With a fresh round of financing under its belt, Profound Medical Corp. (TSX:PRN) is all cashed up and ready to move ahead with Phase III clinical trials for its TULSA-PRO technology, says analyst Rahul Sarugaser from Paradigm Capital, who on Wednesday kept his “Buy” rating but raised his target price to $3.00 for PRN.
On Tuesday, Mississauga-based Profound Medical announced it had closed on a $34.5 million bought deal underwritten by Canaccord Genuity in the lead and including Paradigm Capital, CIBC World Markets, Beacon Securities, Echelon Wealth Partners and Mackie Research Capital.
The company says that along with supporting ongoing research, sales and marketing, the proceeds will go towards clinical trials for its TULSA-PRO, a combined ultrasound and MRI minimally invasive procedure for treating prostate cancer.
In a client update, Sarugaser says the financing serves to de-risk investment in the biotech company.
“Our previous calculations had shown that PRN needed $20 million to reach commercialization of the TULSA-PRO,” says the analyst. “Therefore, the company now has $27 million for commercialization activities, and CEO Dr. Arun Menawat has a war chest with which to make asset acquisitions as he continues building out PRN’s platform and product portfolio.”
“We see this transaction as significantly de-risking, providing sufficient cash for the company to: 1) complete its pivotal trial in prostate cancer; 2) make it through the FDA 510(k) approval process; and 3) begin marketing TULSA-PRO in the US,” says Sarugaser.
Sarugaser says that PRN should have results from the Phase III trial before the second half of 2018 and, with positive results by the end of 2018 or early 2019, he sees the company’s valuation rising to $485 million ($5.04 per share) and, if and when TULSA-PRO hits the market, the analyst sees PRN’s valuation reaching $635 million ($6.61 per share).
The analyst calls PRN a Top Pick for Q1/18 and he maintains his “Buy” rating and raises his target price from $2.25 to $3.00, which represents a 186 per cent return at the time of publication.