Hi,
One of the worst percentage losses I took in the early part of this year was with Nexstim. Fortunately, the stake was relatively small. I sold my last shares on March 5th at a price of EUR 0.93. Apparently, the stock rose significantly in value after this. I noticed in Kauppalehti that the price for the same day has now been retroactively quoted as EUR 0.16 (5.3.2019). Has the stock undergone a split, or what explains this? I didn’t see any mention of a split that has already occurred on Nexstim’s website. Is a rights issue on the way?
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So, Nexstim did organize a share offering. Tomorrow, May 2nd, seems to be a critical day as information on the success of the offering should be released. If sufficient funds are not raised, things could get tight, as Kreos’s loan might become due for repayment.
On the other hand, if the offering is successful, I believe the company could have a good window to get the therapy business off the ground. News in this area has been positive, and for example, even leasing one device in the USA brings in significant annual revenue. A key upcoming news item could be an update on the number of therapy devices delivered this year. Sales teams have apparently only just started to be built, so expectations for the end of the year would be there regardless.
The diagnostics side has reportedly been for sale. A month ago, the notice of the Annual General Meeting seemed to include a proposal for the management to be authorized to approve the sale price, but this was withdrawn on the day of the AGM. Am I understanding correctly that perhaps an attempt was made to get an offer for diagnostics from some company by the AGM, but a suitable offer could not be obtained (negotiated) in time? Maybe it didn’t quite go that way. I think diagnostics would be much more valuable in the hands of a larger player than Nexstim, which will focus on therapy in the future.
Looking at this company’s history, it’s quite sad that tens of millions have been burned, and the company’s value is minimal. It’s a difficult industry. I myself only familiarized myself with Nexstim a few days ago, but it seems that the products are promising and, from a commercial perspective, at a good stage. The financing history has been a bit grim with expensive loans (though not quite as terrible as some companies that have fallen into a death spiral).
From an investment perspective, the best moment for such a company would probably be when “the last” financing round is at hand. I would be interested if the offering succeeded and diagnostics went for an OK price, perhaps then this would be the last round. At least for now slight_smile:
Inderes used to follow this. I don’t know if you would find the motivation to throw some assessments of the company on the forum, based on your old memories, so to speak. For example, when the information on the success of the offering comes out, you could provide some estimates of the company’s EV and prospects for business development. Or many other things, you know best. I promise to read your old Nexstim analyses if you reply.
Yeah, my first message, let’s see if it gets through.
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Yep. I also later observed that this was a tasty offering that affected the number of shares.
Regarding the investment, one would have to seek a higher risk. If the offering succeeds, it will raise the value of the shares quite a bit. On the other hand, there’s also the risk that the company will be driven into bankruptcy and operations will be continued by other financiers, cf. Talvivaara.
The new Nexstim shares then received a cold reception on the stock exchange. I concluded that even if Nexstim is a bit of a lottery ticket, it’s worth investing some amount in it at current prices. Some justifications for this are provided below. And if someone doesn’t want to read to the end, here’s a summary at the beginning: In my opinion, this company has clear value based on the growth of its commencing therapy business, for which there is already some evidence. The current share price does not reflect this value at all.
Regarding the older business, diagnostics, it has been announced at times this year that a buyer is being sought, and at other times, a partner. The latest information in communication states that ONE partner is being sought, “a partner” in the English version of the release. I am unaware whether the diagnostics business is being sold or if it’s about an agreement where a larger company would take Nexstim’s device into its own sales, utilizing its broader marketing channels. That is, a company with a market position as a supplier of neurosurgery equipment. One theoretical option could be Inomed, with whom there is a joint lunch symposium in Germany on Monday (found in events and on Twitter), but guesses are just guesses. I cannot name other potential partners, as I am not familiar with the field and do not intend to study it too closely. In any case, Nexstim’s communication indicates that the diagnostics business is somehow being transferred, at least in part, to another operator.
Anti-financing (equity financing), gradually increasing turnover (from therapy), and the possible sale of the aforementioned diagnostics enable greater investments in therapy, and these investments have already been announced (growth of sales teams, especially in the USA, and, for example, the acquisition of numerous experts for the steering group this spring). It is promising that therapy sales, which apparently started in 2017, were already clearly growing last year, even though US sales only started about a year ago. And it’s about device rental, at least in the USA (target of 100,000 USD per year per device, which in itself speaks of Nexstim’s great potential). Last year, 5 devices were delivered to the USA; hopefully, this year it will be more than double. Perhaps greater growth will follow once the sales team is built. A good thing about the therapy side is that nothing seems to be dependent on ongoing research or permit processes, but rather on the success of marketing. Of course, country-specific permits have also been granted recently and more may come.
Nexstim’s problem is, and this is currently overemphasized on the stock exchange, that the company is still making a large loss, and the money from the offering will only last for a limited time at the current rate (i.e., last year’s rate). And since revenue now and in the future will come at least in part from device leasing rather than device sales, it will take quite a long time to break even, even if sales grow as desired. In this context, the share price drop after the offering is probably no surprise, especially since the number of shares increased by about tenfold, and the company is still on an uncertain footing. Of course, the magnitude of the drop is surprisingly large, and in my opinion, it illustrates that no one really knows/wants to evaluate the company.
I believe that even with uncertainty, Nexstim should have a positive “debt-free price” (EV). Even at the offering price, the EV is very insignificant, and after last week’s share price drop, is it even zero anymore? It seems the EV has never been this low in the company’s history, which is a bit strange, considering that the main driving force, the therapy business, has already shown growth, even if it is in a very early stage. Its potential is huge; hardly anyone can completely deny that. And it’s always possible to sell the entire company. According to management, offers have already been made. (And at that time, the company also had a significant EV on the stock exchange, i.e., at the time before the offering).
