Nexstim

For those not yet familiar with Nexstim, could you briefly describe the company, your business model, and how you position yourselves within your market?

Nexstim is a medical technology company headquartered in Finland and listed on Nasdaq First North Growth Market Finland. All of our devices are designed, developed and manufactured in Finland, but we operate internationally. Our technology helps patients who need brain diagnostics or brain therapy, and everything we do is built around one technology, navigated transcranial magnetic stimulation.

We have three businesses.

The diagnostics business maps the brain’s motor and speech functions prior to complex brain surgery, such as tumor or epilepsy surgery, or radiotherapy.

In the therapy business, we help patients get treated for major depressive disorder, chronic neuropathic pain and OCD, as well as post-operative motor rehabilitation. Some of these indications are FDA approved and some are CE marked, while depression is approved in both the US and the EU.

The third is our research and neuroscience business, which accounted for about 10% of our revenue last year. It has no approved indications, but uses the same system that we provide for diagnostics and therapy as a platform, which we can tailor to the needs of research customers. TMS-EEG, for example, is now a growing area in this field.

We are a growth company and the business model is quite simple. We sell medical devices, meaning systems, and in addition we sell service and maintenance contracts, consumables and spare parts for the systems, as well as, nowadays, software licenses for different features and modules. Depending on the needs of the customer, we can be flexible between system sales and so-called recurring revenue elements. About half of our revenue is recurring today.

Could you tell us a bit about your value proposition and what differentiates you from competitors?

Our value proposition, and at the same time a differentiator, is our navigated TMS system, nTMS, short for navigated transcranial magnetic stimulation. In real time, we navigate the actual electric field that will be induced into the brain and show it on a 3D model of the patient’s own MRI on the screen.

Another key differentiator is that you get a fully integrated system. When you order from Nexstim, you basically need two power sockets in the office or clinic, and then it is plug and play. We provide everything: the TMS itself, the navigation system with cameras and screens, the cart and the patient chair. Our competition typically comes in different parts, where someone manufactures the TMS, a third party takes care of the navigation and the chair might come from somewhere else. We have shown that there is added value in integrating all of this.

We have always been a navigated TMS company and have never offered non-navigated TMS. We are a premium provider in the high end of pricing, but at the same time we provide the accuracy, repeatability and dosing for TMS in a very sophisticated, integrated way. Last year, we also received CE marking and MDR approval for our newest product, NBS 6, the sixth version of our system and the easiest to use on the market right now. Being a sophisticated navigated TMS provider with an integrated system that is easy to use is a real value for the customer.

If the definitive agreement with Sinaptica gets signed, what would that mean for Nexstim, and what makes Nexstim the right long-term partner for them rather than another supplier?

We have agreed on a letter of intent and a separate exclusivity period with Sinaptica, meaning that we are Sinaptica’s exclusive TMS provider until the end of 2026. Our aim is to get the definitive agreement signed by the end of the year, during the exclusivity period.

Under the definitive agreement, we would develop the next versions of the system together with Sinaptica. We would also support Sinaptica with more systems for their multi-site phase 3 trial, which according to them is set to start later this year, as well as with development services for the future product. If the phase 3 trial for their Alzheimer’s treatment shows a positive result, it would probably lead to an FDA approval, since Sinaptica is running the trial under FDA Breakthrough Device Designation. If agreed in the definitive agreement, we would then be the exclusive manufacturer of all the systems for this indication.

Based on the draft of the definitive agreement, there would be revenue from system sales for the trials and from our R&D work, and, after a possible positive phase 3 result, a commercial future where we manufacture the approved systems for Sinaptica. There are risks and milestones along the way, but it is quite a big possibility and could be a very bright future together with Sinaptica.

Is there anything specific left to settle before the agreement can be signed?

Sinaptica is currently raising Series A funding, which they have also presented publicly, most recently at H.C. Wainwright’s investor conference in New York in September. Funding for a trial like this is a big need. We are already working with Sinaptica, have built prototype systems for them and are supporting the first sites of the phase 3 trial. But multi-site trials are very expensive, why further funds are needed before they can move fully ahead with the plan.

Could you walk us through what a typical sales process looks like at a neurosurgical clinic? Who drives it internally and how long does it take?

A typical sales case starts at an industry event. We attend the neurosurgical meetings in Europe, such as EANS, the European Association of Neurosurgical Societies, as well as US events such as AANS, the American Association of Neurological Surgeons, and in October, CNS, the Congress of Neurological Surgeons. We demonstrate our technology at these events, and neurosurgeons or members of their staff visit Nexstim because they are interested in this new technology.

The other main starting point is digital marketing, such as our website, social media and webinars where key opinion leaders give presentations, which generate so-called inbound leads.

