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Published to the market and investors on 17^th August 2018 @ 1.26pm (London time).

Nexstim OYJ (NXTMH-FI): Pivotal E-FIT trial results expected for late August
Recommendation: OUTPERFORM
Target Price: EUR1.23
Current Price: EUR0.22 (COB on 16^th August 2018)

KEY TAKEAWAY

Nexstim delivered solid results broadly in line with our expectations and reported a decrease in net loss, indicating disciplined operational spend. Net sales increased by 2% in H1/2018 and amounted to EUR1.08m, compared with EUR1.06m in H1/2017. While revenue growth was mainly driven by a 55% YoY increase in Navigated Brain Stimulation ("NBS") system sales in the US, commercialisation of Nextim's Navigated Brain Therapy ("NBT") system for stroke rehabilitation and treatment for depression remains the company's primary strategic focus. In our view, the key uncertainly remains the outcome of the E-FIT trial in stroke expected for late August, but with the launch for depression in the US de-risking the device, the risk-reward situation has improved. in our view, Nexstim is well-positioned to broaden its commercial footprint and is on track to reaching our FY2018E revenue estimate of EUR3.25m. We continue to believe that Nexstim is significantly undervalued, offering a highly attractive investment opportunity due to its asymmetric risk profile and limited downside risk. Hence, we reiterate and maintain both our OUTPERFORM recommendation and target price of EUR1.23.

NBS sales the main driver for growth in H1/2018

Overall, H1/2018 sales increased by 2% YoY, while personnel and operating expenses increased by 3% and 2%, respectively. Net loss for the period amounted to EUR-2.4m, decreasing from EUR-3.4m in H1/2017 (-29% YoY). While the cash balance of EUR10.3m is estimated to be sufficient to fund operations until at least Q2/2019E, management is actively considering a fundraise in H2/2018E in order to strengthen its sales channels and marketing efforts associated with the anticipated upcoming stroke launch in the US. Meanwhile, we expect revenues from the recent launch in depression to continue to drive growth in Q3/2018E and to increase the recurring revenue potential.

Pivotal Phase III E-FIT trial results to be published in Q3/2018E

Results for the supplementary Phase III E-FIT trial in stroke rehabilitation are expected to read out in Q3/2018E, representing an important catalyst for the commercialisation of NBT in the US, and we expect the current 60-patient supplementary trial to confirm the efficacy of the system. Nexstim intends to file a 510k de novo submission for stroke directly following release of the results in H2/2018E and anticipates commercial launch in the US in H1/2019E, in line with our previous estimates. This would allow Nexstim to market and sell its NBT system in the largest and most lucrative market for this device, representing a pivotal step for the company's future commercial success.

Risk diversification due to launch of NBT for depression in Q2/2018

Shortly following launch of the NBT system for depression earlier this year, Nexstim announced the successful placement of its first system in the US in May 2018. To date, Nexstim's NBT system remains the only FDA approved personalised navigation approach for targeted TMS in depression, representing a promising commercial opportunity and diversifying risk as the platform is not solely based on stroke rehabilitation anymore. With the ability to build the base of the installed units from Q3/2018E onwards with depression launch, the company should be able to increase the US sales rapidly going into 2019E.

We reiterate our OUTPERFORM recommendation and target price of EUR1.23

We continue to believe that Nexstim is significantly undervalued and offers a highly attractive investment opportunity. The shares experienced a significant hit after the company released the stroke trial results in 2016 followed by unfavourable financing arrangements where the pre-existing shareholders were heavily diluted. We believe that the clinical trial failure was due to an ill-designed control arm and there is now significant upside opportunity for new investors. In addition, the launch of the NBT system in depression further improve the risk reward profile. We reiterate and maintain both our OUTPERFORM recommendation and target price of EUR1.23.

Kind regards,

Martin Brunninger | Analyst

goetzpartners Healthcare Research Team | Research Team

goetzpartners securities Limited

The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.

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