Promising progress with NBT

Update | 20 August 2019

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Nexstim’s revenues grew by 13% to €1.2m on the back of sales of NBT systems increasing by 170% to €0.6m. The company has only been focused on this marketing NBT in major depressive disorder (MDD) since September 2019. Nexstim increased its installed base of NBT systems by eight to 18 during H119, and appears to be gaining momentum with repeat orders, and progress should be boosted by the White Paper from Island Psychiatry. Sales from NBS systems for pre-surgical mapping were slightly disappointing as sales were pushed back into H219, but careful cost control means that cash burn was as expected. The company had cash of €6.4m on 30 June, and continues to look to strengthen its balance sheet. We value Nexstim at €0.41/share diluted.

Year-end: December 31201720182019E2020E
Sales (€m)
PBT (€m)(7.3)(6.2)(7.0)(6.4)
Net Income (€m)(7.3)(6.2)(7.1)(6.4)
EPS (€)(2.77)(1.93)(0.36)(0.13)
Cash* (€m)
EBITDA (€m)(5.3)(5.9)(6.1)(5.3)
Source: Trinity Delta. Note: *Our cash forecast assumes that all the warrants issued with the rights issue are exercised at €0.115 raising €1.8m in Q419 and Nexstim raises an additional €10m in FY20
  • NBT launch making good headway Nexstim installed four NBT systems in the US and a further four in Europe during H119, helping to increase NBT sales by 170% (vs H118) to €0.6m. Momentum has continued into H219 with extra installations at Island Psychiatry in New York and Neuro Wellness TMS Centers of America in Florida. The growth should benefit from white papers detailing clinical outcomes with NBT. The first paper suggests that MDD remission rates can increase by over 20% to c 50% with NBT (vs other transcranial magnetic stimulation (TMS) systems), as NBT uniquely stimulates the key part of the brain accurately and reproducibly.
  • Delayed sales affected NBS in H119 Sales of NBS systems fell by €0.3m to €0.6m as potential sales were delayed into H219. Essentially, two fewer systems were installed compared to H118, but reassuringly, management believes that this is largely a matter of timing and that those sales should be achieved in H219.
  • Various funding paths being pursued Nexstim raised €3.5m in April 2019, and finished the period with €6.4m, which should be sufficient for the company to operate to the end of Q120. The company could raise c €2m from the warrants issued with the April capital raise in October/November; but recognises that additional capital will still be needed. It has started discussions with major shareholders and continues to explore divestment options for the NBS business.
  • Valuation updated to €0.41/share We have updated our model to reflect the H118 results. We now value Nexstim at €19.0m or €0.41/share diluted (in the money options or warrants only), compared to €18.8m or €0.40/share diluted previously, as the better than expected sales of NBT more than offset the weaker NBS sales. A new opportunity could materially increase our valuation as Nexstim is in strategic discussions with a major US institution for the treatment of very seriously depressed patients; further details could be disclosed in the coming months.


20 August 2019

Market Cap€6.7m
Enterprise Value€8.3m
Shares in issue35.4m
12 month range€0.09-7.13
Free float86.5%
Primary exchangeHelsinki
Other exchangesStockholm
Company CodesNXTMH/NXTMS
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.


Mick Cooper PhD
+44 (0) 20 3637 5042

Lala Gregorek
+44 (0) 20 3637 5041

Nexstim: White Paper highlights potential of NBT

Island Psychiatry, which has three practices in New York, was the first organisation to purchase an NBT system in the US. The clinical results achieved by the first 10 patients to be treated with the devices suggest significantly better results can be achieved using NBT instead of one of the other transcranial magnetic stimulation (TMS) platforms.

Seven of the ten patients (70%) obtained a clinical response and five (50%) were in remission at the end of their treatment programmes, which on average included 37 therapy sessions. A clinical response was defined as a reduction of at least 50% in BDI (Beck’s Depression Inventory) or PHQ-9 Health Questionnaire, patient-reported measures of depression. The number of patients included in the White Paper is limited, but these initial clinical data compare favourably to those seen with other TMS systems. Historically, 41.5%-56.4% of MDD patients treated with TMS achieve a clinical response and 26.5%-28.7% enter remission.

