Planning the next phase of growth

Update | 10 December 2020

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Nexstim is well placed to benefit from the novel accelerated rTMS (transcranial magnetic stimulation) therapy protocols being developed for severe depression and chronic neuropathic pain. Its accurately navigated SmartFocus TMS NBT technology could provide the precision and reproducibility required for clinical success. Promising data, expected in Q121, from the ongoing pilot study in severe depression would guide the format of a proposed double-blind multi-centre trial. Success would open sizeable new treatment opportunities for the NBT platform. Revenues from both NBT and NBS diagnostic systems have proven to be remarkably resilient during the COVID-19 pandemic which, coupled with careful cost control, suggests FY20 results will be in line with our forecasts. Strategic delivery prompts us to upgrade our valuation to €38.4m (€0.09/share), with room for further upside.

Year-end: December 31201820192020E2021E
Sales (€m)
PBT (€m)(6.2)(6.8)(3.8)(4.5)
Net Income (€m)(6.2)(6.8)(3.7)(4.4)
EPS (€)(1.93)(0.25)(0.01)(0.01)
Cash* (€m)
EBITDA (€m)(5.9)(6.0)(4.0)(3.7)
Source: Trinity Delta Note: *Our cash forecast assumes additional fund raise of €10m in FY21
  • Sizeable opportunities with accelerated protocols Successful outcomes in clinical studies exploring accelerated treatment protocols in severe depression and chronic pain could materially shift the rTMS world towards greater targeting accuracy. Nexstim’s NBT platform is acknowledged as providing highly precise, reliable, and reproducible navigation to a target site. Whilst this would underpin medium-term growth, the near-term should benefit from the strengthening evidence base generated by the patient registry (currently >100 treatments). For NBS, obtaining US pre-surgical mapping reimbursement would drive future revenue growth.
  • Five-year strategy focussed on growth Organic growth prospects should be bolstered by improved profitability as utilisation of the existing installed base (c 170 NBS systems, 28 NBT systems) increases. Understandably, focus is on the unfolding NBT opportunities, yet the outlook for NBS is also promising. Wider applications for motor and speech mapping, new prototype development, and gaining US reimbursement codes, would sustain double-digit growth through the next decade.
  • Funding required to unlock potential Nexstim has successfully navigated a difficult period, with a resilient performance throughout the COVID-19 pandemic supporting an expected reduction in FY20 operating loss. The cash runway extends to end-Q121 and our forecasts suggest a funding requirement of c €10m to support the necessary pivotal trials for the accelerated treatment protocols.
  • Valuation increased to €0.09/share Our rNPV valuation of €38.4m (€0.09/share), up from €32.2m (€0.07/share), reflects strategic delivery despite COVID-19 impact. Ahead of near-term pilot study data, on conservative assumptions, the accelerated protocol MDD opportunity could add €8.4m (€0.02/share) to our core valuation.


10 December 2020

Market Cap€26.6m
Enterprise Value€30.1m
Shares in issue439.6m
12 month range€0.01-0.07
Free float55%
Primary exchangeHelsinki
Other exchangesStockholm
Corporate clientYes

Company description

Nexstim is a targeted neuro-modulation company that has developed a proprietary navigated rTMS platform for use in diagnostics (NBS) and therapeutics (NBT). NBS is used in planning brain surgery while NBT is focused on depression and chronic pain. FDA approval for depression was given in 2017, and the focus is on commercial roll out in the US, Europe, and Asia.


Lala Gregorek
+44 (0) 20 3637 5043

Franc Gregori
+44 (0) 20 3637 5041

Nexstim is approaching a key value inflection point. The efficacy of its navigated neuro-stimulation platform has been demonstrated by its FDA approved use in pre-surgery brain mapping and in severe depression; however, it is the results of the E-FIT study in stroke that will define Nexstim’s near-term outlook. A positive outcome (results are expected in Q318) should lead to the FDA approving it for stroke rehabilitation and will further differentiate the proprietary platform from other rTMS players. The shares are still languishing following the highly disappointing failure of the pivotal NICHE trial in 2016 and the subsequent decidedly dilutive funding rounds. Nonetheless, the progress achieved since then means that Nexstim now appears to be materially under-valued. We initiate coverage with a €120m valuation, equivalent to €0.97/share (fully diluted).

