OpSens has 110 per cent upside, says Raymond James

Raymond James analyst Rahul Sarugaser delivered an update on OpSens (OpSens Stock Quote, Charts, News, Analysts, Financials TSX:OPS) on Wednesday, saying the Canadian medical device company should be getting US FDA clearance this fall for its SavvyWire tech for heart valve replacement procedures.

Quebec City-based OpSens develops fiberoptic sensors for medical and industrial uses, including the OptoWire fiberoptic pressure guide wire used in diagnosing and treating coronary artery disease. The company is now also marketing the SavvyWire, which has received Health Canada approval for transaortic valve replacement (TAVR) procedures and had its first commercial use this past June.

With the FDA approval coming up imminently, Sarugaser has updated his model on OPS and is now moving from a risk-adjusted Net Present Value (rNPV) analysis to a discounted cash flow (DCF) plus multiples-based analysis where he has added anticipated revenue from the SavvyWire.

“We have a high degree of confidence in US FDA clearing SavvyWire. Opsens’ 3-in-1 device for the placement of heart valves in patients undergoing TAVR—given its Health Canada clearance this spring and the publication of strong safety data,” Sarugaser wrote.

On the estimated Canadian and US market for the SavvyWire, Sarugaser is putting out a forecast of about 140,000 procedures in 2023, which would then grow to about 170,000 procedures by 2025 and about 260,000 by 2030. For those three timepoints, Sarugaser is estimating a total guidewire-specific market opportunity at US$100 million, US$140 million and US$240 million, respectively. 

As far as market penetration goes, Sarugaser is estimating one per cent of the market for the SavvyWire in 2023, moving to 15 per cent by 2025 and 20 per cent by 2030, which in turn results in SavvyWire-based revenue estimates of US$1.0 million in 2023, US$21 million in 2025 and US$47 million in 2030.

“We conservatively do not include Europe or rest-of-the-world until we see imminent clearances and distribution agreements in those jurisdictions,” he said.

OpSens last reported earnings in July, where its third quarter fiscal 2022 featured record sales of $10.1 million compared to $9.2 million a year earlier and a net loss of $2.9 million. Revenue from its coronary artery disease segment was $6.6 million, and the company finished the quarter with $28 million in cash compared to $38.6 million a year earlier. (All figures in Canadian dollars except where noted otherwise.)

Commenting in a press release on the quarter, President and CEO Louis Laflamme said, “I am pleased with the financial performance of the third quarter, as we achieved record revenues surpassing $10 million with a number of significant milestones that include Health Canada approval of our SavvyWire, as well as the first successful procedures and revenues for the SavvyWire, as part of the controlled commercial launch in Canada.”

Sarugaser’s overall forecast for OpSens sees the company generating full fiscal 2022 revenue of $35 million and EBITDA of negative $8 million. For fiscal 2023, he is calling for $44 million in revenue and negative $9 million in EBITDA. On valuation, Sarugaser is now putting OpSens’ EV/Revenue as moving from 8.8x in 2021 to 8.5x in 2022 to 6.8x in 2023 and its EV/EBITDA going from 150.9x in 2021 to negative 37.4x in 2022 to negative 33.8x in 2023.

With a current market cap of $286 million, OpSens share price has rallied over the past few months, making for a year-to-date return of about negative 15 per cent. Over the last 12 months, the stock is down about seven per cent.

Sarugaser reiterated a “Strong Buy” rating on OpSens as well as a maintained target price of $6.00 per share, which at the time of publication represented a projected one-year return of 109.8 per cent.