(page 18)
We’ll see what happens. The company now has time after the offering to either provide evidence of sufficient business development and/or take strategic actions regarding either diagnostics or the entire company. If by the end of the year there is evidence of, for example, the success of US operations (at least some 20 leased machines delivered there in total in 1.5 years), the situation would probably be saved. Of course, machines will and should go elsewhere too; hopefully, some will be sold rather than leased, so that larger sums of money accumulate acutely.
There seems to be active discussion about the company on a couple of other forums, but I’m trying to entice people from Inderes to give a comment or two, or more 
. A couple of foreign analysis firms provide analysis on Nexstim. I haven’t looked into it yet, but it seems they talk about a completely different company than what is being battered on the Helsinki stock exchange at practically zero value. (Of course, I should familiarize myself with those analyses more closely so I don’t talk nonsense about their analyses.)
I will try to familiarize myself with the company a little better during the weekend or early next week and add a small addition to my scattered thoughts. (It seems my paragraph breaks in this overly long message are also off; please forgive me, this is only my second message here.)
As I promised and threatened, I’m writing “a little” more about Nexstim, now focusing on the value of diagnostics and therapy, leaning on analyses from various sources. Reading these analyses opened my eyes in that the great potential really lies in the therapy side, not in the old diagnostics business!
Trinity Delta values the diagnostics unit at a risk-adjusted 6.2 MEUR, but also estimates that nowhere near that amount would be achieved if sold, partly because Nexstim’s financial situation doesn’t provide a strong negotiating position. (Of course, now after the offering, this position might be a little better?) So it seems that selling diagnostics wouldn’t make Nexstim’s summer, even if they got 2-4 million for it. Of course, even at this price, for example, at the offering price, Nexstim’s EV would be strongly negative, which is, in my opinion, a completely distorted situation.
Trinity Delta estimates the risk-adjusted value of depression treatment at 21.5 MEUR and neuropathic pain treatment at 5.4 MEUR. These businesses are still in their early stages, but they are still valued elsewhere, just not on the stock market.
Goetzpartners’ analysis was more numbers-oriented with its forecasts; I won’t bother to refer to it here. However, the target price for Nexstim was (2 months ago, during the old share counts) as high as 8.4 euros per share. So, in any case, the total value of the company was shockingly high in their opinion. Since then, more money has come into the cash register through the offering, and good news about therapy has emerged, so the TOTAL value of the company should not logically decrease, at least in their eyes. On the stock market, it seems that when money comes into the cash register, the total value of the company decreases.
I found information verbally given by the CFO in a spring presentation video at an investment event in Sweden, stating that therapy revenue was 200 kEUR in 2017 and 700 kEUR in 2018. The company hasn’t seemed to specify these figures in its press releases, so this was good information for me, at least. The growth percentage has therefore been good, considering the therapy business is still in its infancy. I tried to clarify for myself what has practically happened. I suspect that 2017 was the first year for therapy. The information is that a total of 10 therapy devices for depression treatment had been delivered by mid-January 2019, and the 200+700 kEUR revenue is likely comprised of income from these, but it’s unclear whether any additional devices have been delivered that are used ONLY for pain treatment. For example, all devices in Finland are used for depression treatment, but some of these are also used for pain treatment, so perhaps these 10 include all machines. All 5 devices delivered to the USA, mentioned above, have been on a rental model, and it has been said that little revenue from them was recorded in 2018, which suggests that most of them went out at the end of the year or even as late as January this year. Some of the other five devices have certainly been sold, but some might be rental machines, I don’t know. Thus, it’s not really possible to estimate unit numbers in relation to revenue, but perhaps the 200 kEUR in 2017 corresponds to the sale of one device. 2018 revenues are probably partly from nascent rental income in the USA, income from a possible rental machine that went elsewhere, perhaps additional product sales from the one sold in 2017 (i.e., patient-specific items), and probably mostly sales revenue from 2-4 machines sold. This speculative method of calculation doesn’t get you very far, but perhaps the selling price of one machine could be around 200 kEUR, in which case there would probably be additional income from subsequent patient-specific item sales. The annual target of 100 kUSD for the rental machine in the USA is a surprisingly promising sum, and this presentation mentioned a hypothetical example where Nexstim accrued 150 kUSD in annual revenue, which might then be on the high side of the average expectation, which is 100 kUSD. Based partly on these rental model revenue estimates, I estimate that if the selling price of a device were the 200 kEUR I threw out, it must also include significant amounts of later patient-specific additional sales so that there wouldn’t be an illogical difference between the assumed total revenues for a rental machine and a sold machine.
In any case, if the selling price of one device were “only” the 200 kEUR I suggested, the machines sent to two different hospitals in Sweden, as announced in Friday’s press release, would generate about 10% of the funds received from the offering for the company. The fact that these two were the first navigated magnetic stimulation machines for depression treatment introduced in Sweden at all says something about the company’s product and market position. One might think that other hospitals would also consider Nexstim’s device first. As I understand it, this treatment is now becoming more widespread outside the USA, meaning that many devices will be purchased in Sweden in the future, whoever sells them. It’s worth noting here that the company probably wouldn’t have issued a press release unless these were the first devices delivered to that particular country, Sweden, as other individual devices haven’t been reported much either. So, the total number of deliveries remains somewhat speculative until the company updates the matter. I personally don’t expect a large number to go out in the first half of the year, for example, but I do trust in the end of the year, especially in the USA, although this estimate is also based on gut feeling. It’s worth calculating how many sold and rented units are needed to first build trust in the company and then grow into profit. And also the interim stage, where we know that future sales from rental machines will lead to profit, even if we are currently at a loss. The number of units needed for this does not need to be very large, as I understand it.