Nexstim has two related, but distinct, businesses that are based on its proprietary navigated TMS (Transcranial Magnetic Stimulation) technology: the NBS (Navigated Brain Stimulation) system is employed in accurate pre-surgical mapping of the brain; and the NBT (Navigated Brain Therapy) system is used in clinical indications such as major depression and chronic pain. In August 2020 management articulated its strategic goals for 2020-24, detailing its plans to support the organic growth of both businesses and, notably, the initiatives to develop novel accelerated treatment regimens for various depression indications.

Exhibit 1 highlights the steps to improve profitability and the applications on which it will focus. These form the first phase of the longer-term strategy that we explore in this Update note.

Exhibit 1: Nexstim’s 2020 strategic objectives
Source: Nexstim, Trinity Delta

Nexstim is differentiated from its TMS peers through the capabilities of its proprietary e-field navigation technology. This means the localisation and visualisation of a targeted area of the brain is highly accurate and, importantly, can be reproduced in a reliable and dependable manner (across operators and treatment centres). Such consistency and personalisation results in clinical outcomes that are materially improved in both diagnostic and treatment applications, with a sizeable body of real-world evidence now in place to support its uses. This differentiation from competition, coupled with strong endorsement from KOLs (key opinion leaders), underpins the sustained growth that has been reported and offers the prospects for widening the overall market opportunities.

Nexstim plans to leverage the use of its TMS platform into broader indications and treatment settings. Our January 2020 Outlook note provides greater detail on the background to the technology, the competitive landscape, and market opportunities. The next sections summarise the near- and medium-term activities, notably the shift towards accelerated treatment protocols, that should drive sustained growth and achieve profitability.

NBT: aiming to broaden therapy applications

The use of TMS is increasingly gaining traction for the treatment of recalcitrant depression in Europe and, notably, in the US. Nexstim’s NBT platform is approved in Europe (CE marked) and the US (FDA approved and widely reimbursed) for the treatment of major depressive disorder (MDD). Depression remains one of the most widespread and debilitating forms of mental illness despite major pharmacological advances. First-line therapy of antidepressant medication, typically SSRIs (selective serotonin reuptake inhibitors), is prescribed by a primary care physician, with or without psychotherapy.

Exhibit 2: MDD patient continuum of care
Source: Trinity Delta, Neuronetics Note: * ECT (electroconvulsive therapy) may be used earlier in the patient continuum of care in patients experiencing catatonia, acute suicidal behaviours, or psychotic symptoms; ** TMS may be used at any point along the continuum of care following one or more failed treatment attempts

Referral to a psychiatrist occurs after treatment failure(s) and it is estimated that 15-40% of all MDD patients are treatment resistant (ie refractory to any pharmacological therapy), and periods of remission and relapse are common over a lifetime. Treatment-resistant depression is acknowledged as a leading cause of disability, with high levels of morbidity and mortality. The therapeutic strategies, including intrusive techniques such as Vagus Nerve Stimulation (VNS) and Electroconvulsive Therapy (ECT), reflect this. For context, ECT is associated with notable side effects and remains the most stigmatized treatment available in psychiatry, yet c 100,000 patients receive ECT annually in the US alone.

The FDA first authorised TMS for depression in 2008, when Neuronetics’ Neurostar focal iron core coil platform was approved as a de novo device. It took a decade to achieve the milestone of 1.7m treatments on 50,000 patients in the US. Further approvals, using Neurostar as the predicate device followed in 2013 (Brainsway’s H-Coil), 2015 (Magstim’s Horizon and MagVenture’s MagVita), with Nexstim’s NBT approved in December 2017 and launched in mid-2018. Within two years Nexstim has established an installed base of 28 NBT systems globally, focussed on primary care (outpatient) centres in clinics and hospitals. These posted growth of 18% at H120 (despite COVID-19 restrictions).

Treatment with rTMS usually comprises daily out-patient sessions lasting about 30 minutes, typically for two to six weeks. In depression, the activity of the left dorsolateral prefrontal cortex (DLPFC) is reduced. DLPFC is primarily associated with cognitive or executive functions, such as the maintenance and manipulation of working memory, intention formation, goal-directed action, abstract reasoning, attentional control, and emotion. It is the reappraisal and suppression of negative affect that is believed to be a protective mechanism against depression, in other words depression is associated with abnormally low levels of left DLPFC activity.

