NovoCure Ltd (NVCR) stock intrinsic value fair value estimate & owner earnings analysis

Novocure sells Tumor Treating Fields (TTFields) therapy, delivered through wearable devices. The main product is Optune Gio for glioblastoma, a brain cancer. Optune Lua treats pleural mesothelioma and, since 2025, a form of lung cancer (NSCLC), and in 2026 the company received FDA approval for Optune Pax in locally advanced pancreatic cancer. Revenue was $655.4 million in 2025, up 8% from $605.2 million in 2024. The United States was $385.6 million, slightly down from $391.8 million, while international markets grew from $196.0 million to $250.3 million, led by France ($76.2 million versus $55.7 million) and Germany. Gross margin was 75%. The problem is what the business costs to run. Research, sales and administrative spending was $642.3 million in 2025, more than the $488.5 million of gross profit. We measure owner earnings as operating cash flow, less working-capital swings, less share-based compensation (a real cost paid in shares), less the capital spending needed to keep the business going. On that measure Novocure earned about $23 million in 2020 and lost money in every other year we measured (2019 and 2021 to 2025). We use 2019 to 2025 as the window: the median is about -$1.04 a share, and the 2025 figure was -$158 million (-$1.42 a share). Losses were larger in 2023 (-$2.31) and 2024 (-$2.05). The 2025 improvement came mostly from $55 million less share-based compensation. Spending excluding share-based compensation rose by about $56 million as the company launched in lung cancer and prepared for pancreatic cancer. Balance sheet: at the end of 2025 the company held $447.7 million of cash and short-term investments against $195.0 million (carrying value) of senior secured term loan debt. It repaid its $560.9 million convertible notes at maturity in 2025. Because we include the interest cost and the share-based compensation cost in owner earnings, we counted the roughly $253 million of net cash as the pool that funds the losses. We credit growth only where it is already secured or is a long-proven repeating process. The following was left out: revenue from the new lung and pancreatic indications, expanded insurance coverage that has not yet been granted, and any reduction in spending, because none of these has yet shown up in the results. Optune Lua revenue was only $10.4 million in 2025. Bear case, $0 a share: losses stay near the 2025 level, launch spending does not turn into revenue, and U.S. sales stay flat (they fell about $6 million in 2025, partly because one-time benefits from prior-period claims did not repeat). Medicare classifies the products as durable medical equipment and the company discloses that reduced coverage or payment would materially cut revenue. The net cash is used up within a few years and the shares would be left with nothing. Base case, $0 a share: international patient growth continues but is absorbed by launch and clinical-trial costs, so owner earnings stay negative through year 10. Even if the loss narrowed by $10 million a year, the losses over ten years would exceed the net cash by a wide margin. In 2025 owner earnings improved by $0.63 a share, but that improvement was driven by lower share-based compensation, not by operations, so we assume a much smaller $10 million (about $0.09 a share) improvement in year 1. We assign no value to new indications that are not yet earning money. Bull case, $2.90 a share: the business's own recent pattern continues. Revenue grows by about $50 million a year for seven years, as it did in 2025, with 75% gross margin, so owner earnings improve by about $37 million a year, from -$158 million to roughly +$101 million a year by year 7, and are held there through year 10. Total operating costs were nearly flat in 2025 ($642.3 million versus $638.5 million), which is the evidence for holding costs level, although spending excluding share-based compensation did rise that year. We credit nothing after year 10, because the filings do not tell us how long the key patents last. The present value of those owner earnings is about $74 million; adding the $253 million of net cash and dividing by about 112.5 million shares gives about $2.90 a share. What would prove this wrong: if the new indications, especially the pancreatic and lung cancer launches, generate large revenue at low added cost, the shares are worth much more than we show. If instead revenue stalls, the cash runs down and the company must issue more shares or debt. For 2019, the per-share figure uses the average of the four quarterly share counts. The margin-of-safety price sits well below the bull case, because the bear and base cases are worth nothing on the evidence we have.