Nexstim
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Nexstim |
NICHE stroke rehab trial fails its primary endpoint |
Clinical trial update and FY15 results |
Healthcare equipment & services |
1 March 2016 |
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Nexstim is a research client of Edison Investment Research Limited |
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The pivotal trial of Nexstim’s Navigated Brain Therapy (NBT) System in treating stroke patients has failed to meet its primary endpoint. We suspend our financial forecasts and valuation while Nexstim reviews its next strategic steps. It estimates its cash reach until Q316.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14 |
2.2 |
(10.3) |
(2.35) |
0.0 |
N/A |
N/A |
12/15 |
2.5 |
(9.7) |
(1.35) |
0.0 |
N/A |
N/A |
12/16e |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
12/17e |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments.
Pivotal device-based stroke rehab trial fails
The Data Safety Monitoring Board (DSMB) has announced the US-based pivotal trial of NBT (NICHE) failed to reach its primary endpoint. The analysis was based on 138 stroke patients reaching their primary safety outcome assessment six months after treatment. As no safety concerns have been raised and all patients (199) in NICHE have been recruited, the DSMB recommended the study team and subjects remain blinded and data collection completed. If the trial is allowed to run its course, including a six-month follow up, data analysis may enable improvement of any follow-up trial. NBT would target, on our estimates, a €1.6bn market globally, poorly served by costly occupational and physical therapies.
Contrasting solid proof-of-concept trial data
Nexstim initiated the pivotal, randomised, sham-controlled (two-to-one) and double-blind Phase III study across 12 US stroke rehab centres in H114. The primary objective of the NICHE trial was to demonstrate at least a five-point improvement in the upper extremity Fugl-Meyer (UEFM) score, representing a clinically important functional improvement from baseline six months after treatment. NICHE’s failure is surprising considering the robust data in the proof-of-concept study over 2010-13, which indicated a remarkable improvement (13.8 points vs 7.1 points in the sham group) in UEFM using NBT, superior to alternative therapy modalities. Patients on conventional occupational and physical therapies typically only experience three- to four-point UEFM improvement.
Financial forecasts and valuation suspended
FY15 revenues of €2.5m mainly stemmed from €1.9m in sales of the therapeutic device, NBS, used to localise speech and movement centres in the brain cortex before surgery. Despite some order deferrals in H216, NBS sales met our forecast. Operating costs were €1m higher than our estimates, reflecting 40% exposure to the US dollar, which appreciated nearly 20% between 2014 and 2015. However, we suspend our financial forecasts and valuation as it is uncertain if Nexstim will be able to bring NBT to the market, previously expected in FY17. We note that Nexstim believes it has sufficient cash until September 2016 and will review its strategy in the light of the NICHE trial failure.
Exhibit 1: Financial summary
€000's |
2014 |
2015 |
||
Year end 31 December |
**FAS |
|||
PROFIT & LOSS |
||||
Revenue* |
|
|
2,210 |
2,528 |
Cost of Sales |
(638) |
(867) |
||
Gross Profit |
1,572 |
1,661 |
||
EBITDA |
|
|
(7,422) |
(9,315) |
Operating Profit (before GW and except) |
|
(7,654) |
(9,592) |
|
Intangible Amortisation |
(146) |
(142) |
||
Exceptionals |
- |
- |
||
Operating Profit |
(7,800) |
(9,734) |
||
Other |
- |
- |
||
Net Interest |
(2,646) |
(93) |
||
Profit Before Tax (norm) |
|
|
(10,300) |
(9,685) |
Profit Before Tax (FRS 3) |
|
|
(10,445) |
(9,827) |
Tax |
- |
- |
||
Profit After Tax (norm) |
(10,300) |
(9,685) |
||
Profit After Tax (FRS 3)* |
(10,445) |
(9,827) |
||
Average Number of Shares Outstanding (m)* |
4.4 |
7.2 |
||
EPS - normalised (€) |
|
|
(2.34) |
(1.35) |
EPS - FRS 3 (€)* |
|
|
(2.37) |
(1.37) |
Dividend per share (€) |
0.0 |
0.0 |
||
Gross Margin (%) |
71.1 |
65.7 |
||
EBITDA Margin (%) |
-335.8 |
-368.5 |
||
Operating Margin (before GW and except.) (%) |
-346.3 |
-379.4 |
||
BALANCE SHEET |
||||
Fixed Assets |
|
|
979 |
1,000 |
Intangible Assets |
83 |
71 |
||
Tangible Assets |
442 |
523 |
||
Other |
454 |
406 |
||
Current Assets |
|
|
13,014 |
3,640 |
Stocks |
247 |
335 |
||
Debtors |
930 |
889 |
||
Cash |
11,484 |
2,062 |
||
Other |
354 |
354 |
||
Current Liabilities |
|
|
(1,928) |
(2,206) |
Creditors |
(1,382) |
(1,660) |
||
Short term borrowings |
0 |
0 |
||
Short term leases |
0 |
0 |
||
Other |
(546) |
(546) |
||
Long Term Liabilities |
|
|
(3,475) |
(3,405) |
Long term borrowings |
(3,405) |
(3,405) |
||
Long term leases |
0 |
0 |
||
Other long term liabilities |
(71) |
0 |
||
Net Assets |
|
|
8,590 |
(971) |
CASH FLOW |
||||
Operating Cash Flow |
|
|
(7,146) |
(8,991) |
Net Interest |
(640) |
9 |
||
Tax |
0 |
0 |
||
Capex |
(860) |
(440) |
||
Acquisitions/disposals |
0 |
0 |
||
Financing |
19,821 |
0 |
||
Dividends |
0 |
0 |
||
Other |
0 |
0 |
||
Net Cash Flow |
11,177 |
(9,422) |
||
Opening net debt/(cash) |
|
|
3,098 |
(8,079) |
HP finance leases initiated |
- |
- |
||
Other |
- |
|||
Closing net debt/(cash) |
|
|
(8,079) |
1,343 |
Source: Nexstim data. Note: *Only headline P&L data published 29 February; ** Finnish accounting standards.
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