NBT’s SmartFocus navigation is a key differentiator

One of the real limitations clinically of rTMS is the poor localisation of the target. This is typically based on a rather simplistic anatomical approach; namely 5cm anterior to the primary motor cortical representation of the hand (which corresponds anatomically to Brodmann areas 9 and 46). This “standard procedure” fails to take into consideration the wide inter-individual variations in brain morphology. Case studies have consistently shown that the variations in location can be quite significant; for instance, a well-cited patient study [1] showed the prefrontal target was situated 8.3cm anterior to the hand motor cortex (a 3.3cm variation on an original 5cm measurement).

Such variations in targeting underline the need for accurate navigation as part of each patient’s treatment protocol. The issue has been known for some time [2], with the correct stimulation area only being addressed in around 30% of patients. It is thought [3] that the variable efficacy seen in many of the earlier depression trial analyses is due to this inconsistent approach to targeting, not simply between patients, but also within individual patient’s treatment regimens. Yet despite such known limitations, the safety benefits and relative efficacy of rTMS has resulted in a good market reception among clinicians.

Nexstim’s nTMS platform, the ‘SmartFocus’ Navigated Brain Therapy system, has been optimised for therapeutic applications and was FDA approved for MDD in December 2017, with US launch in May 2018. It is the only FDA approved device with built-in navigation, ensuring accurate, reliable, and reproducible treatment. SmartFocus technology can precisely map the motor cortex and uses proprietary e-field modelling to account for distortion caused by bone and brain tissue, accurately visualising the exact location, orientation, and magnitude of the stimulation.

The precision of SmartFocus makes it well placed for such treatment and management is undertaking a patient registry to generate the clinically validated data to support its wider adoption. The first data from 108 patients who have completed MDD therapy at US clinics show that 42% achieved a clinical remission and 74% showed a clinical response. Although the data from such registries is not as robust as a double-blind placebo trial, it does compare favourably with historical meta-analyses from other TMS studies [4] that showed reported remission rates of 26.5% to 28.7% and response rates of 41.5% to 56.4%.

Accelerated treatment protocols are game changing

More relevantly, the newer treatment regimens are increasingly favouring accurate navigation and the novel approaches being evaluated to accelerate the timelines of therapy appear to be particularly well-suited to the SmartFocus navigation. An apt example is iTBS (intermittent theta-burst stimulation), an accelerated treatment protocol that was FDA approved in 2018. Typically, rTMS consists of 20-30 sessions of 37.5-minute duration, five days a week for five/six weeks whereas with iTBS each session is shortened to c three minutes. Clinically iTBS has been shown to be comparable to rTMS, but with clear patient benefit and, importantly, cost and productivity advantages for the clinic.

The iTBS approach is being developed further by Stanford University through a programme known as (Stanford Accelerated Intelligent Neuromodulation Therapy). This aims to improve response rates within a simpler and easier to deliver protocol through a three-step approach: treating patients with multiple sessions per day at optimally spaced intervals; applying a higher overall pulse dose of stimulation; and, most importantly, precision targeting of the left DLPFC to subgenual anterior cingulate cortex (sgACC) circuit. The results, reported in April 2020, of an initial open-label 22 patient study were impressive, with an 86.4% remission rate. These preliminary findings need corroboration by a double-blind placebo (sham treatment) trial, where a positive outcome would support the use of TMS in a broader range of depression indications (including the more severe and treatment resistant).

Nexstim is supporting an investigator-led trial at Kuopio University Hospital using its SmartFocus nTMS system with an accelerated iTBS protocol comparing the responses of 10 patients on a regimen of multiple daily sessions over one week against those seen in 10 patients undertaking conventional TMS. The top line data was originally expected to be available by end-2020, however, it is clear that COVID-19 related restrictions have affected the study and it will now likely to complete slightly later, during Q121. If the data are positive this would be expected to lead to a double-blind, sham controlled study carried out across multiple centres in the US and Europe. We would expect such a trial to involve at least 100 patients in the active arm, in order to support an FDA filing. Clearly Nexstim would require additional funds to support such a study.

