NVCR - NovoCure: Misunderstood Lung Cancer Data Creates Enormous Buy Opportunity

2023-06-06 17:49:38 ET

Summary

• NovoCure Limited's primary endpoint of phase 3 LUNAR study, using TTFields plus standard therapies for 2nd line metastatic NSCLC patients, was met with statistical significance with p-value of p=0.035.
• There is a Premarket Approval submission of TTFields with standard therapies to be filed with FDA in the 2nd half of 2023.
• NovoCure has the potential to expand TTFields towards earlier lines of therapy for NSCLC patients, based on the most recently released positive results from the phase 3 LUNAR study.
• Several other data readouts from late-stage studies using TTFields expected before the end of 2024; these will entail data readouts from target indications such as brain metastases, ovarian cancer, and advanced pancreatic cancer.

NovoCure Limited ( NVCR ) is a good speculative biotech play to look into. That's because I believe there is an enormous buy opportunity, which was created on the back of a selloff. I believe this selloff occurred as a result of misunderstood phase 3 lung cancer data.

This phase 3 study, known as LUNAR, was testing the safety and effectiveness of TTFields therapy together with immune checkpoint inhibitor [ICI] therapy or docetaxel [experimental arm] versus ICI or docetaxel alone [control arm] This late-stage study was deploying NovoCure's therapy to treat 2nd-line non-small cell lung cancer [NSCLC] patients.

I will be going more in depth on the data below, but the reason why I believe the data caused a selloff was because the progression-free survival number achieved in the drug arm was not that far off compared to the control arm. While disappointing and likely causing the selloff in the stock, this wasn't the primary endpoint.

As I will display below, the primary endpoint of the study of TTFields combination achieved the primary endpoint of improved overall survival compared to the control arm. In essence, even though the progression-free survival number was not achieved, the company can still move forward toward filing for regulatory approval of TTFields therapy for the treatment of this 2nd-line NSCLC patient population.

I can take even further than this evidence as to why the selloff is extreme, and that is the fact that NovoCure now has the potential to do better. By that I mean, it can use its therapy to target a population which might be easier to treat, which is 1st line NSCLC patients. The patients in the LUNAR study were refractory to the current standard of care [SOC] and thus either failed on it or progressed in disease. The ability to target this earlier NSCLC patient population would create another possible approval pathway.

With misunderstood lung cancer data, plus the ability to expand the use of TTFields towards an earlier stage (1st-line) NSCLC patient population, these are the reasons why I believe that NovoCure is a good speculative biotech play to look into.

Lung Cancer Data Achieves Monumental Feat

As I stated above, NovoCure just released results from its phase 3 LUNAR study. This late-stage study explored the use of TTFields therapy together with immune checkpoint inhibitor [ICI] therapy or docetaxel [experimental arm] versus ICI or docetaxel alone [control arm]. The use of these therapies was used in patients with metastatic non-small cell lung cancer [NSCLC] who progressed during or after platinum-based therapy. Lung cancer is as the name suggests, which is cancer that develops in the lungs.

There are several reasons why this was a good target indication for the company to explore. The first reason is as I have been saying all along in this article, in that current treatment options are limited for 2nd-line NSCLC. Even then, 1st-line therapy for this patient population is good, but could also be improved upon. It is said that about 70% of treatments for 1st-line NSCLC are checkpoint inhibitors. Thus, while some patients respond to checkpoint inhibitors, others may not respond and may likely need a 2nd-line therapy.

The second reason is that lung cancer is the third most common type of cancer in the United States . The third reason is the market opportunity that is possible for any biotech that develops a working drug to treat this type of cancer. It is expected that the global non-small cell lung cancer market size is projected to reach $36.9 billion by 2031 .

