Profound Medical has price target cut at Raymond James

While COVID-19 will likely take a bite out of 2020 plans for Profound Medical (Profound Medical Stock Quote, Chart, News TSX:PRN), Raymond James analyst Rahul Sarugaser said the company remains nimble and well-positioned for the long term.

Sarugaser issued an update to clients on PRN on Thursday in which he kept his “Strong Buy 1” rating but dropped his 12-month target from $45.00 to $35.00, which at press time represented a projected return of 150.5 per cent.

Profound Medical is commercializing its TULSA-PRO device, a non-invasive, image-guided technology combining magnetic resonance with ultrasound and closed-loop thermal feedback control for the ablation of pathologic prostate tissue.

The company’s first commercial site —at Vituro Health in Tampa, Florida— began treating patients in January and is reportedly approaching a procedure rate of four patients every two weeks, which would amount to almost $700,000 in annualized revenue for PRN.

On Thursday, PRN announced a second commercial site launch at the Busch Centre, a cancer imaging centre in Atlanta, Georgia.

Also on Thursday, Raymond James hosted a webinar with PRN management where the discussion focused on how Profound is navigating the current COVID-19 pandemic and its associated effects. In the webinar, management said the company’s balance sheet remains strong at $55 million in cash, no debt and a quarterly burn of about $5 million.

As Sarugaser reiterated, Profound is now focusing in the near term on sales of the TULSA-PRO to imaging centres rather than to hospitals, as the latter are currently preoccupied by the pandemic while imaging centres, still deemed essential services by state and federal authorities due to their services for cancer patients, remain open for business.

Management indicated to Sarugaser that its immediate sales pipeline remains relatively unaffected by COVID-19 as are reimbursement timelines, for the time being; nevertheless, the analyst said the overall strain on the US economic and healthcare systems will undoubtedly take its toll on Profound, too, regardless of how well-insulated the company may appear.

“While we see no immediate impact on PRN’s sales pipeline, we, and management, anticipate the company’s rate of TULSA-PRO deal execution and installation to plateau or dip for a short period, as health systems decide on tactics for evolving its normal course of care during this pandemic,” Sarugaser said.

The analyst said that despite the short-term sales headwinds, it’s a fact that men will continue to be diagnosed with prostate cancer and require treatment, which means a buildup in cases needing treatment is likely to develop.

“After a brief period of adjustment (we estimate 2Q-3Q20), health systems will adjust how they provide access, and PRN plans to be ready to capitalize on the ‘bulge’ of patients that have built up as a result of COVID-19. This, in turn, could drive robust utilization of PRN’s existing installed base in 4Q20 and into 2021, leading to growing motivation from new imaging centres to order and install TULSA-PRO units,” Sarugaser wrote.

Sarugaser’s newly adjusted estimates call for fiscal 2020 and 2021 revenue of $8 million (was $11 million) and $20 million (was $27 million), respectively, while fiscal 2020 and 2021 EBITDA now reads negative $25 million (was negative $23 million) and negative $24 million (was negative $20 million), respectively.