Profound Medical gets price target raise implying 335% upside at Echelon Wealth

A new acquisition by Profound Medical Corp. (Profound Medical Corp. Stock Quote, Chart, News: TSXV:PRN) has Echelon Wealth Partners analyst Doug Loe feeling bullish about the company’s stock.

Last week, Profound Medical announced it would acquire the Sonalleve MR-HIFU business from partner Royal Philips for 7.4-million shares priced at $1.10, plus earnout provisions. Sonalleve is a magnetic resonance technology used in a variety of ablation therapies, including ultrasound.

“This agreement with Philips is in keeping with our commitment to invest in the powerful combination of real-time MR-guidance as the imaging platform and ultrasound as the energy source for delivering non-invasive ablative technology to clinicians,” said Profound CEO Dr. Arun Menawat. “These key technology pillars, linked with intelligent software and robotics, have the potential to fulfill various unmet needs of patients and clinicians in many anatomies and disease states. At Profound, we see a world where patients no longer need to choose between living well and living long, or between undergoing clinically effective procedures and returning quickly to their normal lives. By leveraging MR-guidance and ultrasound to deliver incision-free, safe, personalized, precise, fast and cost-effective therapeutic solutions, I believe we are well on our way towards realizing that vision.”

Loe says this pickup will work well with Profound’s existing offering.

“Like Profound’s CE-mark approved MR-guided prostate tumour ablation platform TULSAPRO, Sonalleve MR-HIFU uses high-intensity focused ultrasound energy to ablate biological tissue, in this case uterine fibroids and also bone metastasis (in Apr/11), coincidentally a major secondary consequence of advanced prostate cancer,” the analyst says. “Like TULSA-PRO, Sonalleve’s core innovations are only partially hardware-based, with software that guides ultrasound focusing through transducer positioning and MR image analysis just as relevant to tissue ablation of diseased tissue while preserving function of surrounding tissue. Key takeaway – technical synergies with TULSA-PRO/ultrasound ablation and intensifying interest from partner Philips provides upside to our forecasts and valuation.”

In a research update to clients today, Loe maintained his “Buy” rating, but raised his one-year price target on Profound Medical from $4.00 to $5.00, implying a return of 335 per cent at the time of publication.

Loe thinks Profound Medical will generate EBITDA of negative $15.8-million on revenue of $6.1-million in fiscal 2017. He thinks those numbers will become an EBITDA loss of $16.5-million on a topline of $14.1-million the following year.