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Winds of change

MagForce 13 November 2020 Update
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MagForce

Winds of change

Healthcare equipment & services

Scale research report - Update

13 November 2020

Price

€2.52

Market cap

€70m

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Share details

Code

MF6

Listing

Deutsche Börse Scale

Shares in issue

27.7m

Net debt (€m) at 30 June 2020

22.0

Business description

MagForce is a German company with the first European-approved, nanotechnology-based therapy to treat brain tumours. NanoTherm therapy consists of nanoparticle instillation into the tumour, activated by an alternating magnetic field, producing heat and thermally destroying or sensitising tumours.

Bull

US prostate cancer market presents a huge commercial opportunity.

Technology is clinically validated.

CEO has a proven track record.

Bear

Reimbursement has been difficult to obtain in Germany to date.

Approval in the US is needed before launch.

Uptake of NanoTherm has been slow to date.

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr John Priestner

+44 (0)20 3077 5700

MagForce is making progress in its strategy to drive the uptake of NanoTherm, its thermal ablation treatment approved in Europe for brain tumours (GBM). Despite the impact of COVID-19, 17 GBM patients were treated during H120; management expects to sustain this in H220 (c 30–40 in FY20) and triple it in FY21 (c 90–120). Safety data from the US study for prostate cancer are still expected in Q420; however, the impact of COVID-19 means launch is now expected in H221 (vs the prior Q221 forecast). Growth in European sales, driven by reimbursement and the ongoing roll-out of devices, and the potential launch in the US will be key to crystallising value. MagForce’s market cap is €70m with an EV of €92m.

European roll-out gathers momentum

Revenues from NanoTherm have seen an uptick in growth, with 11 patients treated in Germany and six in Poland in H120; a mobile ‘plug-and-treat’ solution means the lead time to start patient treatment in new centres has shortened significantly. New treatment centres are expected to open in Germany in 2020 or 2021. The planned HTA application implies federal reimbursement in Germany could start during H221 and could be the catalyst for meaningful top-line growth and sustainable profitability from 2022. The planned opening of sites in Italy and Spain in 2021 will be delayed until pandemic headwinds abate and management will focus on other EU member states that have been less affected by COVID-19.

US prostate cancer study progressing

During H120, MagForce started the next stage in its pivotal prostate cancer study required by the US FDA for approval and to establish efficacy in thermally ablating prostate cancer lesions. Crucial safety data are expected in Q420 for the new streamlined procedure and will enable a go/no-go decision to start commercial preparations ahead of efficacy data and FDA approval (2021). Positive results would provide a key value inflection as long-term growth depends on the US.

Financials: H120 results

MagForce reported net debt of €22.0m (end-2019: €16.5m) at 30 June 2020. In June, the first €2.5m tranche of a €15.0m convertible bond facility (with Yorkville) was disbursed and will enable the continued commercial expansion plans. Revenues increased significantly during H120 to €384k (H119: €26k) of which €212k relates to commercial treatments in Germany. MagForce reported a net loss of €4.9m in H120 (H119: €4.9m loss). Our forecasts and valuation are under review.

Edison estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

0.1

4.4

0.17

0.0

N/A

N/A

12/19

0.8

(8.7)

(0.32)

0.0

N/A

N/A

12/20e

N/A

N/A

N/A

N/A

N/A

N/A

12/21e

N/A

N/A

N/A

N/A

N/A

N/A

Source: MagForce accounts

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Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

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No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

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95 Pitt Street, Sydney

NSW 2000, Australia

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