The Transcatheter Cardiovascular Therapeutics Conference took place this week in San Francisco, and Pearlstein believes the event will ultimately shed a positive light on the fractional flow reserve (FFR) market in general, and on Opsens in particular.
In June, Opsens announced it had received FDA 510(k) clearance to market its FFR technology, OptoWire, in the United States. The 510(k) clearance came on the heals of earlier regulatory clearances for OptoWire in Europe and Japan. FFR is used by interventional cardiologists to assess the degree of occlusion or stenosis in coronary arteries. The U.S. market is currently dominated by St. Jude and, to a lesser degree, by Philips. Both incumbents use electronic sensors in their FFR products, but OptoWire is the first FFR product to use optical sensors.
The M Partners analyst says Opsens’s technology offers a number of advantages in terms of mechanical performance, accuracy, and reconnectivity. He believes the company will corner 10% of the market share within a few years, and that economies of scale will spike its gross margins from the current 60% level to more than 75%. Pearlstein says investors should use the window before the company becomes fully commercialized to build a position in the stock.
“Given the recent FDA approval in June 2015, not to mention approvals in Canada, Europe, and Japan, we like the stock ahead of the company’s pre-commercialization phase in the US, expected to commence soon and which could lead to a major partnership agreement,” says Pearlstein. “OPS currently trades at 4.7x our 2017E EBITDA on an EV/EBITDA basis, compared to peers at 10.5x.”
In a research update to clients today, Pearlstein maintained his “Buy” rating and one-year target price of $1.60 on Opsens, implying a return of 111% at the time of publication.