Even though metastatic NSCLC only has approximately 46,000 patients for 2nd-line treatment available, it goes back to what I said above, in that with the new data in hand, NovoCure can attempt to test out TTFields as possibly becoming a 1st-line option. If it can eventually also show proof of concept in the 1st-line NSCLC patient population as well, then it can target a larger chunk of the entire global NSCLC market opportunity of $36.9 billion noted above. The final reason is because the LUNAR phase 3 study was the first in 7 years to show a significant extension in overall survival [OS] in metastatic NSCLC post platinum therapy. This extended OS number is what I will be going over below to prove this statement.

It was shown in this phase 3 LUNAR study, that 137 2nd-line metastatic NSCLC patients who took TTFields therapy together with SOC achieved a median OS of 13.2 months. This compared to 139 patients who only took SOC therapies alone who achieved median OS of 9.9 months. Thus, this primary endpoint being met with statistical significance with a p-value of P =0.035. I believe that median OS is the key endpoint investors should be focusing on and not progression-free survival [PFS], especially since it was the primary endpoint of the study.

As you may or may not know, in order to receive regulatory approval, the primary endpoint is what needs to be met with statistical significance. Why did the stock price tank then? Well, it is likely because of a wave of investors exiting after not truly understanding the data that was just released. They only looked at the PFS number and decided to sell on the news. Yes, the progression-free survival number is not good. It was shown that median PFS for patients given TTFields therapy together with standard therapies was 4.8 months versus 4.1 months in patients only treated with standard therapies alone.

While it is disappointing that the PFS endpoint was not met with statistical significance, what truly matters is the median OS endpoint which was met with statistical significance. The bottom line is that regardless of the PFS endpoint from this phase 3 LUNAR study, NovoCure can still move on to obtain regulatory approval of TTFields for the treatment of metastatic NSCLC patients who progressed during or after platinum-based therapy.

Primary Endpoint Being Met Leads To Additional Catalyst Opportunities In 2023

What I stated above about the clinical data leads to additional reasons why I believe that the sell-off in the stock was not warranted. The first reason is as I stated directly above, NovoCure can take the LUNAR clinical trial data and allow it to serve as the basis for filing a Premarket Approval [PMA] submission to the U.S. FDA in the 2nd half of 2023. This sets up one major catalyst which will likely allow for this stock to recover after this unjustified selloff.

The second reason is that these results are going to be submitted for publication in a peer-reviewed medical journal. This might create another trade opportunity to help boost the stock. A third reason is that even more detailed results are going to be shown at an upcoming medical conference. That means there will be some additional data which may have not been included in the top-line results.

There is a final reason why I believe the selloff just created an enormous buy opportunity, which is the ability to expand the market potential in NSCLC and beyond. What do I mean by this? Well, the use of TTFields is currently being explored in several other solid tumor indications as part of the LUNAR trials program. Other data readouts using TTFields expected by the end of 2024 would be with respect to trials targeting patients with tumors in the brain, torso and abdomen.

How can NovoCure expand its potential in NSCLC? Well, the trial data which was just released accomplished proof of concept in that TTFields might be efficient enough to target the 1st-line NSCLC patient population. As I stated before, this would allow NovoCure to target another part of the NSCLC market. I can take the ability for expansion even further than just different target indications. That is, the most recent LUNAR phase 3 study also established that by adding immune checkpoint inhibitor [ICI] therapies, median overall survival [OS] was further extended. This is proven in the data which was just released by the pharmaceutical company.

How so? Well, TTFields when added to SOC therapies demonstrated a median OS of 13.2 months, not bad right? Even better, when TTFields were added with ICI therapies median OS was extended by 8 months. This is shown as follows:

• TTFields therapy and physician's choice ICI - patients achieved median OS of 18.5 months.
• ICI therapy alone - patients achieved a median OS of 10.8 months only.

Not only can the company possibly target additional solid tumor indications with success, but it might even be able to extend median OS beyond what has been achieved thus far by simply only initiating studies specifically adding ICIs only with TTFields.

