The First New Mesothelioma Treatment In 15 Years Could Deliver Benefits to Investors
A drug company recently made news with a treatment for a dreaded disease. Business Wire reported,
Novocure (Nasdaq: NVCR) announced that the U.S. Food and Drug Administration (FDA) has approved the NovoTTF-100L System in combination with pemetrexed plus platinum-based chemotherapy for the first-line treatment of unresectable, locally advanced or metastatic, malignant pleural mesothelioma (MPM).
NovoTTF-100L is a non-invasive, antimitotic cancer treatment that delivers Tumor Treating Fields to the region of the tumor. Tumor Treating Fields therapy uses electric fields tuned to specific frequencies to NVCRrupt solid tumor cancer cell division.
NovoTTF-100L is the first treatment for MPM approved by the FDA in more than 15 years. Preclinical data showed that human mesothelioma cells are highly sensitive to Tumor Treating Fields.
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In the STELLAR registration trial, 80 unresectable MPM patients treated with Tumor Treating Fields plus chemotherapy experienced a median overall survival of 18.2 months (95% CI 12.1-25.8).
MPM is a rare cancer that has been strongly linked to asbestos exposure. Approximately 3,000 people are diagnosed with MPM in the United States annually. Prior to the FDA approval of NovoTTF-100L, pemetrexed plus cisplatin was the only FDA-approved therapy for patients with unresectable MPM.
NovoTTF-100L for MPM is classified as a Humanitarian Use Device (HUD) and was approved under Humanitarian Device Exemption (HDE). The HDE pathway was created to encourage companies to innovate in rare NVCReases with underserved patient populations.
The FDA approved Optune®, another Tumor Treating Fields delivery system, under the Premarket Authorization (PMA) pathway in 2011 for the treatment of glioblastoma (GBM). Since 2011, more than 12,000 patients with GBM have been treated with Tumor Treating Fields.
“Since 2000, we have been developing and commercializing Tumor Treating Fields to extend survivals in some of the most aggressive forms of cancer,” said Bill Doyle, Novocure’s Executive Chairman.
“FDA approval of NovoTTF-100L provides patients with the first FDA-approved treatment for MPM in more than 15 years and, as our first FDA-approved torso cancer indication, marks a major milestone for Novocure. “
MPM is a devastating NVCRease, with only 10 to 20 percent of patients being candidates for surgery to remove the tumor,” said Mary Hesdorffer, NP, Executive Director of the Mesothelioma Applied Research Foundation.
“Typically, mesothelioma patients who cannot have surgery receive palliative care to mitigate their symptoms. NovoTTF-100L provides unresectable MPM patients with a treatment option that may improve survival. We are encouraged by the FDA approval and hope it is just the beginning of innovation in the treatment of this aggressive NVCRease.”
The FDA approval is based on the results of the STELLAR trial. STELLAR was a prospective, single-arm trial designed to study the safety and efficacy of NovoTTF-100L plus chemotherapy first-line in patients with unresectable MPM.
The trial included 80 patients with unresectable and previously untreated MPM who were candidates for treatment with pemetrexed and cisplatin or carboplatin. The trial was powered to prospectively determine the overall survival in patients treated with NovoTTF-100L plus chemotherapy. Secondary endpoints included overall response rate (per mRECIST criteria), progression free survival and safety.
The median overall survival was 18.2 months (95% CI 12.1-25.8) across all patients treated with NovoTTF-100L plus chemotherapy. The median overall survival was 21.2 months for patients with epithelioid MPM (n=53) and 12.1 months for patients with non-epithelioid MPM (n=21).
More than half, 62 percent, of patients (n=80) enrolled in the STELLAR trial who used NovoTTF-100L plus chemotherapy were still alive at one year. The NVCRease control rate in patients with at least one follow-up CT scan performed (n=72) was 97 percent. 40 percent of patients had a partial response, 57 percent had stable NVCRease, and 3 percent had progressive NVCRease. The median progression free survival was 7.6 months.
The stock is in a trading range.
The weekly chart shows the stock move quickly towards its all time highs.
A Trade for Short Term Bulls
As with the ownership of any stock, buying NVCR could require a significant amount of capital and exposes the investor to standard risks of owning a stock.
To reduce the risks of a trade, an investor could purchase a call option. This allows them to benefit from upside moves in the stock while limiting risk to the amount paid for the options. However, buying a call option can also require a significant amount of capital and includes the risk of a 100% loss.
Whenever an option is bought, the maximum risk is always equal to 100% of the amount of spent to purchase the option. Since options cost significantly less than a stock, the risk in dollar terms will usually be relatively small to own an option.
To further limit the risks of the trade, an investor could use a bull call spread. This strategy consists of buying one call option and selling another at a higher strike price to help pay for the cost of buying the first call. The spread strategy always reduces the risk of an options trade.
This strategy is designed to profit from a gain in the underlying stock’s price but has the benefit of avoiding the large up-front capital outlay and downside risk of outright stock ownership. The potential risks and rewards of this strategy are summarized in the chart below.
Source: The Options Industry Council
Both the potential profit and loss for the bull call spread are limited. The maximum loss is equal to the net premium paid when the trade is opened. The maximum profit is limited to the difference between the strike prices, less the debit paid to put on the position.
This strategy could be especially appealing with high priced stocks where the share price and options premiums are often a significant commitment of capital for smaller investors.
A Specific Trade for NVCR
Every day, we scan the markets looking for trades with low risk and high potential rewards. These trades are available almost every day and we share them with you as we find them. Now, it’s important to remember these are trading opportunities in volatile stocks.
When we find a potential opportunity, we evaluate it with real market data. But because the trades are volatile, the opportunities may differ by the time you read this. To help you evaluate the current opportunity, we show our math and explain the strategy.
For NVCR, the June 21 options allow a trader to gain exposure to the stock.
A June 21 $55 call option can be bought for about $1.40 and the June 21 $57.50 call could be sold for about $0.75. This trade would cost $0.65 to open, or $65 since each contract covers 100 shares of stock.
The amount paid to enter the trade is the largest possible loss on the trade. This is generally true whenever a trader is creating a debit to enter an options trade. “Creating a debit” means there is a cost to enter the trade. You could create a debit by simply buying puts or calls to open a directional trade.
In this trade, the maximum loss would be equal to the amount spent to open the trade, or $65.
The maximum gain on the trade is equal to the difference in exercise prices less the amount of the premium paid to open the trade.
For this trade in NVCR the maximum gain is $1.85 ($57.50 – $55= $2.50; $250 – $0.65 = $1.85). This represents $185 per contract since each contract covers 100 shares.
Most brokers will require minimum trading capital equal to the risk on the trade, or $65 to open this trade.
That is a potential gain of about 184% based on the amount risked in the trade. The trade could be closed early if the maximum gain is realized before the options expire.