DJ Nexstim OYJ (NXTMH-FI): FY2018 results reflect growing focus on therapy
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goetzpartners securities Limited
Nexstim OYJ (NXTMH-FI): FY2018 results reflect growing focus on therapy
12-March-2019 / 08:16 GMT/BST
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*Nexstim OYJ (NXTMH-FI): FY2018 results reflect growing focus on therapy*
*Recommendation: OUTPERFORM*
*Target Price: EUR8.40*
*Current Price: EUR0.85 (CoB on 11th March 2019) *
*KEY TAKEAWAY*
Nexstim reported FY2018 sales of EUR2.7m, broadly flat vs. EUR2.6m in FY2017,
as a 127% increase in US sales was largely offset by a -56% decline in Europe.
The company reported solid installed-base growth, bringing the total number of
installed Navigated Brain Stimulation ("NBS") and Navigated Brain Therapy
("NBT") systems to 160 (+10 YoY) and 10 (+10 YoY), respectively. As a result
of the increased focus on NBT commercialisation, we are revising our sales
forecasts for FY2019E and out-years to account for pay-per-use ("PPY") sales.
YE2018 cash stood at EUR7.2m, which should allow the company to fund
operations until YE2019E. Nexstim also announced a potential divestment of its
NBS business and will provide an update following the AGM on March 25th. We
continue to believe that Nexstim is well-positioned to find broad adoption
across the depression market, affecting more than 10 million individuals in
the US alone. We reiterate both our OUTPERFORM recommendation and EUR8.40
target price ("TP").
*FY2018 results reflect successful commercial launch of NBT for depression*
Despite reporting flat sales growth, the operating loss increased by 13% to
EUR6.3m due largely to investments into the sales infrastructure in the US.
Personnel expenses grew by 18% YoY as a result of the addition of 6 new sales
people in the US, bringing the total sales staff to 10. The expanding US team
should allow the company to increase sales rapidly in 2019E. Following the
distribution agreement with Hong Kong-based Ampere Medical in October 2018,
Nexstim recently announced the signing of an additional agreement with
Canadian Health Solutions to bring NBT for depression to the Canadian market.
*Adjusting 2019E sales and beyond to reflect NBT pay-per-use model*
In light of the FY2018 results we adjust our forecasts to reflect expected
delays in monetisation associated with the PPY sales model used in the US. We
have also adjusted our NBS sales forecast in line with historic growth to
reflect an increased commercial focus on the therapy business. As a result of
our adjustments, we have trimmed 2019E and out-year sales, and now expect
profitability in 2022E (vs. 2021E prev.). Due to the inherent revenue lag
associated with the PPY model, we anticipate sales on the back of the growth
in NBT installed base to be increasingly realised from 2019E.
*We maintain our target price of EUR8.40*
We value Nexstim based on a DCF approach using a WACC of 14%, which yields a
fair value of EUR8.40 per share. We continue to believe that Nexstim is
well-positioned to enter a period of accelerated growth as the therapy
business starts to gain traction and recurring revenues from systems consigned
in 2018 begin to be realised from 2019E. The main risk to our TP are low
adoption and utilisation rates, which could lead to lower than expected
top-line growth. We reiterate both our OUTPERFORM recommendation and EUR8.40
target price.
Kind regards, Kind regards,
Martin Piehlmeier | Analyst
goetzpartners Healthcare Research Team | Research Team
goetzpartners securities Limited
The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.
T +44 (0) 203 859 7725 | martin.piehlmeier@goetzpartners.com /
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