Nexstim - To World Domination with Brain Stimulation

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3454

Now that I’ve had some time to reflect on last week’s earnings release, these are the thoughts that come to mind.

  • The business has now been turned profitable, so there is no longer such a rush for good things to materialize, as long as they do happen in the future.
  • No major surprises regarding the start of Brainlab sales. It was known from the beginning that the average sales pipeline lead time is around 18 months. Without budgeting, no hospital can make such an expensive purchase, and therefore sales must be initiated before the autumn budgeting season to make deals possible for the following year. Last year during H1, the Brainlab sales team was only just being trained, so it is realistic to expect deals only for this year. A few random hits did occur last year already, but they were more like statistical anomalies.
  • New partnerships are in the works and they take time, but now that the bottom line is positive, there is time to wait for them. It would be interesting to know what all the opportunities in the pipeline are, but I got the feeling that there are at least some plans for the brain-computer interface world.
  • Regarding therapy, global demand is growing, but customers want predictability for the continuity of equipment purchases and budgeting, which is why a reusable version of the head tracker, sold with a license, has been developed. If one wants to secure the use of devices in the future, there are significant risks with competitors’ devices. Neuronetics as a company is in very poor financial shape, and Brainsway, as an Israeli company, could fall victim to trade embargoes in some regions in this war-torn global situation.
  • Recurring revenue has dipped momentarily, and I adjusted my own expectations to suggest that there might be another small dip this year until NBS 6 maintenance agreements and license sales start bringing in more revenue.
  • With that over 20% revenue growth and 20% profit level, a nice compounding effect is achieved. Strong earnings also enable growth investments.
  • The core business is in good shape and justifies the current valuation. Additionally, there are new opportunities in the works that, if successful, could easily lift the valuation to, say, 20 times the current level (Sinaptica’s FDA Phase 3).

So, one can continue to wait with a sense of security.

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3455

Nexstim’s listed competitors. How long will Nexstim remain independent?

Neuronetics (STIM)

• Revenue (TTM): 129.9 M

• Net income (TTM): –44.5 M (loss-making)

• Market cap: approx. 91 M

• Comparison to 2024: Revenue 74.9 M, net income –43.7 M

BrainsWay (BWAY)

• Revenue (TTM): 49.1 M

• Net income (TTM): +6.2 M (profitable)

• Market cap: approx. 467 M

• Comparison to 2024: Revenue 41.0 M, net income +2.9 M

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3456

I believe that the acquisition offer will not come from these mentioned competitors.

On the diagnostics side, the most natural bidder is, of course, Brainlab, which owns warrants after already subscribing to 13% of Nexstim.

Brainlab itself also has major competitors who would certainly be interested in Nexstim’s solution as part of their own offering. For example, Stryker Group’s market cap is $148 billion, and last year they made a profit of $3.25 billion.

Buyers on the therapy side will likely start appearing more as Sinaptica’s studies progress. Potential buyers include all of those that Sinaptica has mentioned as possible acquirers in its pitch decks. As an example, let’s highlight Boston Scientific, which has a market cap of $113 billion and generated a profit of $2.9 billion last year.

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Has the reporting of trades been discontinued? I couldn’t find any information about it.

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I don’t think so? Although perhaps there is no reason to announce basic deals, but for example, these research-related openings and the equipment sales for them are certainly worth a press release if they occur.

Where did you hear that the disclosure policy has been changed?

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Karvinen mentioned in the webinar that since so many devices are already being sold, standard deals are no longer announced. “Special” deals, such as the second device recently sold to India, may be announced.

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