NovoCure makes it out with a $165M downsized IPO, trades down 10%

NovoCure ($NVCR) has pulled off an enormous $165 million IPO--but the deal wasn't nearly as large as it had hoped for originally. At the last minute, the brain cancer treatment company kicked its existing investors out of selling their 5 million shares in the offering and it also lowered its share price expectations to $22 from an original range of $26 to $29 each.

NovoCure CEO Asaf Danziger

Even with that reduction, NovoCure shares traded down about 10% to under $20 each as it started trading on Oct. 2 on the Nasdaq--where CEO Asaf Danziger and Executive Chairman Bill Doyle rang the opening bell. The company would have had an offering for a total of $344 million, including those existing investor shares, if it had been able to pull off the sale of 12.5 million shares at a midpoint of $27.50 per share.

Now, in the best case scenario it will raise $190 million, all for the company itself if the bankers, who were led by joint book-running managers J.P. Morgan, Deutsche Bank and Evercore, are able to sell an additional overallotment of more than 1.1 million shares.

"We were able to execute on IPO even in these market conditions and that is a testament to the story of the company. The market conditions certainly didn't help," NovoCure CFO Wilco Groenhuysen told FierceMedicalDevices in an interview. "We're very pleased with the proceeds. This increases the strength of our liquidity position. … We will be able to lean into marketing for our therapies and lean into the clinical pipeline."

He added that the existing shareholders were primarily focused on raising money for the company; the new IPO shareholders, Groenhuysen said, are primarily focused on biotech and growth--with a healthy component of individual retail investors.

NovoCure CFO Wilco Groenhuysen

Most of the IPO proceeds will go to support commercialization and to back further clinical trials to keep expanding the potential market. Groenhuysen noted that its Optune Tumor Treating Fields showed promise in preclinical testing across all solid tumors.

The company markets Optune to treat adults with glioblastoma upon recurrence after chemotherapy. It nabbed that FDA approval in 2011. The real focus now is to move that treatment into first-line use for glioblastoma.

In November, a pivotal trial for Optune in combination with chemotherapy for newly diagnosed glioblastoma was halted early for efficacy. It had shown significant improvement in both progression-free and overall survival primary endpoints, the latter of which is quite difficult to do for many cancer treatments.

In April, NovoCure submitted a supplement PMA application for the first-line indication, which was granted priority review status by the agency. That designation came in May, starting a 180-day clock for the agency, so a decision should come before year end. The company expects that Optune will become part of the standard-of-care for newly diagnosed and recurrent glioblastoma.

Up next, the company is targeting Phase II and Phase III testing across multiple solid tumor types--preclinical research suggests that its TTFields technology has an antimitotic effect in 15 separate solid tumor types.

The technology requires a portable electric field generator, transducer arrays, rechargeable batteries and accessories. The transducer arrays are placed directly on the skin near the tumor, with the device worn continuously and operating day and night.

The revenue opportunity hasn't been much thus far. During the first half of this year, NovoCure had $11.8 million in net revenues, up from $7.3 million in revenues during the first half of 2014. But it had a whopping operating loss of $50.6 million during the first half, which swelled from a $39.2 million operating loss in the same 2014 period. So, that means the IPO only offers roughly a year and a half of runway. But NovoCure already had $106.5 million in cash at June 30.

The company sells into about 200 U.S. large clinical centers, mostly major academic teaching hospitals. It expects to expand upon that strategy even further upon a first-line FDA approval.

Existing investors including Index Ventures, the Technion R&D Foundation, SilverStone and Highline Capital had all hoped to unload some shares during the IPO--but will likely seek their opportunity again in a follow-on offering. The IPO has a typical 180-day lock-up period for shareholders.

- here is the IPO pricing announcement