From initial introduction to actual delivery of a system to a neurosurgical hospital, it typically takes between one and two years, with an average of about 18 months. It is usually more than a year because this is a budgetary item for the hospital. If a hospital gets interested at CNS this year, it will probably put a placeholder in its budget for 2027, which is the earliest it can get the system, and sometimes for 2028.

Who usually drives the purchase inside a hospital, the surgeons themselves or hospital management?

The first is typically the key opinion leader in the hospital, a neurosurgeon. It requires that the neurosurgeons want the data themselves.

Thus the neurosurgeon is number one to get on board. Number two might be the clinical neurophysiology department, which in some hospitals, for example in Europe, serves the neurosurgical department with intraoperative monitoring or pre-operative mapping. Finally, there is procurement, the purchasing department, which can include financial management and the legal side. When the neurosurgeons have approved the idea and looked at their budget, procurement makes sure that the contract is in line with the hospital’s requirements. Nowadays, that covers a lot of things, such as IT, security, terms and conditions and liabilities if things go wrong, and they are major things in the end. Even though the clinical use of the system has already been approved, this stage can still take months.

In November 2024 you entered a development and distribution agreement with Brainlab, who reach around 4,000 hospitals worldwide. How does the partnership work in practice, and what are the results so far?

In practice, Brainlab now sells to neurosurgeons around the world in the markets where our system is approved. Our system is FDA approved and CE marked for pre-surgical mapping of the brain’s motor and speech functions, and we are the only navigated TMS provider in the world with both approvals, so Brainlab now has a unique technology to sell. We are also adding other markets. We have approvals in, among others, Canada, Australia, the UK, India, Malaysia and the United Arab Emirates, and we are seeking approval in multiple markets, for example Japan, where we have started the regulatory path. Brainlab can sell wherever Nexstim is approved.

We have done a lot of training with Brainlab’s sales and marketing on how to sell the product, how to present it on their website, where there is now a Nexstim section as part of their offering, and how we co-market at events such as CNS.

We don’t report Brainlab’s orders in exact quantities, but as you can see from our press releases, order quantities in general have increased. This summer, we received the largest orders in Nexstim’s history, two orders of 10 systems each. You don’t have to go many years back to when 10 systems were our full volume for a year, and now we receive orders of that size during a single summer. Things have changed, and we are moving according to plan, but of course there is still a lot to do. Brainlab already has thousands of hospitals as customers, while Nexstim has sold 270 diagnostic systems to date, so there is a lot of potential to increase volumes. For us, Brainlab is a channel to significantly increase diagnostic system sales volumes.

Looking ahead, where do you see Nexstim one year from now?

First of all, I see that we will continue our growth and have better profitability than today. We have made great progress, and we have set long-term external targets of more than 20% annual growth and an EBIT margin of more than 20%. That is not to say that we will be there next year, but that is where we are heading. I see us being stronger than ever a year from now.

At the same time, as I mentioned, sales cycles are long, and we are still learning together with our partner. We are serving patients, but we also need to be patient with the progress, because there are so many things to do. We need to train each other to be collaborative, and we need to get regulatory approvals in certain markets. But I believe we are heading in the right direction. You can see how dramatically we have moved forward over the last few years, and I believe that will continue in the year ahead.

Is there anything specific that needs to go right for that to happen?

First of all, it is essential that the Brainlab collaboration works according to our plans and that we succeed together. We need to see volumes grow in the diagnostics business based on our collaborative efforts, and that will come from both sides, with Brainlab and Nexstim working together to achieve results.

Second, on the positive side, we have quite recently received new approvals in the therapy area. We received FDA approval in the US for adolescent depression, for patients aged 15 to 21, as well as for OCD, and we are seeking CE marking in both areas. I see a need for integrated navigated TMS, the Nexstim version, in the therapy area, and I see that growing nicely. We need to maintain that growth.

Finally, in research and neuroscience, the Sinaptica partnership is a big thing. That could fundamentally change Nexstim’s future, because the volumes of systems are big. The needs Sinaptica is presenting are in the hundreds and then the thousands, because Alzheimer’s is such a big neurodegenerative disease. If navigated TMS-EEG together with Sinaptica’s cloud-based engine is the solution, there will be a need for a lot of systems.

Could you give three reasons as to why Nexstim is an interesting investment?

Unique and proprietary technology, approved in the major markets.  We are a in essence a technology company. Our technology is unique and proprietary, and with the latest version, NBS 6, it is already CE marked and FDA approved, meaning it is approved in the major markets.

Demonstrated financial success with a clear path forward.  We have demonstrated financial success in recent years, and we have a clear path forward for maintaining that growth and profitability.

A partnership strategy with momentum. Succeeding with our partnership strategy, with Brainlab and Sinaptica as examples, is going to be a big thing for our future. There is momentum in all three right now, which is why this is an interesting point in time to invest in Nexstim.