Nexstim: A step forward in the Alzheimer's agreement

Translation: Original published in Finnish on 07/01/2025 at 07:28 am EEST

Nexstim announced on Monday an exclusivity agreement with Sinaptica Therapeutics in the treatment of Alzheimer’s disease. This is based on a letter of intent signed in 2024, which has now moved a step closer to a final agreement. The now-announced agreement concerns the year 2025 and is worth 1.5 MEUR. Nexstim expects to sign the final 10-year agreement later this year. The news implies a moderate increase in our earnings estimates for the current year, while forecasts for the following years remain unchanged. With the strong share price increase, we lower our recommendations to Sell and raise the target price to EUR 10.5 (was 10) in line with the forecast hikes.

A step was taken from the letter of intent towards a final cooperation agreement

Nexstim announced a letter of intent with Sinaptica Therapeutics in June 2024. In its Q1’25 business review, Nexstim clarified that the companies were discussing the phased entry into force of the final agreement, which has now been put into practice. According to the letter of intent, Nexstim expects revenues of 6 MEUR in the first phase, which are mainly based on Sinaptica's planned pivotal TMS study in the treatment of Alzheimer's disease (clinical phase III), which is to be carried out using Nexstim's equipment. The companies have now announced the phased progress of the agreement and the signing of an exclusivity agreement. The agreement covers the year 2025 and is worth 1.5 MEUR. We believe this is a signing fee-type item that does not involve system deliveries and has a direct impact on earnings.

The final agreement is intended to be a 10-year exclusivity agreement with an option for three-year extensions. Nexstim announced that the final agreement is expected to be concluded during the rest of the year. After the first phase, the value of the agreement depends on future research results and the implementation and success of Sinaptica's commercialization. We have commented on the outlook for Alzheimer’s disease in our recent extensive report.

Nexstim also stated that the previously announced system deliveries to Sinapticawill be supplied soon, which will support H2 growth. We estimate that these systems are included in the 6 MEUR total stated in the letter of intent.

Slight upward revision to forecasts

Our previous forecast included 1 MEUR in revenue from the Sinaptica agreement for the current year, so the news brings a 0.5 MEUR increase in revenue and earnings to our forecasts for 2025. In addition, we raise our estimate of system sales based on the news stream of the last few days. The earnings impact of the 1.5 MEUR payment for the current year is significant, as we assume the payment will fully increase operating profit. The news also further increases confidence in the implementation of cooperation between the companies and related earnings forecasts.

The price tag is highish

We base our valuation on EV/S multiples and the DCF model, as the earnings level for the coming years is still on a rather uncertain footing. Nexstim's 2025e EV/S is 6.4x and decreases to 5.2x in 2026e, with our estimates that expect strong growth. In our opinion, the multiples require rapid growth to continue even beyond 2025-26, supported by the Brainlab and Sinaptica agreements.The share price is slightly elevated relative to its history and at a high multiple compared to listed peers. Our DCF model values the share at EUR 10.5. We find the stock somewhat overvalued after the recent strong price increase. Thus, we will wait for better places to buy.