Profound Medical is an undervalued life sciences stock for 2019, Echelon says

2018 didn’t shape up exactly the way he had imagined, but Echelon Wealth Partners analyst Doug Loe thinks 2019 could be Profound Medical’s (Profound Medical Stock Quote, Chart TSX:PRN) year.

On March 7, Profound reported its Q4 and fiscal 2018 results. In the fourth quarter, the company lost $4.86-million on revenue of $1.71-million.

“We are pleased to report a fivefold increase in fourth quarter 2018 revenue compared to the previous quarter, driven by the pilot launch of Sonalleve in China and increasing interest in Tulsa-Pro in Europe,” CEO Arun Menawat said. “Profound achieved important milestones in 2018, reporting positive initial data from the TACT pivotal clinical trial in localized prostate cancer, as well as clinical outcomes results that suggest Tulsa-Pro could meaningfully benefit BPH patients. We are looking forward to reporting the full 12-month results from the TACT trial, and plan on filing a premarket submission with the FDA [Food and Drug Administration] for Tulsa-Pro by the end of the second quarter of this year. We also continue to work to obtain additional international marketing approvals for Sonalleve.”

Loe says 2018 was different from his expectations, but says he remains bullish.

“There is no denying that F2018 turned into a transition year for Profound and that was not our original expectation when F2018 commenced; we expected TULSA-PRO unit sales traction to be more substantive in Europe and Canada where the device has long been approved, and we expected Sonalleve MR-HIFU sales to be correspondingly more substantive, at least in FH218 during which the device was SFDA-approved in China (in May/18) and with regionally-generated approval-supporting clinical data from a 107-patient pivotal uterine fibroid study long ago published (in 2016 by Beijing-based researchers in the Journal of Therapeutic Ultrasound, as we have described before) and thus long ago providing foundational support for Sonalleve MR-HIFU sales ramp once SFDA approval was granted,” he said.

In a research update to clients today, Loe maintained his “Buy” rating and one-year price target of $3.00 on Profound Medical, implying a return of 275 per cent at the time of publication.

The analyst thinks PRN will post EBITDA of negative $14.3-million on revenue of $8.96-million in fiscal 2019. He expects those numbers will improve to EBITDA of negative $4.13-million on a topline of $26.9-million the following year.

“…We stand by our view that both devices confer clear medical benefit in their respective target markets, even before considering any downstream upside that TULSA-PRO specifically could realize if early ablation data in a large secondary prostate disease market – benign prostatic hyperplasia (BPH) where orally active alpha blockers (Boehringer Ingelheim’s (Private) Flomax/tamsulosin, for example) and 5-alpha-reductase inhibitor Glaxo’s Avodart/dutasteride, for example) drugs currently dominate standard-of-care –eventually supports more comprehensive testing in a pivotal IDE study,” the analyst adds. “Investment thesis unchanged, especially with seminal TULSA-PRO clinical milestones from TACT study so imminent & Sonalleve MR-HIFU sales in China expected to ramp in F2019.”