Nexstim has been granted a €0.4m R&D loan from Business Finland, a government body to support innovation, to develop and optimise the SmartFocus nTMS system for use in accelerated iTBS protocols. These efforts should be completed during H221 and will likely be ready to be employed in the potential multi-centre trial.

Economic benefits mirror the clinical outcomes

Nexstim’s NBT business model targets a high annual revenue stream per system with high utilisation rates. There are currently 28 NBT systems installed globally, with the prospect of growing the recurring revenues through existing installations and from placing new systems with both new and existing TMS providers. Clinical data from the patient registry will undoubtably contribute in the near- and medium-term as the improved outcomes help cement NBT’s benefits; however, we see the shift towards the accelerated protocols as a likely key driver in the medium-term. Whilst the demonstrable improvement in patient outcomes is the vital element in the NBT value proposition, the economic benefits to service providers should not be over-looked (Exhibit 3).

Exhibit 3: Economic benefit to TMS/Psychiatric Centre (pay-per-use lease)
Source: Nexstim Note: * includes estimated cost of facilities and technician for 45 minutes per treatment, MD costs (3x per patient, 45mins biweekly) and MRI cost of $500/patient divided by amount of treatment. 40% overhead applied.

Cost effectiveness studies have already shown that introduction of rTMS therapy after a single failed antidepressant treatment attempt produces greater cost savings and better outcomes than the current practice of continued successive medication attempts. Consequently, rTMS is widely reimbursed in the US for MDD, with 100% Medicare coverage and coverage by >95 major US commercial payors. Current Procedural Terminology (CPT) codes are available for therapeutic rTMS treatments, supporting reimbursement of $200-500 per session.

Exhibit 4: Nexstim business opportunity in MDD
Source: Nexstim

Nexstim has retained flexible pricing models for NBT, which include pay-per-use leasing, monthly unlimited use leasing, or capital sale (with additional fees from head tracker sales and servicing). This flexibility has resulted in a more rapid sales cycle for NBT in MDD than with NBS. The utilisation rate is the main revenue driver for each installed system and, as detailed earlier, the trends in clinical practice are particularly favourable. Interestingly, the economics of NBT therapy are suitably attractive, especially in the US, that Nexstim is exploring ways to establish joint-ventures and partnerships with treatment centres. The likely format has yet to detailed, but we expect Nexstim would forego its leasing income in exchange for a share of the profit generated.

Chronic pain is NBT’s next clinical focus

Given current resource constraints, Nexstim has prioritised its efforts on exploiting the NBT opportunity in MDD. However, the segment with the greatest commercial potential in the neuromodulation market is the treatment of chronic neuropathic pain, with around 10m addressable patients in the US and Europe. The lack of effective pain relief for such a large proportion of patients, coupled with the growing awareness of the issue of opioid misuse and addiction, means new therapeutic options are sought. NBT is CE Marked for chronic neuropathic pain, but the FDA is yet to approve any rTMS device for this indication. This largely reflects the fact that no large, multi-centre, randomised clinical trials have to date been undertaken by any manufacturer.

The use of rTMS is seen as a safe and effective treatment, with around a dozen clinical trials involving c 350 patients supporting its use published in the past decade. The issues limiting more widespread therapeutic use centre around the relative infancy of the body of clinical evidence; for instance, there are differing views affecting fundamental points such as what the primarily target should be within the brain (cortical reorganisation is a key factor) and the stimulation parameters (number of pulses and frequency). In part this shows the heterogenicity of neuropathic and chronic pain but, increasingly, the consensus is that rTMS is a valuable, effective, safe, and, because of its non-invasive nature, particularly attractive as a long-term treatment.

Nexstim has previously undertaken an exploratory 39-patient Phase II study at The Walton Centre, Neuroscience Research Centre, Liverpool (detailed in our Initiation) which delivered encouraging results. In Q420, a pilot study involving 5-10 patients was started at Helsinki University Hospital, which, replicating the advances seen in depression, uses an accelerated iTBS protocol. The patients selected have not benefitted from the standard 10Hz rTMS treatment targeted to the motor cortex that Helsinki University Hospital typically employs. This pilot study should complete in H121, with top line results released shortly after. These data, if positive, will guide a larger definitive multi-centre trial.

