Following a progress update on its TULSA-PRO device, Echelon Wealth Partners analyst Doug Loe has maintained his bullish target on Profound Medical (Profound Medical Stock Quote, Chart, News TSX:PRN).
This morning, Profound announced it signed its first-ever U.S. multisite imaging centre agreement for Tulsa-Pro with RadNet which provides fixed-site outpatient diagnostic imaging services through a network of 340 owned and/or operated outpatient imaging centres.
“We are excited that RadNet, the largest U.S. owner and operator of outpatient imaging centres, will be the first multisite user of Tulsa-Pro,” said Profound CEO Dr. Arun Menawat. “RadNet’s imaging centres offer state-of-the-art technology, in-house radiologists, existing relationships with local urologists and anesthesiologists, strong marketing support and established payer networks. From a commercial perspective, this partnership with RadNet will help us pursue our vision of a site-specific continuum of care to help drive utilization of Tulsa-Pro, where multiple local urologists will perform MRI-guided Tulsa procedures at the same imaging centre that they are already sending their patients to for MRI diagnostics and posttreatment MRI-guided monitoring. As our agreement with RadNet is based on our recurring revenue-only business model, we view this as an important early validation of our go-to-market strategy.”
Loe says this is clear positive for a device at TULSA-PRO’s stage.
“RadNet represents a solid client win for Profound/TULSA-PRO during its early commercial days post-FDA approval in Q319: So on RadNet specifics, Profound announced that it will be rolling out three TULSA-PRO systems for deployment to three of RadNet’s imaging centers in California, specifically in Los Angeles where RadNet has high-field 3T MR imaging capabilities already and where a few of its key radiologists, specifically R Princenthal who has published two papers on MR imaging and prostate pathology in Abdominal Radiology in recent years, already have active practices in MR-based prostate cancer care. Generating initial TULSA-PRO US unit placement traction with RadNet is certainly consistent with Profound’s strategy to initially target MR-equipped diagnostic imaging centers as a focus market for prostate tumor ablation, as the firm summarized on its FQ319 conference call (Profound estimates that there are about 8,000-to-10,000 imaging centers in the US, with 40% of those owned by private firms.”
In a research update to clients today, Loe maintained his “Buy” rating and one-year price target of $37.50 on Profound Medical, a price that implied a return of 189 per cent at the time of publication.
The analyst thinks PRN will post and EBITDA loss of $14.9-million on revenue of $7.27-million in fiscal 2019. He expects those numbers will improve to an EBITDA loss of $5.16-million on a topline of $24.1-million the following year.
Loe says there may be much more to the Radnet deal than the mere initial win.
“We see the RadNet alliance as positive for Profound/TULSA-PRO not just because of the economics it should specifically infuse into our F2020 recurring revenue forecasts, but also for the brand awareness that RadNet could provide for TULSA-PRO in regional markets (initially in California, where the initial three TULSA-PRO systems will be installed) and the potential for RadNet to install additional TULSA-PRO systems across its transnational US medical imaging services network (the firm has imaging clinics in six US states, mostly concentrated in northeastern US but with growing infrastructure in California and to a lesser extent in Florida, where coincidentally, Canadian peer firm Akumin (AKU.U-T, NR) also operates most of its US imaging facilities). 73% of its 336 imaging centers are located in California and NY, and we thus expect Profound to concentrate its marketing efforts with RadNet in those geographies as well,” he added.
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