Novocure files for $300m Nasdaq IPO

Novocure

The company's device for treating brain tumors using an electric field is FDA-approved.

Novocure, which develops and markets a medical device for treatment of brain tumors using electric fields, yesterday submitted a prospectus for an IPO on Nasdaq. The company aims to raise the huge sum of $300 million at an estimated company value of $1 billion, after money. The chief underwriters for the issue are JPMorgan, Deutsche Bank, and Evercore, while the secondary underwriters are Wells Fargo, JMP, and Wedbush PacGro. The company has raised $473 million to date, and had $106 million in cash as of the end of June.

Novocure's product, which has been approved for marketing by the US Food and Drug Administration (FDA) following a comprehensive clinical trial in 2011, is designed to treat Glioblastoma brain cancer. It was developed by Technion Israel Institute of Technology Prof. Yoram Palti, and includes a helmet that broadcasts electric fields from electrodes placed on the scalp. These fields disrupt cell multiplication, and can therefore halt or slow a tumor's development non-invasively and painlessly, although the treatment requires patients to wear the helmet most of the day. The Israeli capital market already is already familiar with the brain stimulation helmet developed by Brainsway Ltd. (TASE:BRIN), but the two products are completely different in purpose and method of operation.

Novocure's treatment is one of the few new treatments approved in recent years for treatment of this type of brain cancer. At this stage, approval is limited to treatment of Glioblastoma that has recurred following chemotherapy. Novocure has filed a request for approval of the device for use in combination with chemotherapy, following a successful trial in this format, which was discontinued before its official end because the results were obtained sooner than expected. The company estimates that there are 27,000 Glioblastoma patients in its main markets, of whom it has treated 1,600 so far.

The technology may also be suitable for treatment of other types of cancer, and the company is conducting Phase II (initial effectiveness) trials on forms of secondary brain tumors originating from other sources in the body: NSCLC lung cancer, pancreatic cancer, ovarian cancer, and mesothelioma, a rare type of cancer usually caused by exposure to asbestos.

The company posted $11.8 million in revenue in the first half of 2015, compared with $15.50 million in all of 2014 and $10.4 million in 2013. Revenue on this scale puts the company right on the borderline of gaining interest from Wall Street investors looking for medical device companies with revenue in the tens of millions of dollars. The company currently derives most of its revenue from the US, Germany, Switzerland, and Japan.

Novocure lost $81 million in 2014, and has already lost $52.6 million in the first half of 2015. Its cumulative losses totaled $329 million as of the end of the first half of 2015. The company believes that in view of the necessary investment in clinical trials and marketing, it will continue losing money in the coming years, and therefore needs to raise a lot of money.

Like every medical device company, Novocure depends on insurance companies paying for its product, and is gradually achieving this. Meanwhile, the company is paying part of the cost for patients who are uninsured, or whose insurance pays only partly for the device. Therefore, although the current consumer price for the device is $21,000 a month, the average revenue per patient is actually only $14,700, with the company furnishing the difference.

Novocure is led by chairman Bill Doyle, who is also the main investor in the company with a 29.9% stake through the WFD Ventures fund, which he controls. Asaf Danziger, who has been CEO of the company since 2002, holds 2.7% of its shares, and inventor Palti owns 2.4%.

The company's investors include the venture capital funds of Johnson & Johnson, Medtronic, and Pfizer, but these are not major investors in in Novocure. Swiss billionaire Hansjoerg Wyss, founder of medical device company Synthes USA, holds 13% of the company. The Volati fund, founded by Lennart Perlhagen, a former senior oncology executive in a number of leading corporations and the founder of Meda, a major Swedish pharmaceutical company, owns 11.3%. Novocure operates from the US and Israel, and its development center is in Haifa.

Published by Globes [online], Israel business news - www.globes-online.com - on September 1, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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