Profound Medical is ready for a breakout, says Mackie Research

Investors should soon expect a breakout for Profound Medical Corp (Profound Medical Corp Stock Quote, Chart, News TSX:PRN) after the company’s just-received FDA clearance for its TULSA-PRO medical device, says analyst Andre Uddin with Mackie Research Capital Corporation.

The analyst provided an update to clients Friday, reiterating his “Speculative Buy” rating and $2.15 target price, which represented a projected 144 per cent return on investment at the time of publication.

Toronto-based Profound Medical on August 16 announced that it had received clearance from the US Food and Drug Administration to market the TULSA-PRO for the ablation of prostate tissue, which came after the company’s TACT pivotal clinical trial which met all of its primary and secondary efficacy and safety endpoints. The approval allows the TULSA-PRO to be used to ablate both malignant and benign prostate tissue, while the coming anticipates a US launch now in Q4 of this year, ahead of its earlier assumption of early 2020.

“We believe the upcoming U.S. launch of TULSA-PRO should propel the breakout of PRN…”

Uddin says that Profound is now working on reimbursement in the United States.

“Without reimbursement, a patient would pay out-of-pocket fees of US$15,000 to 25,000 for each TULSA-PRO procedure. For the procedure to be eligible for reimbursement with existing CPT codes, PRN would have to continue the TACT trial as the agency requires at least 50 per cent of the data to be from US patients – this should not require many more patients. PRN also plans to meet with CMS to possibly generate new technology CPT codes for the TULSA-PRO,” he writes.

As Uddin explains, Profound aims to initially focus on generating recurring disposable sales through the TULSA-PRO, looking to place the device in high-procedure-volume clinical centres (of which there are about 50 to 60 in the US). In terms of recurring revenue, PRN would get about US$6,000 per patient procedure, US$4,000 for each disposable piece and US$2,000 for the use of the TULSA-PRO.

Profound Medical to turn profitable in 2021…

“We believe the upcoming U.S. launch of TULSA-PRO should propel the breakout of PRN. We expect the US launch of TULSA-PRO to turn PRN profitable in 2021,” says Uddin.

Looking forward, Uddin sees PRN generating fiscal 2019, 2020, 2021 and 2022 revenue of $5.6 million, $23.0 million, $62.3 million and $92.4 million, respectively. For fully diluted EPS for the same fiscal years, the analyst is calling for negative $0.19 per share, negative $0.01 per share, $0.04 per share and $0.12 per share.

Last week, Profound also announced its second quarter 2019 financial results, which featured revenue of $574,000, with $466,000 coming from the sale of products and $108,000 from installation and training services. The company recorded a net loss for the quarter of $5.8 million or $0.05 per share, which compared to a loss of $5.8 million or $0.05 per share a year prior.

“This was a pivotal quarter for Profound, marked by TACT’s compelling clinical trial data, positive TULSA-PRO and Sonalleve user feedback from leading researchers and clinicians at our first Analyst & Investor Day event, the strong reception that TULSA-PRO received at AUA, and the filing of our 510(k) application for TULSA-PRO with the FDA,” said Arun Menawat, Profound’s CEO, in the quarterly press release.