Profound Medical scores rating upgrade from Raymond James

Even with its share price down substantially over the past year and a half, Raymond James analyst Rahul Sarugaser is raising the roof over Profound Medical Corp (Profound Medical Stock Quote, Charts, News, Analysts, Financials NASDAQ:PROF), saying the stock now deserves a ratings boost after the company’s report of strong traction in the US market for its TULSA-PRO medical device. 

In an update to clients on Thursday, Sarugaser increased his rating from “Outperform” to “Strong Buy” while maintaining a $15.00 target price, good for a projected return at the time of publication of 283 per cent.

Profound Medical, which is commercializing the TULSA-PRO medical device for the incision-free ablation of prostate tissue, announced its third quarter 2022 results on Thursday, reporting $2.0 million in revenue compared to $2.5 million a year earlier and an EBITDA loss of $6.7 million. (All figures in US dollars.)

“As clinical data continue to demonstrate that TULSA is the best modality when it comes to prostate cancer treatment outcomes and side effects, and more physicians learn of our technology’s flexibility to treat an unrivalled variety of prostate disease patients, our confidence is growing in its potential to change the current standard of care,” said CEO and Chairman Dr. Arun Menawat in a press release. 

“Among the keys to reaching that level of long-term success will be continuing to expand our installed base of TULSA-PRO systems and helping to drive increased per-site utilization,” he said.

On the Q3 top and bottom lines, Sarugaser said the $2.0 million in revenue was better than his forecast at $1.8 million but under the consensus at $2.2 million, while the EBITDA loss of $6.7 million compared to Sarugaser’s call at negative $6.8 million and the Street’s $6.5 million.

But it’s the road ahead that’s looking better, according to Sarugaser, who said that during Profound’s Q3 conference call, management revealed “some very promising glimmers of traction and broadening clinical applicability across its installed base,” saying that the number of installed TULSA-PRO devices would go from a current 30 to 34 by the year’s end.

Further, management said multiple installed sites are reporting four to six-month, fully-scheduled wait lists, while one teaching hospital reported that 25 per cent of all prostate cancer removals are being performed using the TULSA (75 per cent surgery). And management said another teaching hospital now uses TULSA for BPH, and yet another for palliative prostate cancer treatments, which is beyond TULSA’s core application in intermediate prostate cancer.

“We are raising our rating on Profound Medical to Strong Buy given our base case scenario analysis implying a 5x return on PROF’s stock over the next 24 months. Even our bear case scenario implies a 3x return over 24 months,” Sarugaser wrote.