Oncology company NovoCure (Nasdaq: NVCR), which has developed a novel therapy for solid tumors using electric fields, has announced a strategic restructuring program to save $60 million in operating expenses. The program includes laying off 200 employees, 13% of the workforce, although there will only be a few layoffs in the company's Israel development center. "Decisions like these are deeply personal and challenging, because of the impact on our employees and their families," said NovoCure CEO Asaf Danziger. "To those departing NovoCure, I want to express my sincere gratitude for your hard work. Your contributions have influenced the lives of many cancer patients and your legacy will forever be intertwined with NovoCure."
NovoCure is not in any immediate cash-flow crisis with $921 million cash in the company's coffers, while commitments amount to $127 million and long-term debt is $567 million. The company says it prefers to focus its resources on financing future growth.
NovoCure became an Israeli success story after developing its novel GBM treatment for brain tumors. The company's technology was invented by Prof. Yoram Palti from the Technion - Israel Institute of Technology after his retirement, based on his PhD thesis, which he always hoped to development further when he had more time. The company's value soared on the promise of also being applicable to other more common types of cancers and at its peak in June 2021, NovoCure had a market cap of $22.9 billion.
The biotech bubble burst
In 2021, the biotech bubble burst on Nasdaq and by 2022 NovoCure's market cap had fallen to $8 billion. Following clinical trials results, the company's market cap has fallen in recent months to just $1.33 billion, 94% below its peak.
Such sharp falls in biotech development companies are usually related to failed clinical trials and not having any assets but that is certainly not the case with NovoCure. In the third quarter of 2023, the company recorded revenue of $127 million, an impressive amount for an independent medical device company originating in Israel. But revenue was down 3% from the corresponding quarter of 2022, largely due to difficulties in obtaining indemnity for patients from insurance companies.
To deal with saturation in its existing markets, especially the GBM market, NovoCure is expanding globally. In the third quarter, 68% of the company's revenue came from the US, and the rest from Germany, Japan and China. In the third quarter NovoCure recorded a loss of $49 million, due to high development and marketing costs.
But the share price didn't fall for that reason. The market realized that brain cancer was a small indication to prove feasibility, while the more exciting indications are, for example, common NSCLC type lung cancer. NovoCure has reported trial success in this type of metastatic cancer, and is now preparing to launch the product, after hoping to receive FDA approval in 2024.
However, in May, doctors at the ASCO cancer conference claimed that although the trial achieved its goals and may even be approved by the FDA, by the time the trial ends these goals have already become obsolete, and it is not certain that the results will be convincing enough for doctors to adopt the technology. This is one of the leading reasons for the stock's decline. In addition, in August the company published poor results in an ovarian cancer treatment trial.
NovoCure's current cuts are not in the NSCLC sector. On the contrary, the company plans focusing resources on the commercial launch of this product, if it is approved. In addition, it expects results in 2024 in two other clinical trials - one for treating NSCLC's brain metastases and the second is for treating pancreatic cancer, which could be an even more major market for the company.
Published by Globes, Israel business news - en.globes.co.il - on December 11, 2023.
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