Profound Medical will have a transformative 2020, says Raymond James

Medical device company Profound Medical (Profound Medical Stock Quote, Chart, News TSX:PRN) is already up 22 per cent over the last two weeks but investors can expect more where that came from in 2020, according to Raymond James analyst Rahul Sarugaser.

The analyst provided an update on the company on Friday where he gave PRN his “Best Pick” status while maintaining his “Outperform 2” rating and price target of C$35.00 per share, which at press time represented a projected 12-month return of 195 per cent.

Profound is commercializing its Tulsa-Pro technology which combines real-time MRI with transurethral robotically-driven therapeutic ultrasound and closed-loop thermal feedback control, designed for the ablation of prostate tissue. The Tulsa-Pro has recently been given 510(k) marketing authorization in the United States, with Profound now launching its marketing efforts.

Sarugaser says 2020 should be a transformative year for Profound, with a number of potential catalysts arriving. The first of which is the JP Morgan Healthcare Conference in January (January 13 to 16 in San Francisco), where, based on experience, PRN is expected to issue a corporate update during the week leading up to the conference. The analyst adds that the stock should get a bump if history serves as a guide.

“During this same period [leading up to the conference] in 2018 and 2019, we saw the company’s stock price increase 40 per cent (versus the TSXV down 6 per cent) and 50 per cent (versus the TSX up 7 per cent), respectively. We expect management to issue a similar corporate update during the first or second week of January 2020, which we anticipate could be accompanied by a similar escalation in the company’s stock price,” said Sarugaser.

Next up is PRN’s announcement of its first multi-site commercial sale (into a group of high-volume imaging centres), which management predicted would be announced within 90 days of its last earnings report, November 7, 2019.

Sarugaser calls the anticipated announcement “an important milestone and a key early indicator of sales strategy success.” He says that for comparison’s sake, medical device companies Novadaq and Intuitive Surgical had their first multi-site sales five and seven years following their FDA clearances, meaning, that garnering a multi-site deal in its first year would bode well for long-term adoption of the Tulsa-Pro.

As well, Sarugaser points to PRN’s application for a ‘C-Code’ for insurer reimbursement, which the analyst says would reduce patient-pay sticker prices and thus motivate adoption of the Tulsa-Pro. Profound should have a C-Code announcement in June or July 2010, the analyst said.

The analyst thinks PRN will finish fiscal 2019 with revenue of $4 million and EBITDA of negative $16 million and generate fiscal 2020 revenue of $11 million and EBITDA of negative $17 million.

“PRN has consistently involved a growing community of key opinion-leading (KOL) physicians in the TULSA-PRO’s development, clinical research programs, and its integration in clinical practice. With this cohort of influential US urologists primed on the technology and now advocating for its use, we anticipate sales growth proceeding exponentially through the back half of 2020,” wrote Sarugaser.