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Research: Healthcare
MagForce has received FDA approval to proceed with its streamlined trial protocol for the next stage of its pivotal US clinical study for the use of NanoTherm in prostate cancer. This follows completion of the first 10-patient cohort in its pivotal prostate cancer study and means the next stage of the US focal ablation study can be initiated. MagForce will enrol up to 120 patients with stage 1 prostate cancer to establish efficacy in thermally ablating prostate cancer lesions with minimal side effects. Positive results would be a critical value inflection, and we now expect approval and launch in Q121 (previously Q420). NanoThermâs US prostate indication contributes 70% to our valuation of MagForce, which is â¬303.1m.
Written by
MagForce |
FDA approves streamlined trial protocol |
Corporate update |
Healthcare equipment & services |
30 April 2020 |
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MagForce is a research client of Edison Investment Research Limited |
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MagForce has received FDA approval to proceed with its streamlined trial protocol for the next stage of its pivotal US clinical study for the use of NanoTherm in prostate cancer. This follows completion of the first 10-patient cohort in its pivotal prostate cancer study and means the next stage of the US focal ablation study can be initiated. MagForce will enrol up to 120 patients with prostate cancer to establish efficacy in thermally ablating prostate cancer lesions with minimal side effects. Positive results would be a critical value inflection, and we now expect approval and launch in Q121 (previously Q420). NanoTherm’s US prostate indication contributes 70% to our valuation of MagForce, which is €303.1m.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
0.7 |
(9.5) |
(36.0) |
0.0 |
N/A |
N/A |
12/18 |
0.1 |
(8.7) |
(32.8) |
0.0 |
N/A |
N/A |
12/19e |
0.7 |
(10.5) |
(38.7) |
0.0 |
N/A |
N/A |
12/20e |
2.9 |
(6.6) |
(23.7) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Pivotal US prostate cancer study in final stage
During 2019, MagForce completed treatment of the first 10-patient cohort in its pivotal prostate cancer study required by the US FDA for approval. The company reported that initial findings shown in Stage 1 were encouraging, demonstrating a favourable safety and tolerability profile, as well as well-defined ablation and cell death in the region of the nanoparticle deposit. This led to FDA approval of a streamlined trial protocol for the next stage, which means patients can receive treatment in an outpatient facility within one day (NanoTherm particle installation in the prostate and activation) rather than weeks previously. Enrolment will take place at three established urological clinics in the US (Texas, Washington and Florida). MagForce is still hopeful that the COVID-19 pandemic will not cause significant delay beyond 2020 to complete this single-arm clinical trial. We have adjusted our approval and launch expectation to Q121 from Q420.
Financials: EIB extends cash reach until profitability
End-June 2019 net debt was €15.1m, primarily from drawing down the first tranche (€10m) of the loan from its facility with the EIB (€25m remaining). MagForce raised gross proceeds of €5m in a private placement of 1.2m shares (in June 2019). We note the $4.5m capital increase of its US subsidiary MagForce USA in December 2019 from Lipps & Associates (principle owner is CEO Ben Lipps), which will ensure funding for the US prostate cancer trial. We believe an additional €15m will be required to fund operations until profitability, which we forecast in 2022.
Valuation: €303.1m (€11.0/share)
Our revised valuation of MagForce is €303.1m (previously €269.7m), based on a risk-adjusted NPV analysis. We have updated FX and rolled forward our model, which has offset US NanoTherm launch by one quarter to Q121. We note that delays in the US trial would materially affect our valuation, and prudent execution is needed to launch the asset on time (the US is ~70% of our valuation).
