Raymond James analyst Rahul Sarugaser remains optimistic about OpSens Inc. (Opsens Stock Quote, Chart, News, Analysts, Financials TSX:OPS), maintaining his “Outperform 2” rating and $6/share target price, projecting a return of 167 per cent in an update to clients on Wednesday.
Founded in 2006 and 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.
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 Raymond James hosted a call with Dr. Philippe Genereux, an interventional cardiologist and someone Sarugaser names a key opinion leader (KOL) who leads the structural heart program at Morristown Medical Center in New Jersey, to discuss the large and growing transcatheter aortic valve replacement (TAVR) market, and how Opsens’s SavvyWire offering could be in position to claim a significant market share.
“KOL calls like this leave us feeling bullish on OPS’s opportunity in TAVR and several adjacent cardiovascular markets,” Sarugaser said. “Given the rapid growth in these markets, combined with stiff competition among major device-makers, we assign a non-zero probability to OPS’s technologies attracting the attention of large acquirers in the medium term.”
OpSens has developed the SavvyWire as an all-in-one TAVR solution to deliver a replacement valve and concurrently confirm that the procedure has resolved the aortic stenosis by relaying pressure gradient information to the surgeon in real time as opposed to having to wait until after the procedure, as well as having the ability to also perform rapid pacing in all ventricles of the heart.
“We’re talking about delivering a heart valve—where you need specific mechanical properties of the wire—then you need pacing capacity and you need a sensor,” Dr. Genereux said in the analysis. “The engineers at Opsens deserve a lot of credit because they succeeded in making something that will be reliable and robust: I believe SavvyWire may have a free run on this market for 3-4 years before any competitor comes close.”
On top of simplifying heart-related procedures, Dr. Genereux said the SavvyWire provides superior performance in valve placement, rapid pacing and procedure confirmation.
“If you have the choice of one access point versus three, it’s a no-brainer,” Dr. Genereux said. “It’s safer for the patient and it saves time.”
The company recently made an addition on the executive side, bringing in Brad Davis, who previously served as Vice President, Global Marketing and Health Care Economics & Reimbursement at Cardiovascular Systems, Inc., as the new Chief Commercial Officer, where he will head a leadership team responsible for global commercialization and expanding U.S. commercial operations.
“OptoWire is already recognized as the most accurate and user-friendly pressure guidewire with over 150,000 patients served,” Davis said in the company’s February 9 press release. “With our upcoming SavvyWire launch, we will be delivering the first and only intelligent one-wire solution for minimalist TAVR by providing continuous pressure measurements and reliable rapid pacing while safely delivering the valve.”
Sarugaser’s financial projections remain intact, as he continues to project $40 million in revenue for 2022, implying year-over-year growth of 17.6 per cent against the $34 million in revenue reported in 2021. From there, Sarugaser forecasts another jump to $49 million in 2023, bringing about a potential year-over-year increase of 22.5 per cent.
Meanwhile, after being $2 million in positive EBITDA for a 5.9 per cent margin in 2021, Sarugaser projects the company to post a $2 million EBITDA loss in 2022, then bounce back in 2023 at $5 million for a 10.2 per cent margin.
Sarugaser also kept his valuation data the same, as he projects the company’s EV/Revenue multiple to drop from 6.3x in 2021 to 5.5x in 2022, then to a projected 4.4x in 2023. With the loss projection in 2022, Sarugaser projects more volatility in the company’s EV/EBITDA multiple, moving from 108.8x in 2021 to a projected (122.3)x in 2022, then getting back into positive territory at 46.4x in 2023.
OpSens has produced a return of 8.8 per cent over the last 12 months, though it has dropped off by 36.9 per cent since the year began, part of a descent that began when the stock hit a 52-week high of $3.56/share on November 25.
However, in Sarugaser’s view, there is still plenty for investors to learn about the company.
“We encourage our clients to capitalize on OPS’s recent stock price weakness that, in our view, is being driven by the market’s fundamental misunderstanding of the story—focusing on quarter-over-quarter FFR revenue versus OPS’s massive opportunity in TAVR and other new applications —along with the healthcare sector-wide selloff in early 2022,” Sarugaser said.
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