Well, I think I’ve sufficiently justified this investment of mine. (It’s by no means my largest, and in principle, I don’t really want to add much more. I have relatively little investment assets in general, as I am poor. Hopefully, I’ll have a lot more in a couple of years thanks to Nexstim 
). The company is a new acquaintance for me, which certainly shows in my writings, and I’m sure I’ve written something incorrectly. Perhaps someone will correct me, otherwise I’ll correct myself later as I get to know the company more in the coming weeks. Perhaps it also comes across in my writings that I’m a little excited too. Of course, it’s primarily advisable to look at what those analysts have to say and decide to what extent their assessments are correct. The disparity between them and the stock price is large; the EV alone in those is easily an 8-digit number in euros (at least in one, I don’t remember the other), while on the stock market, the EV is probably around zero now, if even that.
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I thought I’d continue my chat about Nexstim. In the future, probably not weekly, especially since I haven’t really familiarized myself with the company any more. I pondered a bit about the company’s financial position and what it would require, and whether it’s possible that a new funding round would no longer be needed. (Finally, a mention of the anchor investor (Leena Niemistö) who joined the offering, information about whom came from a tweet.)
There seemed to be a thread on the forum about potential 10-baggers. It’s hard to say about Nexstim’s probability of becoming one, but on the other hand, one could say that just the fact that a new funding round wouldn’t be needed would probably be enough for it to reach that. Because if we could get to profitability with current funding (including the autumn round for those who subscribed in spring), sales of diagnostics, and growing revenue from therapy, the current market value would be peanuts compared to that situation.
Current funding will only last until roughly the end of the year at the current burn rate (meaning therapy wouldn’t grow very much this year). The additional autumn round will only succeed if there is sufficient evidence of therapy development by autumn, or if diagnostics can be sold. (And partly for this reason, I think it’s a matter of 1-3 months until diagnostics is agreed to be sold and a co-operation negotiation (YYK) is called, and negotiations have been ongoing for a long time.) The autumn funding would then provide a few more months of time, but not much, at the current burn rate.
I already talked about the sales value of diagnostics. My own guess of 2-5 MEUR might be realistic, but 3-5 was what the analyst had in mind before the financial situation improved, and the risk-adjusted estimate for diagnostics they gave was a little over 6 MEUR. Of course, at the current rate, sales in this sector only provide 5-12 months of additional time, but it should be clear to everyone that the therapy sector is growing strongly and there are signs that it COULD take off already this year.
The therapy sector grew from 0.2 million to 0.7 million from the previous year, and didn’t really get off to a proper start in the most important market, the US (and the revenue from those five rented machines was said to almost entirely start only this year). And as the sales team is growing, one would think that the therapy growth percentage will be triple-digit this year, and not necessarily even start with a one. Thus, the revenue side will start to extend the coverage time of funding already this year, and next year we might already be looking at very interesting revenue figures. Common sense already says that when there are 10 or a little over 10 therapy salespeople of their own, each one will probably sell/rent a few per year. In addition, most markets have a separate distributor, meaning no own salespeople, as has been revealed in some press releases either in the form of sold devices (Sweden) or distribution agreements. And by the way, there’s a big conference going on in San Francisco now, where hopefully a couple of deals will be made , even if we don’t hear about them until the total number of delivered units is published perhaps in the H1 report.
Regarding costs, the absence of significant clinical studies and personnel reductions decrease costs, while the hiring of several salespeople increases expenses. And of course, these funding rounds cost money, but now at least to the guarantors, it went in shares. Perhaps a net zero situation compared to the previous year overall?
Based on the foregoing, one can calculate how one estimates the funding will actually suffice. The variation of possibilities is quite wide. I myself am optimistic here and see that things are developing favorably, not necessarily ideally of course. But since the EV is negative now, I don’t see the point of the stock price.
Indeed, Leena Niemistö was revealed as the new anchor investor. I try to get to know companies more, not so much owners, but I guess such an investor is also a good thing, for example, if additional funding is needed.
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Something has happened at Nexstim this week, so I’ll throw in an update to what I’ve already written.
Trinity Delta, one of the firms providing analysis on Nexstim, updated its situation after the share issue.
As expected, the money that came into the company through the issue increased Nexstim’s valuation in their eyes, which is the opposite of the stock market, where the issue crashed the company’s market value. The crash on the stock market was probably related to the massive number of new shares, and I suspect that the banking entities acting on behalf of the underwriters dumped the shares paid as commission almost at any price, as per their mandate.
TD estimates Nexstim’s fully diluted (considering options, etc.) value per share to be essentially 0.73 euros (1 euro without dilution, which is not as significant). However, they (rightly) still consider the financing risk to be high, and thus the diluted, financing-risk-adjusted value per share is only 0.40 euros. It should be noted that, according to them, they do not take into account the planned sale of diagnostics, which, if realized, would naturally further reduce the financing risk. And of course, they could not have taken into account Wednesday’s news, which raised the share price, and considering the terms of the “additional subscription” related to the completed financing round for the autumn, the share price increase naturally slightly reduces the financing risk compared to the time of the analysis.
One must, of course, be very pleased that even professional analysts consider Nexstim to be so valuable, i.e., well above the market price. And what really gives additional hope, and I’m only speaking for myself, is that they estimated this year’s revenue to be 4 MEur. In fact, according to my own estimate, there is over a 50 percent chance that this amount will be exceeded. But I am a pure amateur and don’t even know anything about the industry. And yes, the majority of the year’s total revenue will probably be in H2.
In any case, some confirmation for my optimism regarding this year’s revenue came on Wednesday, when the “new market entry announcement” this time came from Germany. And it was a device sale, not a rental, which is good as a counterbalance to the US rental machine model; more precisely, direct sales bring in more money immediately, and this is a good addition to the cash. Of course, these sold devices also generate a small additional revenue during use. Overall, will the US rental machines really be everything for Nexstim in the future?
