Nexstim — Funded and back on stroke trial track

Nexstim — Funded and back on stroke trial track

A key uncertainty for Nexstim was removed in December as the FDA confirmed that only one additional stroke rehabilitation trial in 60 patients will be required to seek de novo 510(k) regulatory approval for the NBT system. US approval might be obtained during Q418. Nexstim has used €8.8m from the Bracknor/Sitra funding arrangement and had €8.2m in cash in December. A further €3.2m can be raised from the arrangement. Excluding 30m issued warrants, this could fund Nexstim until late 2018. The NBS system achieved €2.5m in sales in 2016, with modest increases anticipated by Nexstim for 2017; new US distributors have been appointed.

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Written by

Nexstim

Funded and back on stroke trial track

FY16 results and update

Healthcare equipment & services

7 March 2017

Price

€0.20

Market cap

€11m

Net cash (€m) at 31 December 2016

8.2

Shares in issue

57.3m

Free float

98%

Code

NXTMH, NXTMS

Primary exchange

Nasdaq First North Finland

Secondary exchange

Nasdaq First North Sweden

Share price performance

%

1m

3m

12m

Abs

(20.7)

(17.9)

(95.8)

Rel (local)

(22.3)

(25.1)

(96.5)

52-week high/low

€5.72

€0.13

Business description

Nexstim sells its navigated brain stimulation (NBS) system to plan brain surgery; the system is sold in the US and EU. The therapeutic stimulation system (NBT) is in clinical development for stroke rehabilitation, with data due in Q118 and a possible de novo 501(k) approval by late 2018.

Next events

Start of E-FIT trial

Q117

E-FIT data

Q118

NBT stroke de novo 510(k) filing

Q218

NBT stroke de novo 510(k) approval

Q418

Analyst

Dr John Savin MBA

+44 (0)20 3077 5735

Nexstim is a research client of Edison Investment Research Limited

A key uncertainty for Nexstim was removed in December as the FDA confirmed that only one additional stroke rehabilitation trial in 60 patients will be required to seek de novo 510(k) regulatory approval for the NBT system.US approval might be obtained during Q418. Nexstim has used €8.8m from the Bracknor/Sitra funding arrangement and had €8.2m in cash in December. A further €3.2m can be raised from the arrangement. Excluding 30m issued warrants, this could fund Nexstim until late 2018. The NBS system achieved €2.5m in sales in 2016, with modest increases anticipated by Nexstim for 2017; new US distributors have been appointed.

Year
end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/15

2.53

(9.55)

(119)

0.0

N/A

N/A

12/16

2.48

(6.48)

(54)

0.0

N/A

N/A

12/17e

2.56

(4.59)

(8)

0.0

N/A

N/A

12/18e

2.98

(2.83)

(5)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. EPS is estimated after current dilution only.

Going for de novo in stoke rehabilitation

Nexstim anticipates that this trial will report in Q118. The FDA confirmed that Nexstim’s 60-patient supplementary stroke rehabilitation trial (E-FIT), costed by Nexstim at about €2m, will be sufficient, pooled with data from the Phase III NICHE trial, to seek regulatory approval for Navigated Brian Therapy (NBT). The trial could complete by March 2018 allowing a spring de novo 510(k) application and launch by late 2018. The NICHE trial showed meaningful clinical improvements in 66% of patients in both the active and sham (placebo) arms. Nexstim has developed a non-active sham procedure instead of the active sham used in NICHE. Nextstim will apply for 510(k) approval in 2017 for use of NBT in depression; there are three predicate devices to act as benchmarks. A pain indication is also being developed.

Finnish share storm

The financing arrangements with Bracknor and Sitra (see our note FDA de novo filing, funding package published on 27 July 2016) have been extensively used, raising €8.8m (€7.7m equity, €1.1m unconverted loans) in H216. Shares in issue rose 39m from 8.1m in June 2016 to 47.1m in December 2016. A further 10.2m shares were issued to 28 February, taking the total to 57.3m. There are now 31.2m warrants and 1.3m management options, with €3.2m of potential drawdown funding remaining plus any warrant proceeds. Cash on 30 December was €8.2m; H2 cash burn was cut to €2m.

