Interview with Nexstim’s CEO Mikko Karvinen

For those who have not heard about Nexstim, could you tell us about your business, what you do, and what markets you are active in?

Nexstim is a Finnish-based growth-oriented medical technology company operating globally. Our medical devices are designed in Finland and manufactured through subcontractors in Finland. We provide personalized and effective therapies and diagnostics for challenging brain diseases and disorders.

Our systems typically assist patients undergoing complex brain surgeries, such as those with tumors, epilepsy, or receiving radiotherapy. Nexstim can accurately map motor and speech functions in the brain using a 3D model created from the patient’s MRI, allowing for precise mapping of critical brain cortex areas.

In addition to diagnostics, our technology is used for therapeutic purposes, particularly in treating major depressive disorder and chronic neuropathic pain. This makes it applicable not only for diagnosing brain conditions but also for offering treatment solutions.

We primarily operate in the EU and US markets, where we hold regulatory approvals, including MDR and CE markings for the EU and FDA approval for the US. Our operations are supported by teams in the US, Germany, and Helsinki, with additional customers in Asia, the Middle East, and Australia to mention a few. Although these markets currently contribute less to our overall revenue. Asia, in particular, holds significant potential for future growth.

Sales are conducted through a combination of direct sales and an extensive network of 15 distributors. We manage direct sales in the US, Germany, and Finland, while distributors handle other markets such as the Nordics, Canada and Australia. In regions such as the UK, Poland, and Italy, we partner with Inomed, a German company. Our distributor network also extends to the Middle East and some Asian countries.

In summary, our focus is on the EU and US markets, with global expansion supported by a combination of direct sales and strategic distributor partnerships.

Can you elaborate a bit on your products, its advantages, and how they hold up against competitors?

Nexstim offers a single product platform, though it has evolved over the past 20 years with several versions. Our primary product is the Navigated Brain Stimulation (NBS) system, a sizable integrated setup consisting of a cart, a patient treatment chair, and, most importantly, a non-invasive magnetic coil that stimulates the brain using navigated transcranial magnetic stimulation (nTMS). This technology is applied for both diagnostic and therapeutic purposes.

What makes Nexstim unique is our ability to visualize TMS by navigating the actual electric field in real-time on a 3D model brain based on the patient’s own MRI. This allows precise treatment targeting and ensures repeatability. Personalized dosing is also a key feature, as we can calculate exactly how much electricity is induced into the brain. Additionally, our software-guided therapy contributes to ease of use, setting us apart from competitors who offer non-navigated or non-integrated systems, which tend to be less efficient.

Our fully integrated system includes all necessary components, TMS, the chair, and navigation, is offered as a seamless package with advanced software integration. This ease of use, along with our focus on accuracy, repeatability, and dosing, places Nexstim in the premium market. While our pricing may be higher than the cheapest alternatives, we deliver significantly more value in terms of integration and performance.

The latest version, NBS 6, is approved for therapeutic use in the US and EU for treating major depressive disorder (MDD) and chronic neuropathic pain, where we are in the process of obtaining approval for pain treatment in the US. On the diagnostic side, we are developing the NBS 6 for diagnostic capabilities, with the release expected next year. Currently, we offer NBS 5 for diagnostic purposes, which enables accurate brain mapping prior to surgeries. This helps surgeons plan complex procedures or even decide whether surgery is viable based on the location of the tumor. For patients with gliomas, this mapping improves resection rates and extends progression-free survival by up to 46%.

In the area of depression treatment, our technology is highly effective for patients resistant to other treatments. Our patient registry shows an approx. 50% remission rate and over 70% response rate among patients who have undergone multiple unsuccessful treatments prior. Similarly, in treating chronic pain, the system has demonstrated significant clinical impact. At Helsinki University Hospital, annually around 40 chronic pain patients, many of whom have exhausted all other treatment options, are treated each year with our system, and roughly half experience clinically meaningful pain relief.

Finally, our system is the only TMS device in the world with both US FDA and European CE marking for pre-surgical mapping of motor and speech functions, highlighting its accuracy and uniqueness. This dual approval is a testament to the exceptional standard of our technology.

Given the growing focus on mental health and non-invasive treatment options, what trends are you seeing in the market for neurostimulation today? And how are you positioned to capitalize on these trends?

Neurostimulation, especially with the increasing focus on mental health and non-invasive treatments, is seeing significant market growth, and several trends are becoming evident. Recently, we sponsored a scientific symposium in Berlin, in collaboration with institutions like Charite Berlin, TUM Munich and Heidelberg University Hospital, where leading experts discussed key trends in Transcranial Magnetic Stimulation (TMS) and some other neurostimulation therapies.

One major trend is the growing need for brain surgeries and treatments as a result of the aging population. With age comes a higher incidence of conditions such as tumors, requiring more surgeries and interventions. For us at Nexstim, this is particularly relevant because we are actively pursuing a partnership with Sinaptica Therapeutics, a U.S.-based company working on a personalized brain stimulation treatment for Alzheimer’s. Their non-invasive approach has shown promising results in slowing Alzheimer’s progression by over 80% within six months, with further 12-month data expected soon this week. We’re positioned to collaborate on the technical side, integrating our navigated TMS system with their cloud-based technology and third-party EEG systems. This presents a significant possible opportunity for us to contribute to the development of innovative Alzheimer’s treatments.