Exhibit 1: Financial summary
€'000s |
2016 |
2017 |
2018 |
2019e |
2020e |
||
December |
HGB |
HGB |
HGB |
HGB |
HGB |
||
PROFIT & LOSS |
|
||||||
Revenue |
|
|
474 |
716 |
67 |
667 |
2,898 |
Cost of Sales |
(574) |
(974) |
(455) |
(2,058) |
(2,252) |
||
Gross Profit |
(101) |
(258) |
(388) |
(1,391) |
646 |
||
EBITDA |
|
|
(6,555) |
(8,763) |
(7,068) |
(9,583) |
(5,348) |
Operating Profit (before amort. and except.) |
(7,457) |
(9,434) |
(7,068) |
(9,583) |
(5,348) |
||
Intangible Amortisation |
(4) |
(1) |
0 |
0 |
0 |
||
Exceptionals |
0 |
2,024 |
13,896 |
0 |
0 |
||
Other |
0 |
0 |
(877) |
0 |
0 |
||
Operating Profit |
(7,461) |
(7,411) |
5,951 |
(9,583) |
(5,348) |
||
Net Interest |
231 |
(53) |
(1,591) |
(892) |
(1,210) |
||
Profit Before Tax (norm) |
|
|
(7,226) |
(9,487) |
(8,659) |
(10,475) |
(6,558) |
Profit Before Tax (reported) |
|
|
(7,230) |
(7,464) |
4,360 |
(10,475) |
(6,558) |
Tax |
(1) |
(1) |
(2) |
0 |
0 |
||
Profit After Tax (norm) |
(7,227) |
(9,488) |
(8,661) |
(10,475) |
(6,558) |
||
Profit After Tax (reported) |
(7,231) |
(7,465) |
4,358 |
(10,475) |
(6,558) |
||
Average Number of Shares Outstanding (m) |
26.0 |
26.3 |
26.4 |
27.1 |
27.6 |
||
EPS - normalised (c) |
|
|
(27.8) |
(36.0) |
(32.8) |
(38.7) |
(23.7) |
EPS - (reported) (€) |
|
|
(0.28) |
(0.28) |
0.17 |
(0.39) |
(0.24) |
Dividend per share (€) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
N/A |
N/A |
N/A |
22.3 |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
18,742 |
20,672 |
34,470 |
34,402 |
34,744 |
Intangible Assets |
3 |
2 |
91 |
186 |
280 |
||
Tangible Assets |
3,706 |
3,589 |
3,401 |
3,239 |
3,486 |
||
Investments |
15,033 |
17,082 |
30,978 |
30,978 |
30,978 |
||
Current Assets |
|
|
1,536 |
1,360 |
2,664 |
3,999 |
2,711 |
Stocks |
71 |
301 |
291 |
169 |
185 |
||
Debtors |
71 |
85 |
95 |
365 |
1,588 |
||
Cash |
614 |
665 |
1,493 |
2,679 |
153 |
||
Other |
780 |
307 |
785 |
785 |
785 |
||
Current Liabilities |
|
|
(4,431) |
(3,747) |
(3,049) |
(2,891) |
(3,502) |
Creditors |
(4,431) |
(3,747) |
(3,049) |
(2,891) |
(3,502) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(197) |
(5,091) |
(15,926) |
(22,926) |
(27,926) |
Long term borrowings |
0 |
(5,012) |
(15,876) |
(22,876) |
(27,876) |
||
Other long term liabilities |
(197) |
(79) |
(50) |
(50) |
(50) |
||
Net Assets |
|
|
15,650 |
13,194 |
18,159 |
12,584 |
6,026 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(1,079) |
(5,286) |
(4,636) |
(9,307) |
(5,335) |
Net Interest |
231 |
(53) |
(2,468) |
(892) |
(1,210) |
||
Tax |
(1) |
(1) |
(2) |
0 |
0 |
||
Capex |
(115) |
(553) |
(499) |
(515) |
(982) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
||
Financing |
0 |
5,000 |
0 |
4,900 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(964) |
(894) |
(7,605) |
(5,814) |
(7,527) |
||
Opening net debt/(cash) |
|
|
(1,393) |
(614) |
4,347 |
14,383 |
20,197 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
185 |
(4,067) |
(2,431) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(614) |
4,347 |
14,383 |
20,197 |
27,723 |
Source: Company accounts, Edison Investment Research. Note: Reported other operating income (non-cash) relating to the transfer of shares between subsidiaries has been booked as an exceptional item in our model.
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