Valuation: Tough call while waiting for 2018 data

Sales over 2016 of Navigated Brain Stimulation (for brain mapping) were about 10 units, worth €2.5m. New distributors should enable modest 2017 sales growth. Forecasts have been updated with 2016 results. On an unchanged indicative value of €28.6m and using 89.8m fully diluted shares in issue (current level), the indicative value is about €0.3/share, formerly €0.58 share. There may be further share and warrant issues; more cash will be needed for the NBT launch in 2019.

Exhibit 1: Financial summary

€'000s

2015

2016

2017e

2018e

Year end 30 June

FAS

FAS

FAS

FAS

PROFIT & LOSS

Revenue

 

 

2,528

2,483

2,560

2,983

Cost of Sales

(821)

(645)

(1,025)

(1,162)

Gross Profit

1,707

1,837

1,535

1,821

EBITDA

 

 

(9,984)

(6,436)

(4,590)

(2,804)

Operating Profit (before GW and except)

 

(10,096)

(6,446)

(4,600)

(2,814)

Intangible Amortisation

(274)

(250)

(250)

(250)

Exceptionals

-

-

-

-

Operating Profit

(10,370)

(6,696)

(4,850)

(3,064)

Other

-

-

-

-

Net Interest

544

(34)

16

(15)

Profit Before Tax (norm)

 

 

(9,552)

(6,480)

(4,585)

(2,828)

Profit Before Tax (FRS 3)

 

 

(9,826)

(6,730)

(4,835)

(3,078)

Tax

(1)

(2)

-

-

Profit After Tax (norm)

(9,553)

(6,483)

(4,585)

(2,828)

Profit After Tax (FRS 3)

(9,827)

(6,733)

(4,835)

(3,078)

Average Number of Shares Outstanding (m)

8.0

12.0

55.0

57.0

EPS - normalised (c)

 

 

(119)

(54)

(8)

(5)

EPS - FRS 3 (€)

 

 

(1.23)

(0.56)

(0.09)

(0.05)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross Margin (%)

67.5

74.0

60.0

61.1

EBITDA Margin (%)

-394.9

-259.2

-179.3

-94.0

Operating Margin (before GW and except.) (%)

-399.4

-259.7

-179.7

-94.3

BALANCE SHEET

Fixed Assets

 

 

974

911

911

911

Intangible Assets

631

652

652

652

Tangible Assets

333

249

249

249

Other

10

10

10

10

Current Assets

 

 

8,233

9,506

4,574

1,396

Stocks

421

292

292

292

Debtors

659

789

789

789

Cash

6,875

8,156

3,224

46

Other

277

268

268

268

Current Liabilities

 

 

(2,417)

(2,137)

(2,140)

(2,140)

Creditors

(1,084)

(397)

(400)

(400)

Short term borrowings

(384)

(1,012)

(1,012)

(1,012)

Short term leases

0

0

0

0

Other

(948)

(728)

(728)

(728)

Long Term Liabilities

 

 

(3,245)

(3,802)

(3,702)

(3,602)

Long term borrowings

(3,197)

(3,778)

(3,678)

(3,578)

Long term leases

0

0

0

0

Other long term liabilities

(47)

(24)

(24)

(24)

Net Assets

 

 

3,545

4,479

(356)

(3,434)

CASH FLOW

Operating Cash Flow

 

 

(9,065)

(7,250)

(4,587)

(2,804)

Net Interest

(544)

25

16

(15)

Tax

0

0

0

0

Capex

(380)

(310)

(260)

(260)

Acquisitions/disposals

0

0

0

0

Financing

5,280

7,700

0

0

Dividends

0

0

0

0

Other

100

0

(100)

(100)

Net Cash Flow

(4,609)

165

(4,932)

(3,178)

Opening net debt/(cash)

 

 

(7,945)

(3,293)

(3,366)

1,466

HP finance leases initiated

-

-

-

-

Other

(43)

(92)

100

100

Closing net debt/(cash)

 

 

(3,293)

(3,366)

1,466

4,544

Source: Nexstim accounts, Edison Investment Research forecasts

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Nexstim and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Nexstim and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

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