Yes, that Wednesday’s launch announcement was just a press release, which Inderes didn’t even publish. We’ll see what kind of stock exchange releases regarding the company’s business will be like in the future if even press releases are this significant . The share price did correct reasonably well with the announcement, which is also good for the company due to financing. The percentages in the correction were quite large (and also in the setback today), but the company’s enterprise value (EV) is still negligible at current market prices, in my opinion.
There is still risk in the company, but a fair amount of good news flow is coming from business development, and investors will surely gain confidence at the latest when diagnostics are sold. Or then the next “market opening” news. Now a large number of sellers in the aftermath of the issue are keeping the price in check.
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I didn’t intend to constantly update the news from Nexstim here, but this morning’s news brings so much joy, and I have enough time now, so I’ll share it. For some reason, the news isn’t showing on Inderes’ website. This is already the third country to “break the copper” in a few weeks. First Sweden (a couple of systems), then Germany, and now Canada, all familiar countries from the Ice Hockey World Championships.
https://nexstim.com/news-and-events/news/press-release/news/nexstim-nbs-system-sold-to-the-jewish-general-hospital-in-canada/
One would think that a lot of devices are being sold in the USA right now, but apparently, only these country launches are being published. However, the USA already has 10 salespeople, according to a recent analysis. Even one device has a significant percentage impact on Nexstim’s revenue increase.
It’s really starting to look like the sales of therapy devices are indeed taking off. This means that revenue funding will undeniably start to turn the ship around.
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Nexstim’s sales of therapeutic devices still seem to be progressing. Yesterday, a press release came out about an Austrian private clinic’s experiences with a device they purchased earlier in the spring. (For me, this release was more an announcement of a sold device and strong revenue growth than of the feedback given, which, of course, can also be significant.)
https://nexstim.com/news-and-events/news/press-release/news/leading-austrian-clinic-klinik-pirawarth-provides-positive-feedback-on-its-first-nexstim-nbtr-syst/
In my message, I try to estimate H1 sales in terms of unit numbers and revenue (separately for therapy and diagnostics). And I try to conceptualize what kind of sales volume in H1 would indicate that the continuation (especially the year as a whole) would be strong enough to build faith in the company before the current funding runs out. (At best, increased revenue funding could even secure the future alone, and in this case, it would probably be a 10-bagger quite quickly).
I read the spring offering circular a bit more carefully. I found more precise sales figures for therapy revenue there (i.e., we are now talking about that future business): 2017 €211.1k, 2018 €659.9k. These figures even more clearly point to the estimate that 1 device was sold in 2017, and 3 devices in 2018. (In 2018, a small amount of accessories for the devices and a small amount of rent from the five recently installed rental devices in the USA were added to the revenue). Thus, the 5 devices mentioned as sold in mid-January 2019 would include 1 device sold at the beginning of January, i.e., for this year. Since then, several devices have been announced as sold via press releases, but it has been, as I understand it, obvious that not all sold devices have been announced separately (just as the device related to today’s release was not announced when the sale originally took place). I have been under the impression that only the first sales in individual markets/countries are announced. However, now, information about the first delivery to Austria came only afterwards in the press release, apparently because the praise given by the Austrian clinic was now wanted to be published. So, apparently, not even all first sales per country have been announced? This mixes things up a bit, making it harder to estimate the number of deliveries in H1. Of course, estimating revenue can also be difficult because one cannot be certain whether the sales will bring in the full price at once (+patient-specific accessories over the years) or if some deal has been an interim sale/rental.
The comparable period H1 2018 revenue was the best H1 in the company’s history (but still poor) at €1.079 million. That was solely diagnostic machine sales (or so I understood from some presentation last fall, which would mean that the few (3 according to my estimate) therapy devices were sold only in H2 2018). Diagnostic machine sales have been quite stable for some years now, but in the spring annual report, the CEO says that diagnostic machine sales are currently growing. I don’t entirely trust this statement 100%, but the change in the total number of delivered machines in the annual report compared to the previous H1 report seemed to suggest that growth in diagnostics would also have occurred in early spring H1, but perhaps it is at least not decreasing. What if H1 sees about 1 more machine sold than in the comparable period, in which case H1 revenue could be something like €1.079 + €0.2 million, i.e., about €1.3 million, and I will include this in my calculations.
The number of therapy machines sold in H1 is difficult to estimate precisely, but from just the announced and “known” ones (e.g., at some point, all the remaining machines must have been delivered to all five central hospitals in Finland, as based on spring presentations, all of them are supposed to have one), we already get about 6 devices as a minimum for this year, as I understand it. (Of course, I could be wrong here; I do try to stay on the straight and narrow with my estimates.) Who knows if there are more therapy device deliveries we haven’t heard about, which would, of course, add to the calculations. But wouldn’t even these “semi-certain” machines already generate about 6 x €200,000, or €1.2 million? (That €200,000 price is not an overestimate, as I understand it, at least. On top of this, of course, the still small rental income from the US machines; have the machines been in good use? A key figure, of course, is also how many machines have been rented this year. There is already enough sales staff in the USA, and perhaps the spring financing solution has finally opened the door for these deliveries as well? Of course, there will be little revenue from these machines this year in H1, as it is post-billing. And manufacturing costs for the machine are tens of thousands, so everything comes in with a delay. On the other hand, this is good to keep in mind when the company is only slightly unprofitable; the situation may be that rental machines will inevitably bring it into the black soon.
