its clinical and commercial progress in GBM, NVCR is currently planning or conducting clinical trials evaluating the use of TTFields in brain metastases, NSCLC, pancreatic cancer, ovarian cancer and mesothelioma.

Commercialization rights
NVCR owns all commercialization rights to TTFields in oncology, and has a patent and intellectual property portfolio that, as of June 30, 2015, consists of a total of 52 issued patents, including 36 issued in the United States, as well as over 30 additional patent applications on file.

NVCR believes it will maintain exclusive rights to market TTFields for all solid tumor indications in its key markets through the life of its patents.

Intellectual property
As of June 30, 2015, NVCR's patent portfolio consists of a total of 52 issued patents, including 36 issued U.S. patents, two issued EU patents, one issued Canadian patent, eight issued Japanese patents and five issued Chinese patents.

The U.S. patents have expected expiration dates between 2021 and 2031. The EU, Canadian, Japanese and Chinese patents have expected expiration dates between 2021 and 2026.

NVCR has also filed over 30 additional patent applications that, if issued, may protect aspects of its platform beyond 2031 in the United States and beyond 2026 in Europe, Canada, Japan and China.

Competition
TTFields is NVCR's proprietary method for treating cancer.

No direct competition
As such, there is no direct competition from other TTFields delivery systems. NVCR believes its intellectual property rights would provide an obstacle to the introduction of TTFields delivery systems by a competitor, and NVCR intends to protect and enforce its intellectual property.

In addition, even after the expiration of NVCR's U.S. patents, potential market entrants applying low-intensity, alternating electric fields to solid tumors in the United States will have to undertake their own clinical trials and regulatory submissions to prove equivalence to TTFields, a necessary step in receiving regulatory approvals for a competing product.

5% shareholders pre-IPO
William F. Doyle 29.5%

WFD Ventures Fund II 26.5%

Hansjoerg Wyss 13.2%

Volati Limited 11.3%

Dividends
No dividends are planned.

Use of proceeds
NVCR expects to receive $189 million from its IPO and use it for the following:

$75.0 million for clinical trials;

$25.0 million for other research and development;

$60.0 million for commercialization efforts;

$1.0 million for its payment to the Technion; and

$27.9 million for working capital and other general corporate purposes.

Disclaimer: This NVCR IPO report is based on a reading and analysis of NVCR's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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