MagForce — NanoTherm on track for US approval in 2021

MagForce (DB: MF6)

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Research: Healthcare

MagForce — NanoTherm on track for US approval in 2021

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.

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Written by

Susie Jana

Healthcare

MagForce

NanoTherm on track for US approval in 2021

Clinical trial update

Healthcare equipment & services

11 February 2021

Price

€4.47

Market cap

€131m

$1.21/€

Net debt (€m) at 30 June 2020 (excluding €4.7m gross share placing)

22.0

Shares in issue

29.4m

Free float

69%

Code

MF6

Primary exchange

Frankfurt (Xetra)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(13.4)

79.5

3.8

Rel (local)

(12.6)

69.6

0.6

52-week high/low

€5.4

€2.1

Business description

MagForce is a German firm with the first Europe-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.

Next events

NanoActivator installations in Europe

2021

Federal reimbursement for GBM treatments in Germany

H221

FDA approval and launch of NanoTherm in the US for prostate cancer

H221

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr John Priestner

+44 (0)20 3077 5700

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*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

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.


General disclaimer and copyright

This report has been commissioned by MagForce and prepared and issued by Edison, in consideration of a fee payable by MagForce. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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 2021 Edison Investment Research Limited (Edison).

Australia

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

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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

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

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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

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by MagForce and prepared and issued by Edison, in consideration of a fee payable by MagForce. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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 2021 Edison Investment Research Limited (Edison).

Australia

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

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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