But if the total H1 revenue were €1.3 million for diagnostics + €1.2 million for therapy + perhaps €0.1 million from US rental machines, i.e., €2.6 million, there would be a strong increase compared to the comparable period (€1.079 million). And if more than the “minimum” 6 therapy devices have been sold, the revenue would naturally be higher. In its analysis, Trinity Delta estimates sales of €4 million for the entire year. Taking into account that by all accounts, H2 2019 will be a period of clearly accelerating sales (especially for rental machines), doesn’t everything suggest that the analysis’s forecast will be easily achieved? If my H1 estimate is wrong (too high), I would say that the pain threshold for H1 revenue is €1.5-1.6 million, because that would still target the analysis’s €4 million revenue for the whole year. But can I be so off that we would stay around €1.5 million? In my own mind, the only thing that suggests such low revenue is the low stock price. In any case, almost any increase of tens of percent compared to the comparable period would perhaps be perceived as positive, but realistically, €1.5 million would be a disappointment for me. €1.8 million would already be quite good, but clearly smaller than my estimate of the matter. (And my bold wishes for H1 I will leave unsaid for now )
For there to be enough faith in the company at a certain critical time, e.g., at the beginning of next year, that €4 million for the whole year is also the pain threshold, in my opinion. At that point, a new financing solution would be needed next year, and if €4 million (perhaps €3.7 million would suffice?) is not achieved, it could be difficult to arrange financing on favorable terms, if at all. If the revenue this year were €5-6 million, there would be, in my opinion, enough evidence for the future, and the risk would increasingly become that someone buys a good Finnish company too cheaply. (Now, let’s not start calling Nexstim a good company yet, but with a little more evidence, things are completely different.)
Not so much related to the content of this message, but it’s good to remember that the sale of diagnostics could also be a financing solution. The more I think about it, the less I hope for it. The different devices are so closely related from a technical point of view.
Well, a bit of text again. In the long run, I hope someone gets excited enough to comment. But for now, I’m quite happy with this monologue and I’m happy if even one person is interested in it. I learn as I write. The company is still a bit unfamiliar to me, and it doesn’t seem to interest many others, anymore or yet. Perhaps when I go through the joy or pain of the first financial review, I too will start to understand something of what I have written.
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There has been some movement in Nexstim’s stock price in recent days, generally trending upwards. Not much new has been heard from the company, but there have been individual device delivery announcements. Or at least one; the first therapy client in the US from a year ago ordered their second device, which crossed the publication threshold. If the enthusiasm of that clinic and its clients is even half as described, then perhaps several other clinics will gradually recognize the device’s certain competitive features and order a Nexstim device next. (So, what does it say that patients suffering from severe depression are enthusiastic about anything at all? The device must be sensationally good ).
In my view, the device sales situation is still such that merely the “certain” or known device delivery numbers during H1 (which I have speculated about in my previous messages) alone are already a clear step towards improvement and likely foreshadow clear success for the company, provided that sales in H2 gradually accelerate a bit more. On the other hand, it is clear that not all device deliveries have been published (also regarding therapy devices), and this allows for the possibility that the upcoming H1 report will reveal that numerous devices have been delivered, especially after the spring offering, more than what has been individually announced. I cautiously estimate that a few additional (therapy) devices have been sold, and in addition, a few rental devices have, of course, been delivered to the US. (It is worth noting separately that sales bring a lot of revenue, while rental devices mostly incur costs during their delivery time.) Diagnosis devices, on the other hand, have generally not been announced before. The total numbers remain a matter of guesswork. Nevertheless, the total number of devices revealed in the review will likely inspire confidence in the company, and the stock price will likely be quite strong when this first strong “therapy half-year” is reported. (I.e., that the therapy side is experiencing strong percentage growth in H1 is already clear, as you can read, for example, from my stories in this thread. That is, if you just trust my layman’s thoughts.)
We are heading towards the H1 report; perhaps before that, an announcement of a market opening for therapy sales might still come, e.g., France, the UK, or Russia. The China contract will probably also come at some point. Or perhaps during the quiet period, the threshold for issuing these press releases is higher, if any individual sale would otherwise cross the news threshold. Of course, there is a small possibility that a total sales update would come in mid-July, which would be symmetrical with the mid-January report, when an update was given, however, perhaps due to the upcoming offering. I would certainly like it if such an update were given.
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Thank you very much! As I believe I said, if even one person finds joy in my posts, then they haven’t been in vain.
Nexstim’s earnings report is next Friday, and it can’t come soon enough. It’s finally time to get updated information on the budding sales of therapy devices to clarify how strong the therapy business truly is.
Regarding this year’s device deliveries: I haven’t really followed the company much lately, and there haven’t been any new sales announcements from the company (which doesn’t mean some devices couldn’t have been sold during this time). Of course, according to a recent tweet, a depression machine will be put into use in La Jolla this Thursday. A few weeks ago, I realized that my earlier speculation about “sure therapy device deliveries this year” is even harder to grasp than I had thought. I read a press release from over a year ago about therapy devices in Finnish central hospitals, and the deliveries mentioned there are at least seemingly contradictory to several other press releases regarding delivery times, revenue, etc. It would be pointless to delve deeper into the matter here, but it would require quite a bit of effort to reconcile later company releases and investor presentations on therapy revenue, deliveries, etc. Explanatory factors for the discrepancies could include the use of a sales/rental model, later invoicing in relation to deliveries, the company’s verbal juggling of “therapy device”/“depression device,” etc. However, it’s best to largely disregard my assumptions about “sure delivered devices this year,” which I must acknowledge as self-criticism.
Related to the above, the analysis provided by Trinity Delta, an analysis firm, in the spring also contains practically impossible information about device quantities. The analysis stated (from memory) that a total of 7 therapy devices had been delivered to Europe at that time, including 2 recent ones to Sweden. When a few weeks later, a user experience report came out about a device delivered to Austria, it was quite clear that the number 7 could not be correct (in retrospect), because 5 to Finland and 2 to Sweden already make 7, and I don’t believe user experiences can be given based on 2 weeks. Well, all of this illustrates that information is poorly available, and even analysis firms are probably not given extra information.
