Nexstim is progressing with plans to fully exploit the promise of its SmartFocus TMS system in major depressive disorder (MDD). It recently announced that discussions are underway with a leading California-based academic institution to license their technology to treat hospitalised patients with severe depression who may be suicidal. While disclosure is limited, management have stated that this tie-up could open a new TMS market for treatment resistant depression that is distinct from the current outpatient MDD opportunity. If Nexstim’s NBT TMS system is approved for severe MDD, competition in this market is likely to be limited due to the need for accurate targeting. Based on conservative assumptions, we estimate this could be worth €0.23/share (fully diluted) on top of our current €0.41/share valuation.
The key differentiating feature of Nexstim’s NBT platform is that it is the only FDA approved TMS (transcranial magnetic stimulation) device with built-in navigation, enabling accurate and reproducible treatment. This precision is critical to delivering improved patient outcomes and supports Nexstim’s strategy of driving NBT revenues from MDD. It is also likely to be the reason that the Californian academic institution is interested in collaborating with Nexstim, rather than with one of its competitors.
In the US, c 6m MDD patients are considered treatment resistant and use of repetitive TMS (rTMS) is an accepted second-line therapy. However, it is not yet approved for the treatment of severe MDD with possible suicidal ideation, partly because the treatment course is too long. A shorter, more intense TMS treatment protocol – which we believe could be the goal of the proposed licencing transaction - could lend itself to this setting.
In the US, c 160k patients/year are currently treated across c 650 hospitals, and in-patient psychiatric therapy for MDD is reimbursed. The main treatments used currently are electroconvulsive therapy (ECT) and ketamine-based medications, both of which have limitations. If a short and effective TMS protocol can be developed, it could become an important treatment modality for major depressive events.
Our core valuation of Nexstim is €19.0m or €0.41/share diluted (in the money options or warrants only). This valuation could be materially increased should Nexstim secure a deal with the Californian academic partner; our calculations suggest it could be conservatively worth €0.23/share (fully diluted) on an rNPV basis.