Depression is another key area where TMS shows great potential, though it’s currently underutilized. Despite the availability of TMS, only a small percentage of depression patients receive this treatment. We see a lot of room for growth in this space, particularly as patients and clinicians seek non-drug approaches. Personalizing treatments to target specific brain areas for depression is a growing field, and Nexstim is well-positioned to play a significant role in advancing this.

Chronic pain is also a focus area. Although we don’t yet have approval in the U.S. market, we’ve seen encouraging data from European trials indicating that TMS can help reduce pain levels and a decrease reliance on opioids. Given the opioid crisis in the U.S., there’s a strong case for expanding non-drug treatments like TMS to manage chronic pain, potentially offering patients a safer alternative.

In addition to these areas, we are also exploring how neurostimulation can aid in post-surgical rehabilitation. For example, TMS has been shown to help patients regain motor function more quickly after brain surgery, a promising application that could improve recovery times and outcomes. The opportunities in neurostimulation are vast, and we’re working to capitalize on these trends through strategic partnerships, ongoing research, and clinical trials.

With the U.S. market’s strong reliance on pharmaceutical treatments for depression, how is Nexstim, in partnership with your private equity firm, approaching customer acquisition in the U.S.?

We’ve been piloting our strategy in the U.S., which has been evolving since 2020. We started by partnering with a few leading neuroscience clinics that specialize in treating depression, leveraging the fact that our system is already approved for depression in the U.S. To facilitate these partnerships, we created a private equity company called Nexstim Investments, LLC, which allows us to invest directly into these clinics. Currently, we have one partner clinic on the West Coast, and two on the East Coast.  

The idea is to form strong partnerships with these clinics, where we provide the Nexstim system and related services at fair market value while also investing in the management services organizations (MSO) together with the physicians. This arrangement allows us to understand the clinic business models and closely collaborate to advance treatment options. Although we’re not aiming to rival with pharmaceutical companies, we’re focused on addressing the needs of patients with treatment-resistant depression, a population that pharma solutions often don’t fully serve, where about 70% of depression patients are left without sufficient help from medications alone.

In addition to TMS, these clinics offer other treatments like psychotherapy and ketamine-based therapies, which gives us valuable insights into how TMS compares and complements these treatments. Although this is currently a pilot project with just a few clinics, we see potential for expanding this model.

Importantly, the U.S. healthcare market offers a key advantage: reimbursement through insurance groups for TMS treatments, particularly for major depressive disorder (MDD). This makes the U.S. an attractive market for us. In Europe, where private healthcare doesn’t have the same level of reimbursement, we’re seeing slower adoption, though we do have private clinics in Finland and mainly university hospitals using our systems.

As we continue to learn from these pilots, we’re optimistic about scaling this approach and offering high-quality neuroscience-based care in more clinics across the U.S., positioning Nexstim as a leader in non-invasive treatments for mental health.

What strategies are you employing to achieve profitability in the coming years? 

The key focus for us is scalability. Our current team consists of about 40 people, where we’ve grown steadily during the current strategy period ending 2024. We went from about 3 MEUR in revenue in 2019 to over 7 MEUR last year, which shows that we have the capacity to scale, not just in terms of revenue, but also in terms of profitability.

A major strategy for scaling involves expanding through partnerships and distributors, rather than increasing direct sales. In the U.S., Germany, and Finland, we have strong own sales team, but in other regions, we aim to work more with distributors. Inomed, a German company, assists us in a few key markets and has a strategic alliance with us in the U.S. We also have a partnership with Magnus Medical, where we licensed our technology for treating depression, receiving a 4 MUSD one-time payment with potential royalties in the future, though those royalties are under discussion now.

Another example is Sinaptica Therapeutics, where we are offering to develop and supply our system and technology to support their innovative therapies, rather than them developing everything in-house. This allows them to avoid the significant costs and risks associated with development, while leveraging our proven, FDA-approved and CE marked technology.

The key, moving forward, is to maintain our low operational expenses while scaling through these partnerships and distribution networks. As for profitability, we’ve made significant progress. While our losses were once double our revenue, we’ve brought them down considerably, from 6 MEUR in losses in the year 2019 to just over 1 MEUR last year. Given the challenging business environment with factors like COVID, the Ukraine war, and rising interest rates, I think our ability to grow through these challenges demonstrates the strength and relevance of our technology.

Where do you see Nexstim in three years?

We have a new strategy for 2025 and onwards in the works, although I can’t yet confirm the detailed plan. We will be focused on evolving toward profitable growth, which will undoubtedly remain central to our goals over the next few years.

We’ve done significant strategic work this year, including management and full personnel workshops in September and October. These discussions have generated some excellent ideas for us to further process, but the key going forward is likely going to be about sharpening our focus. While it’s been beneficial to balance risk and maximize short-term growth across different areas, long-term profitability might require us to concentrate more on the areas where our technology provides the most value.

I can’t go into more detail just yet but rest assured that we’ll be working toward growth and profitability in a focused and strategic manner. By the end of this year or early next year, we’ll be ready to share more about the new strategy, once we finalize the details.

Could you give three reasons as to why Nexstim is a good investment today?

• Unique Technological Platform: Nexstim offers a neuromodulation system that serves as a versatile platform for brain diagnostics, therapy, and research. This sets it apart in the medical technology field.

• Megatrends: The company’s technology aligns with major trends such as an aging population, the growing role of neurotechnology in healthcare, and the need for effective treatments where traditional drug therapies may no longer work.

• Financial Performance: Nexstim has demonstrated improved operational efficiency and profitable growth, reducing the risk compared to previous years and positioning the company on a more stable financial footing.