NBS: an important contributor to financial performance

NBS (Navigated Brain Stimulation) provides Nexstim with a dependable, high-margin revenue stream through its global installed base of c 170 systems at leading university and research hospitals. The NBS system, launched in 2003, is the only nTMS system that is FDA cleared and CE marked for the pre-surgical mapping (PSM) of the speech and motor cortices of the brain. PSM is typically undertaken ahead of tumour resection and NBS provides greater mapping precision, allowing surgeons to be more aggressive in tumour resection, thus improving treatment outcomes. However, there is scope to further develop the technology to map the speech and motor cortices of the brain ahead of other neurosurgical procedures (eg invasive epilepsy treatments).

Revenues arise from capital sales of instruments and recurring revenues from consumables, albeit a smaller amount than used in NBT. The NBS system pricing is c €200k-300k (dependent on functionality and support equipment). The global installed base of around 170 NBS systems, includes numerous world-renowned cancer centres (for instance: Mayo Clinic, Karolinska, MD Anderson, Charité, Great Ormond Street Hospital, and UCSF). Nexstim’s strategy for growing the profitability of the NBS business includes establishing new US reimbursement codes for pre-surgical mapping, leveraging the existing installed base, and securing new sales direct as well as potentially via a long-term strategic partnership to expand the current commercial reach.

NBS may also have utility beyond its current pre-surgical mapping applications. A recent prototype research project, worth €0.9m, has been signed with an anonymous US-based research foundation to develop further novel applications for stimulating and diagnosing the brain. The deal includes the development and delivery of two prototype SmartFocus nTMS systems, which will be sited in two unnamed institutions, who will conduct the research, with Nexstim also providing technical support as required. Delivery of these systems, and revenue recognition, is expected to occur in H221.


We value Nexstim using a risk-adjusted DCF model, forecasting NPVs for three revenue streams: NBT in depression, NBT in chronic pain, and NBS. The risk adjustments range from a success probability of 100% for pre-surgical mapping to 25% for the early-stage pain indication, reflecting its earlier nature. We employ conservative assumptions regarding patient populations, market sizes and growth rates, net pricing, adoption curves, and peak market penetration. In addition to considering development, execution and commercialisation risks, we also specifically included an adjustment for financial risk. This was, in our view, necessary due to the uncertainty at the time but has since abated, and we have improved this factor again from our last 75% to 85%. This, plus other updates to our model, sees the valuation rise from of €32.2m, equivalent to €0.07/share to €38.4m, equivalent to €0.09/share.

Exhibit 5: DCF-based valuation of Nexstim
Source: Trinity Delta; Note: Peak sales achieved after nine years in the US and 10 years in Europe.

Exhibit 5 shows a breakdown of our valuation elements. We include risk-adjusted cash flows for the three main components:

  • the NBS diagnostic pre-surgery brain mapping indication;
  • the FDA approved major depression indication (EU and US sales); and
  • the earlier Phase II chronic pain indication (EU only, US not included yet).

NBT MDD is the largest element of our valuation: its “commercial” valuation of €38.0m reduces to €32.3m when we overlay our “financial risk” adjustment. The NBS diagnostic unit is valued at €4.7m, reducing to €4.0m after risk adjustment. Similarly, the NBT Pain indication is valued at €6.6m and €5.6m respectively. Net debt is €3.5m under both scenarios. This results in a company valuation of €38.4m (€0.09/share), compared to €45.8m (€0.10/share) were the financial risk removed.

Our current valuation considers Nexstim’s core business, although we acknowledge that with additional funding and positive preliminary pilot study data, the market opportunity for NBT could be broader due to the use of accelerated protocols. In our January 2020 Outlook, we had previously provided an indicative rNPV valuation of the potential NBT opportunity in severe MDD patients who are treated in hospital, and are therefore highly suitable for accelerated therapy protocols. We have revisited our assumptions, applying new timelines and potential development costs, but maintain the key assumptions outlined in Exhibit 6.

