No. of Recommendations: 1
Hey Fools,

This is a stock that I continue to follow with great interest.

For those looking for a primer on this business, see this:

Q4 P/R:

Q4 presentation:

Q4 transcript:

JP Morgan Presentation:

Q4 headlines:
+Revenue +77% to $53.7 million
+Net loss $10.9 million, down 51% year-over-year
+Cash balance $183 million

+Active patients (key metric to watch) +68% to 1,834
+Prescriptions +54%
+Secured reimbursement in Japan

Full year 2017 headlines:
+Revenue +114% to $177 million
+Net loss $61.7 million, down 53%

Published report showing that patients who used Optune (Novocure's products) + Chemo had 5-year survival rate with glioblastoma (deadly brain cancer) of 29% vs. only 5% in chemo group

Upcoming data readouts
+Phase 2 pilot STELLAR trial in mesothelioma (mid-2018)
+Phase 3 pivotal METIS trial in brain metastases (2020)
+Phase 3 pivotal LUNAR trial in non-small cell lung cancer (2021)
+Phase 3 pivotal PANOVA 3 trial in locally advanced pancreatic cancer (2022)

Quotes from call

We saw notable shift in prescription mix during the fourth quarter of 2017. 66% of our prescriptions were written for patients with newly-diagnosed GBM. This move towards newly-diagnosed GBM should allow active patient growth to continue to outpace prescription growth in future quarters.

For Q4 2017, we estimate the global penetration rate of 22% in our currently active markets.
(BF - still lots of room left for expansion).

Earlier in 2017, we received humanitarian use device designation for the use of Tumor Treating Fields for the treatment of pleural mesothelioma, which opens up the possibility to apply for registration based on strong Phase II pilot data in treating mesothelioma.

Overall, a solid quarter. The only knock here IMO is that we have some waiting to do before we learn if Optune will get approved in pancreatic/lung/ovarian cancer. Mesothelioma should be the next label expansion claim (if all goes well), but that's a pretty small market.

FWIW, analysts see this business nearing breakeven in 2018 and profitability in 2019.

The next five years look to be very exciting for investors, but it wouldn't surprise me to see the share price tread water for a year or two given the valuation (11x sales) and how long it will be before we hear about brain metastases/lung/pancreatic cancer results (2020, 2021, 2022). However, my personal view (not the view of the RB team) is that Novocure is a true Rule Breaker in the making.

Let's run it through the RB test:

1. Top dog and first mover in an important, emerging industry. YES - Tumor Treating Fields.

2. Sustainable advantage gained through business momentum, patent protection, visionary leadership, or inept competitors. YES - How about NO COMPETITION AT ALL? That's a pretty big advantage, no?

3: Strong past price appreciation. Sort of. Stock came to market at very high valuation and fell after its first year on the market. However, over the last year it is up 171%.

4. Good management and smart backing. Sort of. I think that management has done a good job of executing and insiders hold 16% of shares. However, glass door ratings are pretty bad - 2.2 stars overall and 50% approve of CEO. Sample size is very small though, so it might be hard to draw conclusions.

5: Strong consumer appeal. YES Cancer patients put on a funny looking hat with NO SIDE EFFECTS and can increase their five-year chance of survival by 6x. I'd say that's a pretty appealing tradeoff.

6: You must find documented proof that it is overvalued according to the financial media. YES.

Assuming these count: &

That's a 4 out of 6, 5 out of 6, or 6 out of 6, depending on your personal interpretation of the results.

Not bad, eh?

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