At the beginning of November, "Globes" reported that NovoCure (Nasdaq: NVCR), developer of a medical treatment for cancer, was worth $12 billion, and that it had surpassed Teva's market cap. Between the end of November and now, the company's market cap rose by a further 30%, to $17 billion. NovoCure has more than doubled its value in a year.
NovoCure's market cap makes it the third most valuable Israeli company traded on Wall Street, after Check Point Software Technologies Ltd. (Nasdaq: CHKP) and NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE). Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), once the undisputed leader among Israeli companies, is currently only tenth, and long-established Israeli-American company Perrigo is worth only a third of the value of NovoCure. Amid dozens of failures of Israeli healthcare companies on their way to the stock market, NovoCure shows what heights this sector can reach.
Asaf Danziger, who has been NovoCure's CEO almost since its inception two decades ago, seems a little embarrassed when asked to comment directly on these figures. "Market cap is very nice, but it's not the main thing as far as we're concerned," he says in a rare interview with "Globes". "Certainly when you look at the comparison with a company like Teva, which has sales of more than $1 billion a quarter and touches so many people," he adds.
NovoCure does not yet have Teva's numbers. In the first nine months of 2020, it had revenue of $350 million, 38% more than in the corresponding period of 2019. This revenue is based on 3,300 active patients at the end of the period, who made a monthly payment for the treatment. This looks like a very small number of patients, in comparison with the company's market potential in the type of cancer it treats, and even smaller in comparison with the range of types of cancer it could treat in the future.
The company's product is currently sold for the treatment of glioblastoma, or cancer of the brain. "About 29% of the patients that manage to persist with the treatment survive for five years after treatment starts, which compares with 4-5% who survived for five years from the date of diagnosis before our product reached the market. This product has demonstrably changed the outcome of this aggressive disease," says Danziger.
The product is approved for marketing for the treatment of glioblastoma in the US, Japan, China, and in several European countries, as well as in Israel. It is covered by private and state health insurance in all these countries. It became part of the Israeli "health basket" in 2020.
This year, the product was approved for the treatment of mesothelioma, a rare lung cancer caused by asbestos. The success in clinical trials and in obtaining approval for this indication demonstrated that the company's technological concept would work for conditions besides brain cancer, and that theoretically it could be effective in treating many cancer types. The company is currently in the midst of a Phase III trial - the final stage before product approval - for difficult-to-treat types of cancer, such as cancer of the pancreas, the ovaries, the lung, and metastases in the brain from lung cancer.
Asked about the company's future, Danziger responds cautiously, "If you look at the types of cancer for which our product is undergoing trials, metastases of lung cancer in the brain, for example, is a market ten times bigger than glioblastoma." In other words, if these trials succeed like the trials for glioblastoma, the market potential could grow substantially.
"When we came to making an offering on Nasdaq in 2015," Danziger says, "we came with the first FDA approval in hand, and within a month we had another approval. In other words, we told the market 'we only have execution risk.' And indeed, we floated the company at a valuation of nearly $2 billion. As far as I know, only three biotech companies have reached the stock exchange with a valuation like that."
The IPO in 2015 actually closed at a price lower than was sought, because of market conditions, and the stock even declined at first. Thanks to the low pricing at the outset, those who invested in the IPO eventually made such a dream return. "We promised at the time of the IPO that the product would be in daily use and that the insurance companies would pay for it, and we kept our promise. To make a promise and fulfill it is apparently something not very common."
Why have you not been sold by now? Cancer treatment companies have been sold at much earlier stages.
"AS CEO of a public company I have almost no control over the question whether we will be sold."
The technology: Electric fields that reach the growth
NovoCure's technology is basically a completely new approach to treating cancer, developed by Prof. Yoram Palti, now aged 82, professor emeritus of physiology and biophysics at the Technion-Israel Institute of Technology. It consists of electric fields directed at the growth from several directions that disrupt the growth of the cancerous cells, without damaging other areas. The treatment is akin to radiation, but without the damage done by radiation to tissues that it encounters on the way to the growth.
"No-one believed in this idea at first," says Danziger. "They told him (Palti) that his ideas were fundamentally untenable. Today, he continues to develop and create and invent like ten doctoral students."
Palti has related in the past how he received the initial money for financing the company, some $300,000, from a friend called Lennart Perlhagen, formerly a senior manager at European pharmaceuticals companies Meda AB and Pharmitalia. Perlhagen served as a director of NovoCure until 2018, and the value of his personal holding in the company is in the hundreds of millions of dollars, as is that of Palti.
Danziger was in effect the company's first CEO, and he even let his brain be used in its initial trials, as did all the managers - so Palti has said in the past.
When the company reached proof of concept, it immediately began to attract international interest. William Doyle, who had management experience in global medical devices companies, invested in the company at the outset, and he serves as its chairman to this day.
The model: Fixed monthly payment from patients
The disadvantage of the company's product at present is a degree of discomfort in using it. It does not cause the severe side effects of radiation or chemotherapy. However, in order to use the company's device for brain cancer, for example, the hair must be shaved off and electrodes must be attached to the head, and the machine that produces the electric fields has to be carried around everywhere.
You said that the product is effective in 29% of the people who manage to persist in the treatment. Are there people who do not manage to persist?
"The treatment extends the lives even of patients who are not completely strict about using the device. In the company's early days, fears were expressed that patients would not use the product, and that women would not agree to shave their hair. Sick people want to live. We have had a very good response to the treatment, and the device is much more convenient than in the past. Use of the treatment is steadily growing in time around the world. After all, we receive payment every month, and our revenue is rising as patients use the treatment and live longer."
In treating lung cancer there is no need to shave the head and the device is not visible. It still has to be used for most hours of the day. This product does not yet have insurance cover, but the company has already started to sell it to patients. "From an ethical point of view, our approach is that as soon as we have an approved product, we start marketing it to patients, and the insurance cover will come later. This is not a strategy for expediting cover - what interests the insurance companies is the trial results, and not if you are pleasant or ask nicely. It simply seems to us the right thing to do for the patients."
How has the coronavirus pandemic affected you?
"In February, we went into 'coronavirus mode'. We appointed a VP for coronavirus who is also a doctor, and by the end of February our team was protected as very few hospitals in the world are protected. No patient of ours anywhere in the world missed a minute of treatment because of the coronavirus. We launched a digital product that passed FDA approval, in order to enable patients to download data from the device and send them to their doctors or to us. We continued to recruit patients for our trials and we continued to grow.
"For a long time now, we have allowed working from home. Beyond that, it has been business as usual. We help our employees as much as possible, whether it's a psychologist or a babysitter - in the US there's even a 'Zoom-sitter', someone whose job it is to sit with the children on Zoom and make sure that they are succeeding in studying remotely. Our employees are very important to us. Our staff turnover is orders of magnitude lower than the norm in the industry."
Are you bringing about a revolution in cancer that could be as big as immunotherapy?
"Why compare? Revolution is a word that the media love to use, and we deal in science and medicine. I can say that we are introducing a new kind of therapy, like radiation, like chemotherapy, and I believe that one day there won't be a single cancer patient who isn’t treated with electric fields."
And you have exclusivity on that?
"We're patent protected for decades ahead."
Are you an Israeli company?
"We have never been registered in Israel. We have a thousand employees around the world, after growing substantially during the coronavirus pandemic, and 200 of them are in Israel. In addition, our only research and development center is located in Israel, and production takes place in Israel, in close collaboration with AL Electronics."
Published by Globes, Israel business news - en.globes.co.il - on December 30, 2020
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