Insights

Why Novocure Stock Is Plunging This Week

What happened

Shares of Novocure (NASDAQ: NVCR) were plunging 18.5% this week as of the market close on Thursday, according to data from S&P Global Market Intelligence. The company didn’t report any news. So what’s behind the steep decline? Novocure was a victim of the broader market sell-off this week.

The Nasdaq Composite was already in a bear market. But the S&P 500 joined the club this week as well. Both indexes tumbled over the past few days as the Federal Reserve raised interest rates by the highest amount in decades as part of an effort to fight skyrocketing inflation.

So what

On one hand, it might make sense that Novocure’s shares would fall significantly with the overall stock market sinking. After all, the company isn’t profitable yet and is riskier than many other stocks.

On the other hand, though, neither Novocure’s current business nor its future prospects are impacted all that much by the factors causing the stock market turmoil. Physicians aren’t going to stop prescribing the company’s Optune therapy for patients with glioblastoma or mesothelioma just because interest rates are rising or inflation is high.

There’s a good case to be made that the sell-off presents a terrific buying opportunity for Novocure stock. Although the company’s revenue growth has stagnated somewhat, Novocure has several potential catalysts on the way in the near future with late-stage clinical studies wrapping up.

Now what

What’s the most important thing to watch with Novocure? The company expects to announce results from a phase 3 study of its Tumor Treating Fields therapy targeting non-small cell lung cancer later this year.

Data from two other late-stage studies targeting ovarian cancer and brain metastases should be available in 2023. Good news from these clinical trials would almost certainly spark a major rebound for the beaten-down stock.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Novocure. The Motley Fool has a disclosure policy.

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