Instead, when I was contemplating the revenue growth percentage earlier, perhaps those speculations are still indicative. That is, double-digit percentage growth is, to my understanding, guaranteed, but the exact growth figure will be very interesting. In addition, it’s important to hear the number of delivered devices from the report and try to distinguish which of them are rental devices or delivered with some intermediate model. It is unlikely that this will be unambiguously clarified, however. The sales/rental model is important because rental devices initially only incur costs, but apparently, at least US rental devices can be expected to generate greater overall revenue during use.
If one were to take a single, simplified metric to assess Nexstim’s future, it could be the estimated average number of devices to be delivered per month over the next six months. Theoretically, one could consider this by converting rental machines into sold machines (to which only small accessories would be added as additional sales during the machine’s approximately 7-year lifespan). With this calculation formula, 2 machines per month means unprofitable business, but 3 machines per month would already mean positive cash flow. Diagnostic machines have been delivered about 10 per year in recent years, but perhaps we trust the CEO’s word that this business is also constantly growing. Thus, 1 diagnostic machine per month is realistic. So, for therapy, the hope would be 2 per month already in H2 2019 (at the earliest after the spring offering; not before that, which is known indirectly at least).
We don’t know the actual sales pace right now, but I’ll share some information or “information” that appeared in Avanza discussions. At the end of June, one user name, in numerous enthusiastic messages, claimed to have called the CFO, who had reportedly said that numerous deliveries were underway and the company was aiming for (siktar på, the discussion was in Finnish) 1 machine delivery per week. The user name “swore” that the CFO had said exactly that word for word, and they had even recorded the phone conversations. Of course, it would be surprising if the CFO had actually slipped that information, but it would also be odd if the user name had engaged in such blatant lying; how the matter stands is unclear. When the share price rose (due to some announcement), the user name disappeared from the discussion, so they probably sold their shares.
It is very unclear to me what kind of numbers will come out. A terrible loss doesn’t scare me; the number of delivered machines is what interests me. I rather believe/fear that the number of deliveries will be more on the meager side, meaning only 2-4 machines in total have been delivered to the USA since mid-January, and nowhere else have there been any beyond those announced, or perhaps just 1. And this guess/fear certainly has no predictive value. The most important thing, in my opinion, would be, for example, the delivery pace in the autumn, but I will probably just have to make estimates based on H1 data, relying on continued growth in the future.
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The half-year review was, overall, a bit of a disappointment for me, and it looks particularly bad in terms of the numbers. Revenue was lower than expected. This was mainly due to two reasons: fewer diagnostic machines were delivered than I anticipated, and on the other hand, quite a few therapy machines seem to have been largely delivered on a rental basis, which means that so far they have primarily only incurred costs.
Regarding the diagnostic machines, the explanation given was that “the delivery of some systems” had been shifted to H2. I am somewhat inclined to forgive this decrease, but given that the CEO stated in the spring that deliveries of therapy machines were constantly increasing, this is indeed a disappointment. On the other hand, if one considers how many of these diagnostic machines have typically been delivered in a 6-month period recently, the number is probably 5 units. Thus, if these deferred deliveries can be referred to in the plural, then perhaps the CEO is right and that 5 units would have been exceeded?
For therapy machines, the key was the number of machines delivered beforehand. 8 (4 USA, 4 Europe) is okay and in line with what I expected (and here the CEO is talking about machines for depression treatment). There are now a total of 18 therapy machines installed for depression treatment, which is good development, although it could be better. I don’t know if there is any additional equipment purely for uses other than depression. In principle, this could be, for example, the BioMag (BioMag) system, which is used to research the treatment of paralysis patients, but let’s talk about depression machines since that’s where the information is provided. Therapy revenue grew strongly in terms of percentage, but the growth was surprisingly small, meaning that deliveries primarily seem to be on a rental basis. (At some point, I will probably revisit US TMS (Transcranial Magnetic Stimulation) clinics in relation to Smartfocus; I believe there are some small, interesting observations to be made online about them.)
In my opinion, the report looks even worse than it is. So, I am still a bit disappointed. At this stage, it is important that the market continues to believe in the company. I suspect that the autumn bonus issue will go well, and the company will probably have time to report on new deliveries before then, which will increase confidence. Of course, it’s a shame when some announcements come months after deliveries, if at all, and diagnostic machines are not really reported on at all.
Better things are to come, but the pace, for example, in H2, is still unclear. I need to find the report from tonight’s conference call. At the latest, I will hear about it when the company analysis comes out.
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I’ll get back to the review. I’ll write a few words about Nexstim’s high costs in H1 and the sufficiency of financing, and I’ll mention some ambiguity/apparent contradiction I noticed in the review. In addition, I’ll ponder a bit about the TMS centers in the USA.
The H1 loss was surprisingly and regrettably large, at EUR 3.7 million. I’ve already talked about the small turnover; delayed deliveries of diagnostic devices and, for therapy machines, apparently the emphasis on the rental model in deliveries explain the smallness of the main part. However, the magnitude of the loss was also affected by increased costs. Of course, anti-costs were a factor here, but personnel costs also grew more than I expected. In itself, the situation can be okay when it comes to expanding marketing teams, but I must say that Nexstim, in my opinion, is playing a “Big Game.” Hopefully, they know what they are doing and the outcome will be in the best interest of the owners.
The loss was so large that one has to reconsider the sufficiency of financing. The company promises that the financing will last for more than six months with the current pace, and naturally, when the bonus issue is implemented this autumn, they will manage a little longer without new financing. In connection with the diagnostics business, some kind of cooperation arrangement is probably still coming, and it may involve the transfer of money to Nexstim, but it could also be a “lighter” arrangement. I suspect that there would be interested parties in buying the entire company. Even if it paid triple the current price, one could get a very promising company for relatively little money. Of course, it would not be very pleasant if tens of millions of investments went cheaply abroad. I also suspect that the fresh anchor investors did not come in to sell everything abroad. There is a great possibility, in any case, that financing arrangements may also be needed next year. If only the indicators (turnover, profit, and TMS installed base) are in better shape then, financing/issue could be realized on good terms/valuation. I do not completely rule out the possibility that we could even manage without an issue-type financing arrangement if growth continues strong and, for example, the possible diagnostics cooperation reshapes the situation.
