Opsens is my current favourite stock, this Raymond James analyst says

The stock may fall back over the next few months but the longer term picture looks rosy for Quebec-based medical tech company Opsens Inc (Opsens Stock Quote, Charts, News, Analysts, Financials TSX:OPS). That’s according to Raymond James analyst Rahul Sarugaser who reiterated his “Strong Buy 1” rating and Analyst Current Favourite (ACF) designation for Opsens in a report to clients on December 13.

Opsens, which develops and commercializes optical devices including the OptoVire, a fibre optic pressure guidewire used in the diagnosis and treatment of coronary artery disease, announced on December 13 that it has filed a 510(k) submission with the US Food & Drug Administration (FDA) for regulatory clearance for the SavvyWire guidewire. The application is for transcatheter aortic valve replacement (TAVR) procedures.

Commenting in a press release, OpSens President and CEO Louis Laflamme said the application is a key milestone for the company.

“The introduction of a novel and advanced guidewire that has the ability to both deliver a valvular prosthesis while allowing continuous hemodynamic pressure measurement during the procedure is considered to be a significant benefit to the medical community, especially given the rapid growth in TAVR procedures,” said Laflamme. “We look forward to the agencies review of our application and will continue to prepare our organization for an anticipated approval in late summer or fall of 2022.”

OpSens has had a superb year both as a stock and in company operations. After returning 45 per cent in 2020, OPS is currently in line for a 2021 return of about 138 per cent. Meanwhile, the company recently posted fourth quarter fiscal 2021 earnings which included record revenues of $34.5 million, up 17 per cent year-over-year, and record sales of its coronary artery disease products at $22.5 million. The company also recently completed a 20-patient first-in-human (FIH) trial of the SavvyWire’s capacity to safely and effectively deliver prosthetic heart valves in TAVR procedures, with a filing with Health Canada and now the US FDA having been the follow-through.

Commenting on Opsens’ fiscal year-end results, Laflamme wrote in a November 23 press release, “The Company made great progress in the U.S. market, signing two three-year contracts with major U.S. GPOs. An agreement signed with Cathmedical in Spain enables the integration of the OpSens system into the Picasso hemodynamic system and opens up additional seamless integrations like this in other markets.”

Looking at Opsens’ recent progress, Sarugaser wrote, “While no summary data from the FIH trial has yet been released, the study was open label, the results were tabulated immediately (no follow-up required), and OPS team was present for every single procedure; OPS has clear visibility on the trial’s likely positive outcomes and decided to proceed with the 510(k) filing.”

“These strong indications of a positive trial outcome motivated us to upgrade OPS stock to Strong Buy [in a November 23 update] and designate it as our analyst Current Favourite (ACF); since adding OPS as our ACF, the stock has returned ~+11 per cent versus the TSX down three per cent,” Sarugaser said.

Sarugaser said industry bellwether Edwards Lifesciences recently released estimates on the worldwide TAVR market which it said will reach $10 billion by 2028 at a ten per cent CAGR from 2021. 

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We view OPS’s TAVR prospects positively on account of the SavvyWire’s capacity to perform several key steps of the TAVR procedure using a single device (versus multiple, as is customary), materially improving procedural efficiency and, potentially, clinical outcomes. In a highly competitive, fast-growing TAVR device market, we expect the market’s key players are on the hunt for competitive advantage via M&A, which may come in the form of superior guidewire technology that can be packaged with proprietary valves,” Sarugaser wrote.

Sarugaser said after the initial market reaction to Opsens’ FDA filing has run its course, there’s likely to be a lull and short-term downward drift to OPS as the next catalysts for the stock are now four to six months away, making for a potential buying opportunity.

“Given our strong conviction in the likelihood of these approvals, the $10-billion total addressable market of the TAVR opportunity, plus a possible acquisition by one of the bigger players at any time, we recommend clients use any stock price weakness over the next few months as an opportunity to add positions,” he wrote.

“Based on our conversations with new large OPS shareholders, we believe the market is beginning to wake up to OPS’s impressive TAVR opportunity,” Sarugaser said.

Looking ahead, the analyst is forecasting Opsens to generate fiscal 2022 revenue and EBITDA of $46 million and $7 million, respectively. With the “Strong Buy 1” rating, Sarugaser has reiterated his $6.00 target price, which at the time of publication represented a projected one-year return of 89.3 per cent.