NovoCure's Q4 Earnings: Revenue Growth but EPS Miss

NovoCure reported an increase in revenue, but its earnings per share (EPS) fell short of expectations due to rising costs and challenges in adopting its therapies.

On February 27, NovoCure (NVCR) shared its mixed earnings report for the fourth quarter of 2024. The company matched analysts' expectations with revenue of $161.3 million, which represents a 21% increase compared to the same quarter last year. However, its generally accepted accounting principles (GAAP) EPS loss of $0.61 surpassed the estimated loss of $0.34.

Even though the results were mixed, NovoCure made significant progress with recent FDA approvals and positive outcomes from clinical trials, signaling potential growth opportunities.

Metric	Q4 2024	Analysts' Estimate	Q4 2023	Change (YOY)
EPS	($0.61)	($0.34)	($0.45)	35.6%
Revenue	$161.3 million	$161.3 million	$133.8 million	20.6%
Gross margin	79%	N/A	N/A	N/A
Adj. EBITDA	$2.6 million	N/A	$(31.6 million)	N/A
Sales and marketing expenses	$67.4 million	N/A	$59.2 million	14%

Source: NovoCure. Note: Analyst consensus estimates for the quarter are based on data from FactSet. YOY refers to year over year. EBITDA stands for earnings before interest, taxes, depreciation, and amortization.

Overview of NovoCure's Operations

NovoCure focuses on innovative cancer treatments using its Tumor Treating Fields (TTFields) therapy, which is a non-invasive method that uses electric fields to impede cancer cell division. The company aims to utilize its TTFields technology on various solid tumors and continues to innovate with recently FDA-approved devices like Optune Gio for glioblastoma and Optune Lua for non-small cell lung cancer (NSCLC).

Key to NovoCure's success is the expansion of TTFields' clinical applications and gaining regulatory approvals, as well as forming global partnerships. Collaborations with Merck and Roche, for instance, are intended to increase the application of NovoCure's therapies and expand its market presence. Their strong intellectual property portfolio supports their technological edge, maintaining their position as leaders in TTFields innovation amid increasing competition.

Review of the Quarter's Performance

The fourth quarter's revenue growth was primarily due to rising demand for TTFields therapy within key markets, including the U.S., Germany, France, and Japan. Despite this revenue increase, NovoCure faced a larger-than-expected EPS loss, primarily caused by a rise in general and administrative expenses, which skyrocketed 84% from the year before due to one-time stock-based compensation amounting to $36.1 million linked to FDA approvals.

Highlighting their successful quarter was the launch of Optune Lua for NSCLC in the U.S. and an increase in active patients, now totaling 4,126 globally. The addition of new Head Flexible Electrode arrays has also enhanced the adoption of the therapy. Nevertheless, NovoCure faces considerable challenges, particularly with reimbursement issues in the U.S. and Europe, which limit the rapid uptake of therapy and overall financial benefits.

The quarter was also marked by significant clinical achievements, such as completing the Phase 3 PANOVA-3 trial that showed improved survival rates for patients with pancreatic cancer. Furthermore, acquiring FDA breakthrough device designations for TTFields in various cancer types highlights their continued dedication to innovation. However, sales and marketing expenses reached $67.4 million, an uptick from $59.2 million in Q4 2023, underscoring their aggressive marketing strategies to bolster therapy adoption.

Strategically, the company made meaningful advances with several FDA approvals and an expanded intellectual property portfolio, solidifying NovoCure's position as a leader in the market. However, concerns loom over potential financial impacts from expected declines in gross margins; however, the company remains confident in leveraging groundbreaking clinical data as a pathway for growth.

Future Outlook

NovoCure did not specify forward financial guidance in its Q4 report. However, management expressed optimism for 2025, driven primarily by encouraging Phase 3 clinical data across various oncology indications. They expect top-line growth, aided by strong market penetration, an expanding total addressable market, and favorable regulatory outcomes.

The company is focusing on diversifying its strategies in Europe and other regions to navigate the post-MDR regulatory landscape successfully. Overall, NovoCure's future growth will depend on how well TTFields therapy is adopted, forming strategic partnerships, and managing market access amid regulatory challenges. Investors should keep an eye on the company's efforts to secure reimbursement for Optune Lua and how its expanding clinical pipeline, particularly for pancreatic cancer, aligns with new regulatory approvals. These potential growth avenues are likely to shape NovoCure's market positioning in the upcoming quarters.

This article is meant for informational purposes and is not intended as financial advice.

NovoCure, EPS, Revenue