Nexstim Plc (NXTMH) Earnings Call Transcript & Summary

Hello and welcome to the Nexstim Plc 2019 Full Year Results Call. My name is Monique, and I'll be your coordinator for today's event. Please note this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Mikko Karvinen, to begin today's conference. Thank you.

Thank you. So this is Mikko Karvinen. I'm the new interim CEO of Nexstim. And I'll be holding this 2019 result call together with our CFO, Joonas Juokslahti.

Hello, everyone.

So I'm happy to begin with reporting progress that we've made in Nexstim during this year 2019, which was the first full year of therapy business commercialization in our company. And we'll have first briefly go through a summarized view of '19 as a business overview. And then I'll hand over to Joonas for some review of some key financials. And then at the end of the call, we will have a chance to ask questions from us to any detail that you would wish to talk about. So as I mentioned, 2019 was the first full year of therapy commercialization, and we delivered 17 new NBT, so Navigated Brain Therapy systems, globally, of which 9 were delivered in the U.S. and 8 in Europe. These were delivered mainly for the treatment of major depressive disorder. But there were also systems in Europe that are used also for chronic neuropathic pain treatment. There is now a 23 system active installed base of these NBT systems, and we are happy that we saw sales growth of 131% in this therapy business area. So the growth in our presurgical mapping business, so in the NBS side, slowed for 2019, and we actually saw a bit of a decrease there. And this led then the company's net sales increasing by a total of 25%. So the net sales was EUR 3.3 million in comparison to EUR 2.7 million in 2018. I'm especially happy that most of the revenue in the therapy business is actually recurring. So 66% of the therapy revenue in 2019 was recurring revenue. So this is revenue other than NBT system sales. And we target internally that we would reach EUR 100,000 per system revenue in therapy, and we achieved EUR 85,000 as an average per system revenue for the full year 2019. So it was 85% of the long-term target of EUR 100,000 per NBT system. During 2019, we were active in fundraising. So we accomplished closing one rights issue in spring of 2019. And then we had warrants attached to those -- that rights issue that led into share issues at the end of 2019 in November. And with these fundraising activity, we raised a total of EUR 6.6 million of new capital. So we thank the investors for participating in the share offers, and we are delighted that we attracted a couple of new major anchor investors. And of course, one of our major new anchor investor, Dr. Leena Niemistö, is also currently the Chairman of the Board at Nexstim Group. So -- and we're happy to have her in that position. If we look at the operational business, as such, we see that in '19, we were -- we started the growth of the NBT system installed base growth. And we think that the patient registry, especially the patient data registry that we are gathering as part of this installed base utilization, is going to be very important for us, especially in the future. And we've -- we're indicating that now that we have the patient registry agreement, a lot of them in place, and we have 23 active systems at the end of '19, I think we will see an accelerated amount of patient registry data that will be available in -- during the year 2020. And we will continue to monitor that and get applications -- I mean, publications out from that patient registry data during this year. We also have been active in 2019 establishing our key opinion leader network and our advisory board. And that was what was an important part of -- in getting more of our patient data analyzed and also going to help us while we move on in publications and highlighting the efficacy -- positive efficacy changes that we can see in this business and especially when using an NBT therapy system in comparison to some competitive systems. I think that the most important work that I see now is -- to start with in this interim CEO role is that we go through the strategy, Nexstim strategy, and update and renew it where necessary. We've just completed 2 very good strategy works of days here during this week, actually, with the Nexstim management team. And we anticipate that we will have a lot of good discussion also with the Board soon about these opportunities. We see positive opportunities in both the NBS and the NBT business. But we especially await the discussion and the review of the opportunities that we have when we talk about the accelerated treatment protocols for depression treatment as they are quite, quite magnificent results quite recently in that area that are likely to guide the depression treatment to a totally new level of efficacy. So we're hopeful about the early results, and we are active in trying to collaborate with the partnerships, especially in this area. So that we think that in the long run, both NBT clinical business that we are running and growing today and then future applications that might involve treatments that are done with the NBT system in the area of depression, severe depression, suicidal depression, and in the hospital environment could be possible. So we will evaluate those. And we will also evaluate quite a bit of different funding options and strategic alternatives for our businesses. So this is a very exciting, exciting time for Nexstim. So 2019 was the start for a full year of therapy growth, but we have high expectations that 2020 the NBT business revenue will grow. But as we have expenses that are quite high in the fixed part of this business, we still expect that there's a loss for this financial year 2020. I think at this point, I've gone through most of the business update and -- areas, and I'll hand over now the numbers and the key performance indicator review to be done by Joonas, our CFO.

Thank you, Mikko. So let's go through some of the key figures for the year of 2019. The total net sales for the year increased by 25% to EUR 3.3 million. Now I would like to highlight that the NBT business, which is in the very core of our strategy and focus, grew by 131% to EUR 1.5 million. Now as we are expecting even further growth in 2020, Nexstim hired new personnel to the U.S. commercial team. And this is mainly why our personnel expenses increased by some 20% to EUR 4.7 million. At the same time, we saw a decrease of 8% in the other operating expenses. And some of that -- some was also related to funding round expenses so those are nonrecurring. Depreciation for the financial year were EUR 0.5 million. And as we know in the NBT business model in some market areas, the NBT systems are leased to our customers. That means that the system manufacturing costs, they are fixed assets on our balance sheet and are depreciated from there. So we are expecting annual increase in depreciation. Looking at the operating loss of EUR 6.5 million and the loss for the period of EUR 6.8 million, we can see that it was a year of investment. The cash flows from operating activities of minus EUR 6.7 million, combined with our cash position at the year-end of EUR 4.3 million, shows that we are going to make another funding round in 2020. Now the group total equity at the end of the year was minus EUR 0.7 million. But I would like to note that the parent company equity was more than EUR 12 million positive. The number of shares at the end of the period was about 63 million shares, and that reflects the funding rounds made in 2019 -- the increase reflects the funding rounds made in 2019. And as Mikko already stated earlier, based on our business forecast, we are expecting the NBT business revenue to grow during 2020, and a loss is expected for the financial year of 2020.

Okay. Thank you. Thank you, Joonas. So I think that we've now gone through my review -- my business review of '19 in a nutshell and then also the key financials, and I would like to welcome if there are any questions to the report we've published today or anything that you would like to discuss with myself or Joonas.

[Operator Instructions] We have our first question from the line of Franc Gregori from Trinity Delta.