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Can NovoCure's (NVCR) Steady Optune Business Aid Q2 Earnings?

Zacks Equity Research

NovoCure Limited (NVCR) is scheduled to report second-quarter fiscal 2019 results on Jul 25, before market opens.

In the first quarter, the company's earnings per share was in line with the Zacks Consensus Estimate. However, the company delivered a negative surprise in two of the last four quarters, the average miss being 3.33%.

Let's take a look at how things are shaping up prior to this announcement.

Factors at Play

NovoCure reported a robust first quarter on strong rollout of Optune, the company’s Tumor Treating Fields delivery system. Of late, the company’s active patient base, its main revenue driver, has been witnessing solid uptick. The number of prescriptions for patients with newly diagnosed Glioblastoma (GBM) is also on the rise.

With more than 2,600 patients on therapy (by the end of the last-reported quarter), the number of active patients on Optune has grown for 17 straight quarters. We expect to see a further rise in active patient base in the to-be-reported quarter.

NovoCure Limited Price and EPS Surprise


NovoCure Limited Price and EPS Surprise

NovoCure Limited price-eps-surprise | NovoCure Limited Quote

In the first quarter, the year-over-year growth in net revenues per active patient was primarily led by the improving reimbursement approval rates in Germany and robust performance in Austria and Japan. These trends are expected to continue in the to-be-reported quarter.

The company’s second-quarter results are expected to show strong adoption of Optune in China, thanks to the Zai Lab collaboration. Zai Lab has started treating patients in Hong Kong and is working on progressing the regulatory filing for Optune in China. Zai Lab is working to acquire a trial wavier for the regulatory approval of Optune in China for newly diagnosed and recurrent GBM this year and is actively preparing for a potential launch. These developments are expected to contribute to the company’s top line in the to-be-reported quarter.

Through the first quarter, Novocure has been continuously working with payers to expand access to Optune for GBM patients. As of Mar 31, 2019, more than 245 million Americans had coverage of Optune for newly diagnosed and/or recurrent GBM. We anticipate this trend to continue during the to-be-reported quarter.

Which Way Are Estimates Treading?

Overall, the Zacks Consensus Estimate for total revenues of $81.52 million implies growth of 32.5% from the prior-year quarter’s reported figure. In the second quarter, adjusted loss is estimated at 4 cents per share, a narrowing of 76.5% from the year-ago period’s adjusted loss.

What Our Quantitative Model Predicts

Our proven Zacks model clearly shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has high chances of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

NovoCure has a Zacks Rank #3, which increases the predictive power of ESP. The company has an Earnings ESP of +171.43%, which shows that it a high chance of beating estimates.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post earnings beat this quarter.

AmerisourceBergen ABC has an Earnings ESP of +0.82% and a Zacks Rank #2.

DENTSPLY SIRONA XRAY has an Earnings ESP of +6.95% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amedisys, Inc. AMED has an Earnings ESP of +1.91% and a Zacks Rank #1.

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