One contradiction in this review was found in the devices delivered to Europe for the treatment of depression. It was stated that a total of 4 devices had been delivered to 4 different countries (Germany, Sweden, Austria, and Finland). However, in the spring, a release stated that 2 devices had been sold to Sweden. Something doesn’t add up here. It could, of course, be that the second one had not been delivered during H1 but only later. Still, it’s a bit odd that a device delivery reported in April doesn’t become an event for H1, but a delivery reported in August (to the USA) does! Another contradiction related to device deliveries is found, but I will not speculate on it, because there are always explanations for things and I don’t feel like delving into this particular matter again. In addition, in some places in the review, the situation was said to be at the end of the period, in some places it remained a bit unclear whether it was the present moment or the end of the period, so a very precise picture of device deliveries was not obtained. But I would say that Nexstim does not at least try to exaggerate the number of devices, which is probably a good thing.
Achieve TMS, which recently tweeted that it had adopted Nexstim’s therapy device, states that it is the largest TMS chain in the USA, and it is beginning to have nearly 30 clinics in the USA (and Canada). Only Brainsway devices have been in these centers. The same applies to its sister company Achieve TMS East. From Brainsway’s website, one can see that each of these companies’ clinics has their device in use, and I haven’t seen any signs of other devices anywhere. Nexstim’s SmartFocus is thus apparently the only one that has broken Brainsway’s monopoly in the Achieve TMS chain. Only one clinic has “our” device, but it says something that Achieve TMS organized an information/training event for professionals in the area about the introduction of SmartFocus (Achieve’s Twitter). So it is unlikely that this first clinic at Achieve will be the only SmartFocus, and perhaps Achieve East will follow its sister’s example? In any case, the fact that Nexstim succeeds in breaking the monopoly is a good sign.
Some Nexstim promotional videos (patient experiences and a doctor’s speech, otherwise wearing a Silicon Valley TMS center jacket) came online last week. The video advertises the mysmartfocus.com page, where you can check the “closest” SmartFocus clinic, but this page is not yet active, as far as I understand. However, this indicates that more of these places are coming to America, as it is hardly worth creating a website from which to search for a suitable clinic in a large country for the sake of 9 TMS centers.
I might have a bit of a Finnish Nexstim bias, but what I’ve said above, in addition to other information, suggests that SmartFocus TMS is really a good device compared to other non-navigating devices, or more importantly, professionals in the field also seem to think so, at least in part. SmartFocus may be a bit late to the US market, but there seems to be room for a good device even in old TMS clinics, and in newly established centers, the probability of success should be high. It is a growth sector, so quite a few new clinics/expansions are still being created.
I haven’t read anything about the phone conference on the review day yet.
This message didn’t seem to have a clear “insight” into Nexstim’s goodness as an investment target. This is largely the intention, and this message is a somewhat catalog-like presentation of matters. Perhaps such a thing is allowed, as there is relatively little information available about the company. And I probably won’t write such long messages in the future . However, I will probably link Nexstim’s upcoming company presentations and Trinity’s new analysis here when they become available.
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I’m sure everyone even slightly interested in Nexstim has already noticed that Trinity Delta’s analysis update came out this week. They estimate the company’s risk-adjusted value (financing, etc.) at 0.41 EUR/share. They see the H1 report more positively than I do, which I have a slightly conflicting view on.
In a way, I see that (perhaps even striving for impartiality?) Trinity Delta calculates the value of the analysis target based on mathematical expectation and thus does not OVERemphasize the impact of risks on the target’s market value. This is a good approach in my opinion, as I have sometimes felt that serious analysis services are guilty of valuing a target at zero or close to it, even when the chances of a turnaround are well over 50 percent. But on the other hand (now that I’ve followed Nexstim for a few months and understand things a bit better), I feel that this H1 report was genuinely disappointing compared to expectations. (For example, I had to weigh heavily whether to call the report a slight disappointment or a fairly big disappointment, which was my initial reaction.) Trinity Delta, among other things, considered the delivery volumes of therapy devices to be a positive surprise, with which I cannot fully agree. It makes me wonder if they are perhaps too positive in their analysis (for a paying client)? However, I would give credit to DT’s estimated sales figures for the coming years; I am even slightly more optimistic about them .
DT also commented on the recent White Papers report from Nexstim, which describes the treatment response of 10 treated depression patients at a clinic where the SmartFocus device was first delivered in the US. The response was very good compared to the average reported, but this is indeed only a very preliminary result. It would be nice to know when similar reports will come from other US clinics, and whether these will be combined. I don’t believe that the results can remain as good in the future; these results are likely largely coincidental. Still, it is possible that when, for example, results for 50 patients are known, SmartFocus will prove to be better than other devices due to navigation. The prerequisite would be that these reports at some point elevate Nexstim’s product to the number one product, but at this stage, I consider the White Papers results to be only a glimmer of hope.
A couple of interesting points in DT’s report probably refer to the conference call on the report day, which I haven’t heard anything about elsewhere:
- (On financing)
… 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.
So, the sale of diagnostics is still on the table. Of course, this could be a backup plan if the bonus issue doesn’t succeed. The application for a sales permit, which was brought to the spring general meeting and then canceled, was probably also a similar precaution. Or perhaps the sale is actually coming. And the text does not rule out other financing solutions that have been discussed with major shareholders.
- 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.
This is hopeful news. No information on which institution it would be, or whether negotiations are progressing, e.g., to order several devices (and sale/lease?). On the other hand, what exactly is this VERY severe depression, diagnostically speaking?