Exhibit 6: Key assumptions in accelerated therapy MDD opportunity
Source: Trinity Delta, Nexstim Note: in the outpatient setting, patients currently receive TMS once a day (5 sessions per week) for 4-6 weeks.

We believe that this indicative valuation of the US hospital opportunity is conservative. It is solely based on the placing and use of NBT systems for primary treatment in hospitals; it does not capture any additional revenue that may be generated by maintenance therapy of these same patients in the outpatient setting. Additionally, it assumed that reimbursement is in line with that of conventional TMS therapy. A higher reimbursement rate would result in larger revenues per system; alternatively, a greater number of sessions per patient could result in more NBT systems being placed. Nevertheless, based on the assumptions outlined above, this opportunity (summarised in Exhibit 7) could add an incremental €8.4m or €0.02/share to our core Nexstim valuation.

Exhibit 7: Summary of potential MDD accelerated protocol opportunity
Source: Trinity Delta Note: cost of capital of 12.5%; USD/EUR exchange rate of 0.8.


H120 marked a record interim performance with net sales of €1.6m (+33% on H119m: €1.2m), operating loss of €1.8m (H119: loss of €3.4m), and net loss of €1.2m (H119: loss of €3.7m).

NBS sales increased an impressive 47% to €895k, with NBT revenues growing 18% to €720k. COVID-19 undoubtedly dampened the NBT commercial trajectory; however, the focus was on leveraging the current installed base to generate recurring revenues (ie excluding NBT capital system sales). As such H120 NBT sales were comprised solely of recurring revenues. On a rolling 12-month basis, Nexstim has achieved an average therapy revenue per NBT system of €70k, a lower figure than the €85k reported at FY19. NBS was impacted less as hospital neurosurgeries were largely unaffected. During the period, four new NBS systems (three in the US and one in Sweden) and five new NBT systems were installed.

Cost saving measures and new ways of working remotely that were implemented in response to the COVID-19 pandemic decreased operating costs, with operating cash flows showing a €1.6m outflow in H120 vs €3.7m in H119. Nexstim previously indicated that €0.8m in cost savings would be achieved in April-June 2020, with targeted annual savings of up to €3m.

Demand for Nexstim’s products and services has remained strong during H220, with financial guidance for FY20 most recently updated on November 10. FY20 net sales are estimated to increase and the full year operating loss for FY20 is expected to be lower than in FY19.

The end-June 2020 cash position of €4.8m (including the outstanding Kreos loan of €1.45m) provides sufficient funding through Q121, although execution on the 2020-24 corporate strategy will require additional funds. Our forecasts suggest that a further €10m would be required over the next 18 months to achieve near- and mid-term goals for NBT in depression (including further clinical evaluation of accelerated protocols), repay the Kreos loan (due December 2021) and to secure the company’s financial future.

We have previously highlighted that Nexstim is evaluating various funding options, including non-dilutive funding from strategic partnership(s) or agencies (such as the Business Finland loan for development for SmartFocus nTMS system optimisation), and has engaged an international life sciences investment bank to assist in this process.

Exhibit 8: Summary of financials
Source: Nexstim, Trinity Delta  Note: The accounts are produced according to Finnish GAAP. €10m of short-term debt in FY21e is indicative of our view of the company’s funding requirement; the balance reflects the Business Finland loan. Our sales forecasts do not include any contribution from indications yet to be approved. Historic EPS, DPS and Average no. of shares have been adjusted to reflect the 30:1 share consolidation in December 2018

[1] The value of navigation-guided rTMS for the treatment of depression: An illustrative case. Neurophysiologie Clinique/Clinical Neurophysiology 37(4):265-71 2007

[2] TMS in therapy studies: examination of the reliability of “standard” coil positioning by neuronavigation. Herwig et al. Biol Psychiatry 2001 50(1):58-61

[3] Comparison of “standard” and “navigated” procedures of TMS coil positioning over motor, premotor and prefrontal targets in patients with chronic pain and depression. Ahdab et al. Neurophysiol Clin 2010 40(1):27-36

[4] Carpenter L. et al. Transcranial magnetic stimulation (TMS) for major depression: a multisite, naturalistic, observational study of acute treatment outcomes in clinical practice. Depress Anxiety. 2012 Jul;29(7):587-96


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