A significant improvement in two measures of clinical depression was also observed, which is notable as there were only 10 patients in the sample group. The mean clinical improvement as measured using the BDI was 49.6% (p<0.01) and using PHQ9 was 46% (p<0.02), as shown in Exhibit 1.

Exhibit 1: Mean BDI and PHQ9 scores before and after treatment with NBT
Source: Island Psychiatry

The paper also reports the therapy was well tolerated by the patients. One patient did experience transient ocular migraine after two treatment sessions, but still completed all of his 36 sessions. The limited adverse events associated with NBT therapy is also indicated by the fact that the patients had 37 treatment sessions on average.

The key difference between NBT and other TMS platforms is that Nexstim’s system accurately and reproducibly stimulates the dorsolateral prefrontal cortex (DLPFC). NBT uses Nexstim’s SmartFocus, which can accurately map the different areas of the brain, so that the DLPFC is always stimulated. In comparison, the other TMS systems cannot directly identify the DLPFC and depend on the “5cm rule”, in which the cortex of the brain is stimulated to identify the area that triggers a movement of the thumb (APB location) and then the TMS coils are moved 5cm along the scalp anteriorly (towards the face) to target the DLPFC. Unfortunately, the distance between the two brain areas varies between patients (Exhibit 2), so that there might be sub-optimal stimulation of the DLPFC, which could result in less efficacious treatment of patients, with other TMS systems.

Exhibit 2: A patient described in the White Paper, in whom the “5cm rule” did not accurately locate the position of the DLPFC
Source: Island Psychiatry

The data in this first White Paper suggests that significantly better clinical outcomes can be achieved for MDD patients if Nexstim’s NBT system is used rather than a TMS system produced by one of its competitors (e.g. Neuronetics or BrainsWay). However, it should be remembered that the data in this paper is only from ten patients and it will be interesting to see if the similar results are achieved in larger patient groups and by different clinics. That said, data such as that reported in this White Paper should differentiate NBT from other TMS systems and increase adoption of Nexstim’s systems.


Financials and valuation

Our updated model takes into account the strong sales performance of NBT and the weaker than expected NBS sales. From a valuation perspective, the good progress being made with the launch of NBT more than offsets the disappointing NBS sales. Hence, we are increasing our valuation of Nexstim slightly to €19.0m or €0.54/share or €0.41/share diluted (in the money options or warrants only, Exhibit 3) having previously valued it at €18.8m or €0.53/share or €0.40/share diluted. To be conservative, we are forecasting that the delayed sales in H119 will have a knock-on effect on other periods and have not factored in the potential impact of the White Paper from Island Psychiatry. Similarly, we continue to include a financial risk adjustment and note that our valuation would be €39.7m or €0.81/share diluted if it was removed.

Exhibit 3: Updated DCF-based valuation of Nexstim
Source: Trinity Delta; Note: Peak sales achieved after nine years in the US and 10 years in Europe. We assume the subscription prices for the 2018 options is the weighted average of existing options, which is €5.337.

We have similarly revised our estimates, as shown in Exhibit 4. As indicated above, we are conservatively forecasting that the delayed NBS sales in H119 will have an impact on H219 and subsequent periods, and that we have increased slightly our forecasts for NBT sales solely due to the sales growth in H119. At this stage, we are not forecasting any potential acceleration in growth following the publication of the White Paper by Island Psychiatry. We estimate that the loss at the EBITDA level will only be slightly greater than before, because of the cost control measures (primarily in administrative costs) that have been implemented during H119 by management.

Exhibit 4: Summary of changes to estimates
Source: Trinity Delta  Note: The change in Adj EPS estimate for FY19 primarily reflects an over estimation of the weighted average number of shares in H119 in our previous estimate.
Exhibit 5: Summary of financials
Source: Nexstim, Trinity Delta  Note: The accounts are produced according to Finnish GAAP. In FY19, we assume that all the warrants associated with the May 2019 capital raise are exercised in November at a strike price of €0.115 and the short-term debt in FY20 is indicative of our view of the company’s funding requirement. Our sales forecasts do not include any contribution from indications that are 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.




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