Thursday, August 8, 2019

Novocure NVCR

This stock idea is totally out of range for TheMoneyMadam except for one metric and that is call option potential; that potential allows you to generate income on a non dividend stock.   If you believe in your pick you can concentrate on reaping gains from a growth stock while you work the calls.

This stock is in my portfolio because Alfred Ferol alerted me to the science behind their products.  It is my own analysis of the stock’s potential for growth and income that makes me agree that this stock is worth the risk for me.

Let’s begin with the underlying stock and then I will present several call options that make sense to me.

NOVOCURE, symbol NVCR


Novocure is actually a medical device company operating as a bio technology stock.  The company describes it this way.



treating cancer
with electric fields

Tumor Treating Fields uses alternating electric fields specifically tuned to target cancer cells. Once the electric fields enter the cancer cell, they attract and repel charged proteins during cancer cell division.



By using physics to influence biology, Novocure discovered another way to treat cancer.  Their mechanism of action is broadly applicable across a variety of solid tumors.  As you read through their clinical studies, you can see their therapy is used in conjunction with chemotherapy to extend survival.

REVENUE GROWTH Catalyst

Large market growth catalyst from improving life expectancy when used in common with chemotherapy is real.  Optune is the brand name of their tumor treating fields device for glioblastoma.  Use of tumor treating fields with Optune for Glioblastoma and mesothelioma is  FDA approved.  

Sales of FDA approved products are growing.  And, Medicare will start paying for the treatment effective September 1, 2019.  That alone should be a catalyst for growth.

FUTURE Growth Opportunities

From Novocure’s website:


The science of Tumor Treating Fields extends beyond glioblastoma. Novocure has ongoing or completed clinical trials investigating Tumor Treating Fields in mesothelioma, brain metastases, non-small cell lung cancer, pancreatic cancer, ovarian cancer and liver cancer.
2018 New Diagnoses that Novocure may be able to help treat.


























If this treatment is successful, it is truly a gift for these patients. 
Novocure Fundamentals 

Novocure, like many biotech companies is in the developmental stage and that requires money.   Novocure raised money through their public offering and they have used debt.    

Novocure, unlike many biotech companies has a product approved by the FDA (Federal Drug Administration) and is approved by Medicare.  That means they have revenues.   

Novocure continues to burn cash but is improving cash flow.  With Medicare payment approval cash flow should increase.  The table below clearly presents revenue growth over the past 2 and 1/2 years.  This is without the benefit of Medicare payment approval.

  Revenue / EPS Summary *  
 
 Fiscal Quarter 2019
(Fiscal Year)
2018
(Fiscal Year)
2017
(Fiscal Year)
March      
   Revenue $73,309(t) $52,125(t) $34,880(t)
   EPS -0.13 (3/31/2019) -0.23 (3/31/2018) -0.21 (3/31/2017)
   Dividends N/A N/A N/A
June      
   Revenue $86,713(t) $61,514(t) $38,376(t)
   EPS -0.01 (6/30/2019) -0.17 (6/30/2018) -0.24 (6/30/2017)
   Dividends N/A N/A N/A
September      
   Revenue   $64,756(t) $50,109(t)
   EPS   -0.12 (9/30/2018) -0.12 (9/30/2017)
   Dividends   N/A N/A
December  (FYE)      
   Revenue   $69,674(t) $53,661(t)
   EPS   -0.17 (12/31/2018) -0.13 (12/31/2017)
   Dividends   N/A N/A
Totals      
   Revenue $160,022(t) $248,069(t) $177,026(t)
   EPS -0.14 -0.69 -0.7
   Dividends N/A N/A N/A
   Previous 3 Years
 
 
©2019, EDGAR®Online, a division of Donnelley Financial Solutions. EDGAR® is a federally registered trademark of the U.S. Securities and Exchange Commission. EDGAR Online is not affiliated with or approved by the U.S. Securities and Exchange Commission.


Novocure is a developing biotechnology company and medical device manufacturer that has revenues but is burning cash as it continues the clinical trials to measure the effectiveness of their science in more cancers. 
This table presents Novocure's current fundamentals.



NVCR raised capital when they went public and have financed operations with debt.  If I have one concern it is the high D/E (debt to equity ratio.)  Even with established companies, I like to see D/E ratios of 1 or under.   Some argue that debt is cheap and there is some validity to that.  
I am forgiving that concern as I roll through the options calendar and take advantage of calls to create income.  See below

INCOME Potential through call options. 

I bought NVCR on Tuesday during the overall market swoon at $81.05.  Wednesday while NVCR was rebounding in sympathy with the overall market, I sold a September 20, $90 for $2.75.  That call options is presented first.  Today NVCR has even better calls and the second call option shows a call available today. 

August 7, 2019 Call
























August 8, 2019 Call
If you bought today here is what a $95.00 call would look like.





















But consider a more patient trade.  Buy last Tuesday at $81.05 and sell the $95 today and look at the gain.
























Over time, we have worked this stock.  You can see below a list of buys, sells, and calls.  Out of 3,400 shares we have 1,100 left.   So far we have invested around $134,000 and the value of that investment is about $187,000 of which about $92,000 is in the bank.   Call premiums represent a 3.58% yield.  



In summary, we have a company that has created a technology that helps patients on chemotherapy live longer.  They have growing revenues. It appears Novocure has been discovered by the investing community.    


M* MoneyMadam
Disclosure:  Long NVCR with calls