Opsens should go higher, says Raymond James

Raymond James analyst Rahul Sarugaser is optimistic about OpSens Inc (Opsens Stock Quote, Chart, News, Analysts, Financials TSX:OPS), maintaining his “Outperform 2” rating and raising his target price to $6.00/share, more than double his previous target of $2.75/share, in an update to clients on Monday.

Headquartered in Quebec, Opsens develops, manufactures, installs and sells fibre optic sensors for interventional cardiology, fractional flow reserve (FFR), oil and gas and industrial applications, operating with both medical and industrial segments.

The company has developed and commercialized a suite of optical devices, including the OptoWire, a fibre optic pressure guidewire used in diagnosing and treating patients with coronary artery disease.

Sarugaser’s latest update comes after OpSens received approval from Health Canada to initiate its first-in-human (FIH) study of SavvyWire, its first-in-class guidewire device designed specifically for the fast-growing transcatheter aortic valve replacement (TAVR) market, which Sarugaser labels as transformative.

“SavvyWire is designed to simultaneously deliver aortic valves and monitor hemodynamic pressure during TAVR; incumbent devices do one or the other, hampering workflow and performance,” Sarugaser said. “So, this FIH study is designed to assess the SavvyWire’s capacity to deliver aortic valves safely among 20 patients undergoing TAVR procedures at two structural cardiology trial sites in Quebec.”

The FIH study is the final step OpSens needs to complete before applying for 510(k) clearance with the U.S. Food and Drug Administration, with potential approval coming early in the second half of 2022. With the company’s progress in mind, Sarugaser speculates that OpSens could become a top acquisition target for Edwards Lifesciences, which possesses two-thirds ownership of the TAVR market, but does not include a guidewire in its portfolio.

At present, the majority of valve-placing guidewires in TAVR procedures are sold by Medtronic and Boston Scientific, accounting for the other third of the market’s ownership.

“As these devices are typically sold in bundles, we speculate that EW would be a natural acquirer of OPS’s TAVR guidewire technology, as this would provide the US$75 billion market cap company a means toward consolidating its two-thirds share of the soon-to-be $8 billion TAVR market,” Sarugaser noted.

Sarugaser notes that the Health Canada approval came slightly later than expected, though he expects the 510(k) submission will remain on target with previously-noted timelines. 

According to Sarugaser, the FIH study starting in the third quarter of 2021 begins a pivotal nine-month growth period for the company, with the readout and data completion expected in the fourth quarter, and the company’s rNPV rising to a projected $355 million. From there, the 510(k) submission to the U.S. FDA is expected in the first quarter of 2022, accompanied by the rNPV increasing to a projected $530 million, paving the way for FDA clearance and the beginning of marketing and promotion efforts in Canada and the United States early in the second half of 2022, bringing the company’s rNPV to a projected $600 million.

“The SavvyWire has the potential to bring important innovation to physicians performing the TAVR procedure and could become a key advancement in performing the procedure. Studies continue to demonstrate the benefit of TAVR to a wide range of patients with severe aortic stenosis,” said Louis Laflamme, President and CEO of OpSens, in the company’s September 20 press release. “Health Canada’s approval of the first in-man study is an important milestone for the Company and an important step towards filing for 510k clearance with the U.S. Food and Drug Administration (“FDA”). We remain on track to submit for regulatory approval in the United States in early 2022.”

The news has prompted Sarugaser to slightly revise his financial projections for the company, as he now projects $38 million in revenue (previously $37 million) for 2021 to mark a potential year-over-year increase of 31 per cent, with a further projected leap to $46 million in play for 2022, good for a potential year-over-year increase of 21 per cent.

Meanwhile, Sarugaser’s EBITDA projections remain at $3 million for 2021 and $7 million for 2022.

The majority of Sarugaser’s revisions come to his valuation projections, as an enterprise value of $255 million contributes to raised EV/Revenue projections of 8.7x for 2020 (previously 6.7x), 6.8x for 2021 (previously 5.3x), and 5.5x for 2022 (previously 4.3x), as well as modified EV/EBITDA projections of 1,745.6x for 2020 (previously 1,354.2x), 87.3x for 2021 (previously 67.8x), and 39.2x for 2022 (previously 30.4x).

Overall, OpSens has experienced strong performance throughout 2021, with its stock price up 138 per cent for the year to date. The stock is at its highest point of the year today at $3.19/share, a 21 per cent increase since Monday alone. At press time, Sarugaser’s new $6.00 target represented a projected one-year return of 129 per cent.