MagForce — FDA approves streamlined trial protocol

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Research: Healthcare

MagForce — FDA approves streamlined trial protocol

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). NanoTherm’s US prostate indication contributes 70% to our valuation of MagForce, which is €303.1m.

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Healthcare

MagForce

FDA approves streamlined trial protocol

Corporate update

Healthcare equipment & services

30 April 2020

Price

€3.10

Market cap

€86m

$1.09/€

Net debt (€m) at 30 June 2019

15.1

Shares in issue

27.6m

Free float

66%

Code

MF6

Primary exchange

Frankfurt (Xetra)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

19.0

(24.5)

(34.0)

Rel (local)

6.2

(6.8)

(24.7)

52-week high/low

€5.29

€2.13

Business description

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

Next events

Additional NanoActivator installations in Europe (ex-Germany)

2020

FDA approval and launch of NanoTherm in the US

Q121

Analyst

Dr Susie Jana

+44 (0)20 3077 5700

MagForce is a research client of Edison Investment Research Limited

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*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

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.


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 2020 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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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.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

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London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

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Sydney +61 (0)2 8249 8342

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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

1,185 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 2020 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

1,185 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

1,185 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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