As you can see, I laid out several reasons above on why I believe the stock sell off creates an enormous buy opportunity. It isn't just about the current NSCLC indication, but the fact that median OS can possibly be improved upon towards other solid tumors like: Pancreatic cancer, ovarian cancer, liver cancer and many others. Matter of fact, NovoCure has shown in culture and in vivo tumor models that TTFields might be able to have an anti-mitotic effect in more than 15 different solid tumor types. Anti-mitotic in that cell growth division is blocked, thus attempting to stop cancer in its track.

Financials

According to the 10-Q SEC Filing , NovoCure had $958 million in cash , cash equivalents and short-term investments as of March 31, 2023. Another positive item to note is that NovoCure has commercialized products approved in certain countries for the treatment of adult patients with glioblastoma, malignant pleural mesothelioma and pleural mesothelioma. Thus, it is generating revenues based on these regulatory approved products across the globe.

In the most recent Q1 of 2023 , it reported total net revenues of $122.2 million, which was a decrease of 11% compared to the same quarter in the prior year. Based on the current cash on hand, it believes that it has enough to fund its operations for at least the next 12 months. It has been relying on issuing shares of equity and long-term loans to fund itself and will likely continue to do so.

I believe NovoCure Limited will need to raise cash in the coming months to keep its pipeline funded. One item of note, is that it expects its operating expenses to continue to increase over the next several years and that it may outpace gross profit. The reason why is because of the expansion of it wanting to use TTFields beyond Glioblastoma multiforme [GBM].

Risks To Business

There are several risks that traders/investors should be aware of before investing in NovoCure. The first risk to consider would be with respect to the recently reported results from the phase 3 LUNAR study, which used TTFields with standard therapies [ICI or docetaxel], to treat 2nd line metastatic NSCLC patients who failed on platinum therapy. That's because even though the primary endpoint of median OS was met with statistical significance, this is only the first step in the process to obtain regulatory approval. The next step is to file a Premarket Approval [PMA] submission to the U.S. FDA of TTFields for this indication in the 2nd half of 2023. There is no guarantee that the FDA will accept this application for starters.

Secondly, another risk to consider is that there is no assurance that NovoCure will obtain U.S. marketing approval of TTFields for metastatic NSCLC patients. Another risk to consider would be with respect to several of the other ongoing solid tumor studies, which many data readouts are expected before the end of 2024. There is no guarantee that the primary endpoint will be met for each of these other studies targeting other types of solid tumors as part of the LUNAR program.

The final risk to consider would be with respect to the financial position that NovoCure Limited is in. It believes that it has enough cash to fund its operations for at least the next 12 months. This means it might be looking to raise cash within the next few months and shareholders might be diluted because of such a move.

Conclusion

The final conclusion is that NovoCure Limited is a good speculative biotech play to look into. It has been able to prove that its treatment TTFields can be deployed with standard therapies to increase median overall survival in metastatic NSCLC patients who have failed platinum therapy.

There were other findings, if deployed, that could further boost the company's ability to be successful. This would be the ability to focus on the subpopulation cohort of NSCLC patients who were given TTFields and ICI together which saw median OS improve greatly to 18.5 months, compared to those who only took ICIs alone who achieved a median OS of 10.8 months. Again, this was just targeting the 2nd-line NSCC patient population. The company now believes it is in a better position to target earlier lines of NSCLC patients.

Not only that, but it could deploy the use of TTFields with ICI combination towards new studies. Speaking of other studies, traders/investors still have these to look forward to for the future. The NSCLC data readout from the LUNFAR program was only 1 out of 4 that has been released. It is expected that before the end of 2024 there will be several other data readouts using TTFields in other studies. These other studies with data readouts will be: Phase 3 INNOVATE-3 study for ovarian cancer in the 2nd half of 2023, Top-line data from the phase 3 METIS study in brain metastases in Q1 of 2024, and lastly data from the phase 3 PANOVA-3 study in locally advanced pancreatic cancer in the 2nd half of 2024.

With the primary endpoint of the phase 3 LUNAR study being met with statistical significance, plus several catalysts to look forward to over the next few years, these are the reasons why I believe that NovoCure Limited stock is a good speculative biotech play to look into.

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