Profound Medical is a buy, says Mackie Research

A pair of solid management hires at Profound Medical Corp. (Profound Medical Stock Quote, Chart, News: TSX:PRN) are likely to serve the health device company well, says Mackie Research’s Andre Uddin.

The analyst’s client note on Tuesday maintained his “Speculative Buy” rating and $1.50 target price for Profound Medical.

The company recently announced that Aaron Davidson has been appointed as the new CFO and Senior VP of Corporate Development, along with newly hired Ian Heynen as Senior VP of Sales and Marketing. Davidson was the co-head and managing director of HIG BioHealth Partners, having begun his career with Eli Lilly, while Heynen has over 15 years of experience in medical device companies, especially on product sales.

In March, Profound closed on a $34.5 million financing round, which the company said it will use to finance its Phase III clinical trials for its TULSA-PRO technology for the ablation of pathologic prostate tissue.

As far as future catalysts go, Uddin says that along with its first quarter financial results due on May 10, the company will be presenting interim results on the TACT trial for the TULSA-PRO on May 21 at the 2018 American Urological Association meeting in San Francisco. Full trial results are expected in 2019, with the company expecting to launch the device in the US during the second half of that year.

“We are maintaining our ‘Speculative Buy’ rating and our target price of $1.50,” says Uddin. “Our valuation is based on applying a 6.0x EV/Sales multiple to our 2020 revenue estimate of $86.6M and discounting back by 40 per cent (risks associated with the TACT trial).”

For Q1/18, the analyst is predicting revenue and forward EPS of $2.0 million and negative $0.04, respectively. His $1.50 target represents a projected return on investment of 58 per cent at the time of publication.