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Research: Healthcare
In H120, MagForce started the next stage in its pivotal prostate cancer study required by the US FDA for approval of its thermal ablation treatment, NanoTherm. Stage 2a of the trial has now completed and, as expected, confirmed minimal treatment-related side effects are observed with the streamlined protocol. Stage 2b is due to initiate in early Q221 to establish efficacy in 120 patients and MagForce plans to concurrently begin commercial preparations ahead of potential approval and launch in H221. The US opportunity is ~70% of our valuation. MagForce completed a gross €4.7m share placing in December that strengthened the balance sheet and will continue to fund NanoTherm’s European roll-out for the treatment of brain tumours and the US launch preparations. We value MagForce at €273.1m or €9.3/share.
Written by
Susie Jana
MagForce |
NanoTherm on track for US approval in 2021 |
Clinical trial update |
Healthcare equipment & services |
11 February 2021 |
Share price performance
Business description
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Analysts
MagForce is a research client of Edison Investment Research Limited |
In H120, MagForce started the next stage in its pivotal prostate cancer study required by the US FDA for approval of its thermal ablation treatment, NanoTherm. Stage 2a of the trial has now completed and, as expected, confirmed minimal treatment-related side effects are observed with the streamlined protocol. Stage 2b is due to initiate in early Q221 to establish efficacy in 120 patients and MagForce plans to concurrently begin commercial preparations ahead of potential approval and launch in H221. The US opportunity is ~70% of our valuation. MagForce completed a gross €4.7m share placing in December that strengthened the balance sheet and will continue to fund NanoTherm’s European roll-out for the treatment of brain tumours and the US launch preparations. We value MagForce at €273.1m or €9.3/share.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
0.1 |
(8.7) |
(32.8) |
0.0 |
N/A |
N/A |
12/19 |
0.8 |
(7.6) |
(28.2) |
0.0 |
N/A |
N/A |
12/20e |
0.8 |
(8.2) |
(29.6) |
0.0 |
N/A |
N/A |
12/21e |
2.4 |
(7.2) |
(24.5) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
NanoTherm US approval expected in H221
Positive findings from the Stage 2a 10-patient study showed only minimal treatment-related side effects with the streamlined protocol that are tolerable and similar to those observed with the extended protocol and biopsies. This means patients can receive treatment in an outpatient facility in one day rather than weeks as previously, reducing the healthcare burden of repeated visits. The final stage of the pivotal study (Stage 2b) will enrol 120 patients in a single arm to establish efficacy in thermally ablating prostate cancer lesions and positive results would provide a key value inflection point as long-term growth depends on the US (NanoTherm is already approved for GBM in Europe). MagForce is planning to launch immediately on FDA approval, expected in H221 (assuming no COVID-19-related delays), and intends to have five treatment sites ready at launch.
Financials: Funding secured to forecast profitability
The December share placing plus the remaining €22m of the EIB loan facility and €12.5m zero interest-bearing convertible notes with Yorkville will facilitate the continued commercial expansion plans until sustainable profitability, which we forecast from 2022 with operating margins of c 50%.
Valuation: €273.1m or €9.3/share
Our revised valuation of MagForce is €273.1m or €9.3/share (€260.6m previously), based on a risk-adjusted NPV analysis. Our underlying assumptions are unchanged and we have updated for FX and rolled our model forward. We reflect net debt of €22.0m at 30 June 2020 (excluding the €4.7m gross share placing). We note that delays in the US trial would materially affect our valuation and timely execution is assumed (the US is ~70% of our valuation).
Exhibit 1: Financial summary
€'000s |
2018 |
2019 |
2020e |
2021e |
||
Year end 31 December |
HGB |
HGB |
HGB |
HGB |
||
PROFIT & LOSS |
|
|
||||
Revenue |
|
|
67 |
840 |
805 |
2,415 |
Cost of Sales |
(455) |
(164) |
(595) |
(720) |
||
Gross Profit |
(388) |
675 |
210 |
1,695 |
||
EBITDA |
|
|
(6,470) |
(5,561) |
(6,557) |
(5,210) |
Operating Profit (before amort. and except.) |
|
(7,062) |
(6,171) |
(6,557) |
(5,210) |
|
Intangible Amortisation |
(6) |
(32) |
0 |
0 |
||
Exceptionals |
13,896 |
0 |
0 |
0 |
||
Operating Profit (reported by company) |
6,828 |
(6,203) |
(6,557) |
(5,210) |
||
Other* |
(877) |
(1,058) |
0 |
0 |
||
Operating Profit |
5,951 |
(7,261) |
(6,557) |
(5,210) |
||
Net Interest |
(1,591) |
(1,468) |
(1,652) |
(1,985) |
||
Profit Before Tax (norm) |
|
|
(8,653) |
(7,639) |
(8,209) |
(7,195) |
Profit Before Tax (reported) |
|
|
4,360 |
(8,729) |
(8,209) |
(7,195) |
Tax |
(2) |
(2) |
0 |
0 |
||
Profit After Tax (norm) |
(8,655) |
(7,641) |
(8,209) |
(7,195) |
||
Profit After Tax (reported) |
4,358 |
(8,731) |
(8,209) |
(7,195) |
||
Average Number of Shares Outstanding (m) |
26.4 |
27.1 |
27.8 |
29.4 |
||
EPS - normalised (€) |
|
|
(0.33) |
(0.28) |
(0.30) |
(0.25) |
EPS - reported (€) |
|
|
0.17 |
(0.32) |
(0.30) |
(0.25) |
Dividend per share (€) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
80.4 |
26.1 |
70.2 |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
34,470 |
34,381 |
36,530 |
39,030 |
Intangible Assets |
91 |
172 |
172 |
172 |
||
Tangible Assets |
3,401 |
3,227 |
5,376 |
7,876 |
||
Investments |
30,978 |
30,983 |
30,983 |
30,983 |
||
Current Assets |
|
|
2,664 |
1,682 |
6,452 |
7,860 |
Stocks |
291 |
59 |
163 |
197 |
||
Debtors |
95 |
96 |
309 |
926 |
||
Cash |
1,493 |
167 |
4,377 |
5,134 |
||
Other |
785 |
1,360 |
1,603 |
1,603 |
||
Current Liabilities |
|
|
(3,049) |
(5,057) |
(5,780) |
(6,882) |
Creditors |
(3,049) |
(5,057) |
(5,780) |
(6,882) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(15,926) |
(16,894) |
(26,874) |
(36,874) |
Long term borrowings |
(15,876) |
(16,674) |
(26,674) |
(36,674) |
||
Other long term liabilities |
(50) |
(221) |
(200) |
(200) |
||
Net Assets |
|
|
18,159 |
14,111 |
10,329 |
3,134 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(4,636) |
(3,143) |
(5,750) |
(3,793) |
Net Interest |
(2,468) |
(2,526) |
(1,652) |
(1,985) |
||
Tax |
(2) |
(2) |
0 |
0 |
||
Capex |
(1,370) |
(1,941) |
(2,815) |
(3,465) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
0 |
6,286 |
4,427 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(8,476) |
(1,326) |
(5,790) |
(9,243) |
||
Opening net debt/(cash) |
|
|
4,347 |
14,383 |
16,506 |
22,296 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
(1,560) |
(797) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
14,383 |
16,506 |
22,296 |
31,540 |
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. *Includes amortisation of financial assets that relates to the write-down of the capital contributions made for financial support of the subsidiary MT MedTech Engineering.
|
|
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