This turned out to be a long post again, even though I intended otherwise. Perhaps the next thing to happen at the company will be those company presentations. We’ll see if it makes sense to link or comment on them here. Exciting times ahead for the company, however. And times are exciting for all companies where cash burns as fast as at Nexstim 
.
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Nexstim has been quiet on the communication front. The share price has dropped a bit, which I think is justified given Nexstim’s situation due to the silence, unfortunately.
On Tuesday, Nexstim’s CFO gave a company presentation in Sweden, where not much new was revealed. However, I did get some new thoughts about the company. I’ll list some of my takeaways from the presentation and give my current subjective opinion on the company. And it’s still quite positive.
https://www.aktiespararna.se/tv/folj-aktiedagen-stockholm-10-september-live
(around 5:26:00)
Diagnostic sales, which were disappointing in H1 (due to deferred deliveries), were expected to improve (catch-up) during H2. No mention was made of a possible sale of the diagnostics business (i.e., the old business).
The number of therapy device deliveries was not updated; only the situation on June 30, 2019, i.e., 18 units, was mentioned. One would think the company would provide an update on the situation as the bonus issue approaches. (At the same time, of course, they could also report on the situation with diagnostic devices, e.g., the deferred deliveries.)
Pain treatment. The content of the presentation on pain treatment made me a bit excited. We are a few years behind in depression, and despite a good device, it is not necessarily easy, but in the pain indication, Nexstim’s device was said to be the first in use. And when combined with the company’s leading position in TMS-related navigation and positive preliminary clinical results/experiences, pain treatment is a very promising package, especially for our company. Results from further research are coming soon from a leading pain research center in the UK, and positive results are constantly being obtained from clinical use in Helsinki. (Perhaps anchor investor Leena Niemistö’s interest is precisely in this indication, due to her background.) Phase 2 (and 3) studies could come soon, but would require additional funding. If, for example, money is sought for this (too) next year, one would think that smart money could be available from sources other than a rights issue? The ideal situation would be for this autumn’s bonus issue to carry enough weight so that the depression business (supported by diagnostics) would reach a reasonable situation in terms of revenue and growth in delivered (rental) machines. In that situation, there would be a solid basis to seek more money for very promising research in pain treatment. Otherwise, continuous fundraising will become difficult.
Overall, from my perspective, the situation is as follows:
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Currently, we are too much in the dark about how sales are progressing right now, i.e., in the short term. For example, will the 10 US sales team members achieve anything this year? The ball is in the company’s court here. I expect some update on the sales situation before the bonus issue. I don’t expect a big acceleration in sales if/when such an update comes, but some support for the bonus issue nonetheless.
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The company’s future is potentially promising/very promising despite great uncertainty and the need for funding. In the short term, the investor’s “reward” COULD come from the following, if it comes at all:
A reasonable acceleration in the sales of depression machines, which Nexstim would report.
Collaboration with an institution in the US for the treatment of very severe depression, if it materializes, i.e., “strategically” negotiated. (The presentation only mentioned the hope of getting into these institutions in the future.)
A China contract, which has presumably been negotiated for a long time (I’m not holding my breath waiting for this, though).
Those “white papers” results, which were also promised in the presentation to come out more, I understand fairly soon. If (to my surprise) the improvement percentage still remained around 50% as the number of patients grows, then this would, I believe, accelerate the demand for the depression device, because then everyone would know that Nexstim’s device is the best .
The preliminary results of pain treatment proving so good as more data accumulates that phase 2 is proceeded with. (This would, of course, increase costs and require funding.)
Sale of the diagnostics business (or a collaboration agreement), if the price is right. I don’t hope for a sale, though.
- So, all in all, there is promise, but evidence/success is required. Quite simple, then .
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Excellent analysis, thank you VK001!
As expected, Nexstim provided an update on its sales just before its bonus issue, and at the same time, at the turn of the quarter. The sales figures for the last two months were a disappointment.
No information was provided about the diagnostic devices (plural) that were reported in the interim report as having been transferred to H2, as only 1 diagnostic device was reported sold. This means that these transferred machines have not been delivered in August-September, and probably not in July either, which the new report for some reason does not cover. Two therapy devices were mentioned as sold, with target countries specified. There is a clear contradiction here, as the sale of TWO devices to Sweden was reported in late spring and subsequently confirmed in presentations, and now there were no additional sales to Sweden, and only 1 was delivered in H1. Unless at least 1 additional device was sold to Sweden in July (which this update and the H1 report do not cover), there is no explanation for the situation. Another somewhat similar contradiction may exist, but I will leave that for now.
The presentation was on Saturday from Turku (broadcast by Inderes). Not much new there. If one wants to look for positives, at least they convincingly stated that the sales outlook is good.
The accelerated repayment of Lagos’s debt (which was at least stated to be voluntary) is surprising in this situation, as it reduces cash sufficiency, especially if the issue does not go smoothly. (I have previously speculated about other financing options, which insiders may, of course, already have information about.)
But these last couple of months have been a disappointment. Nothing changes the fact that things can turn for the better in different ways, but the evidence of sales is still too subdued, and the cash burn is too high at this rate. The share price has also continued to fall, but we are still above water in relation to the success of the bonus issue. The share price is indeed very low compared to the potential, but the risk of slow development has at least seemingly increased again.
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A buzz in the US in the future. Maybe.
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Good that those negotiations are still ongoing. In themselves, they are not entirely new information; I have mentioned them myself, although the named state might have been new information .
Presumably, they now want to support the offering by providing up-to-date information about the company. And that’s good, as the updated device sales after early summer didn’t really provide support. A good guess would be that there won’t be any negative results from the negotiations before the offering is over . Now it looks better again for the offering to go through, at least when looking at the stock price. If only there would be more sales, so that the burn rate would decrease.