Hot stock Profound Medical (Profound Medical Stock Quote, Chart, News TSX:PRN) got an update from Raymond James analyst Rahul Sarugaser on Wednesday where the analyst reasserted his “Strong Buy” recommendation and $45.00 price target, which at press time translated to a 12-month projected return of 99.5 per cent.
Makers of the TULSA-PRO technology for the ablation of prostate tissue, Toronto-based Profound Medical announced on Tuesday that it has retired its $12.5-million loan with CIBC.
“We are pleased to have repaid the CIBC loan almost 30 months ahead of schedule, resulting in total estimated net savings of approximately $0.9 million in interest payments,” said CFO and senior vice president Aaron Davidson in a press release. “Now, with a balance sheet strengthened by our recently completed public financing and this extinguishment of all long-term debt, we believe that we are well positioned to scale the business going forward.”
PRN has seen its share price jump on the back of positive news concerning the TULSA- PRO, starting with the technology’s US FDA clearance last August and then announcing its first US sales a few weeks later, moving the company from a clinical development company to a commercial-stage company.
Profound then announced in early January a deal and partnership with RadNet, the largest network of outpatient imaging centres in the United States, with 340 owned or operated sites, an event which stood as a strong indicator of long-term adoption of PRN’s TULSA-PRO, according to Sarugaser.
The analyst commented in his note on Profound’s announcement last month that it had completed its application for a C-Code in November. A C-code is a temporary product code established to promote the adoption of new medical technology that currently does not have codes to facilitate payment and reimbursement — specifically, a CPT or Current Procedural Terminology code, which Sarugaser estimates won’t come for another three years.
“Recall that our models do not include the accelerated sales we expect PRN's potential receipt of a C-Code—around June 2020—would engender: amplifying revenues from 2021 onward by 3-5x. So, even if PRN is not successful in securing a C-code, our calculations imply that PRN would reach a cash minimum of $9.5 million in 2022, illustrating that the company still has sufficient cash to reach full reimbursement,
which we expect they will achieve under a CPT code by 2023,” Sarugaser wrote.
“After receiving its full CPT code, we expect cash to rebound to $44.5 million, escalating to $128.3 million in 2024. This said, we recognize that a $9.5-million cash nadir is possibly a little close for comfort, but we reiterate that we have deep confidence in management's capacity to execute the plan they have set out for PRN,” the analyst added.
For fiscal 2020, the analyst thinks PRN will generate revenue of $11 million and an EBITDA loss of $23 million.
Profound Medical finished 2019 up 168 per cent, while so far in 2020 the stock is up 60 per cent.