Why Is Novocure (NVCR) Stock Down 30% Today?

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Shares of innovative biotechnology firm Novocure (NASDAQ:NVCR) cratered badly, losing 30% on Monday morning before fading even further in the early afternoon session. Unfortunately, the company — which specializes in a tumor-treating technology — failed its Phase 3 trial targeting specific chemotherapy-resistant ovarian cancer patients. Subsequently, the implosion of NVCR stock raises questions about the platform approach to oncology.

According to Novocure’s press release, the biotech’s tumor treating fields (TTFields) technology together with paclitaxel — a type of chemo that addresses multiple different cancer types — did not meet its primary endpoint of overall survival at the final analysis. However, one positive was that “TTFields therapy was well-tolerated with no added systemic toxicities.”

“Recurrent ovarian cancer is a particularly aggressive cancer and options for patients diagnosed with platinum-resistance remain extremely limited,” explained Ignace Vergote, MD, PhD, principal investigator and chairman of the Belgium and Luxembourg Gynaecological Oncology Group and Professor at the Catholic University of Leuven, Belgium.

According to a research paper published on the National Library of Medicine’s website, platinum-resistant ovarian cancer historically refers to disease recurrence within six months of completion of first-line platinum-based chemo.

NVCR Stock Implosion Raises Questions About Platform Approach

Not surprisingly, Wall Street analysts responded to Novocure’s disappointing late-stage clinical trial with an assessment downgrade. Specifically, Wedbush analyst David Nierengarten, while keeping his “neutral” rating on NVCR stock nevertheless slashed his price target to $23 from $46.

Per Investor’s Business Daily, Novocure’s TTFields tech — which is a device known as Optune that uses alternating electrical fields to disrupt tumor cell division — received approval to treat patients with glioblastoma, a form of brain cancer. However, Nierengarten doesn’t anticipate Novocure being able to grow its platform to many other cancers.

“Given the lack of meaningful expansion opportunities to (uses) outside of glioblastoma, which we believe is fully saturated, we do not see a way for tumor-treating fields to grow above low-single-digits in the near-term,” Nierengarten stated in a research note to clients.

Still, not everyone had a sharply dour view of NVCR stock. In particular, Evercore analyst Vijay Kumar believes that Novocure may pivot away from focusing on a platform approach to all cancer types and instead focus on individual diseases.

Still, the pivot would imply a market capitalization downgrade to $1.1 billion. Presently, the market values NVCR stock at $2.06 billion.

Why It Matters

According to TipRanks, analysts peg NVCR stock as a consensus moderate buy. This assessment breaks down as five buys, two holds and zero sells. On average, the experts’ price target stands at $65.29 implying 239% upside potential. Still, with most of the price targets coming from at least three weeks ago, a broader reevaluation risks sending the average target lower.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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