Still more upside to Profound Medical, says Leede Jones Gable

It’s been a heck of a recovery over the past few months by medical device company Profound Medical (Profound Medical Stock Quote, Charts, News, Analysts, Financials NASDAQ:PROF), with the stock more than doubling since the start of December. But there’s more room to grow, according to Leede Jones Gable analyst Douglas W. Loe, who reviewed Profound’s latest quarterly results in a Wednesday report to clients.

Ontario-based Profound Medical, which is commercializing its magnetic resonance-guided prostate cancer-targeting ultrasound ablation technology, the TULSA-PRO, and its uterine fibroid-targeing Sonalleve, announced its fourth quarter and full 2022 financials on Tuesday.

The company recorded $1.3 million in revenue, which was up 26 per cent year-over-year. Total operating expenses were $9.4 million, down from $10.2 million a year earlier. (All figures in US dollars.)

Management said in its commentary that the TULSA-PRO’s CPT reimbursement application will be considered at the upcoming CPT Editorial Panel Meeting in early May, which combined with upcoming data from its CAPTAIN clinical trial will make for catalysts for TULSA-PRO adoption starting in the first quarter of 2025.

“Our US TULSA business, both in terms of installed base growth and existing system utilization, has increasingly become the primary driver of our recurring revenue growth,” said Arun Menawat, CEO and Chairman, in a press release. 

“While one-time capital sales, particularly in select international markets such as China and Japan, have and continue to be challenged by COVID-19 headwinds, we expect this recurring revenue growth trend to continue in 2023,” he said.

Loe said the Q4 revenue of $1.3 million was “clearly softer” than the third quarter’s $2.0 million, which itself was soft compared to past quarters. But Loe said these are minor peaks and valleys compared to the much bigger unit sales for both the TULSA and Sonalleve expected in the future.

Loe noted that despite the challenges in 2022 on TULSA installation, including pandemic restrictions in Asia, Profound did ultimately meet its 2022 systems placement goal with 35 confirmed installations for the year. 

“Although the firm did experience delays to its install base over the course of the pandemic, the firm expects that timelines to installation should shorten over time as hospital environments become normalized again,” Loe said.

“So far, timelines have now been reduced from six months to three months, and with the firm aiming to cut it down to its target of ~60 days. Ahead in 2023/2024, the firm expects that it could be feasible to achieve 50 systems by end-of-F2023 and increasing it substantially to 75 systems by 2024. For comparison, EDAP sold fifteen Focal One systems last year, up from seven in F2021. Device-specific US reimbursement codes once achieved should greatly facilitate growth beyond these threshold levels,” he wrote.

With the update, Loe maintained a “Buy” rating on PROF and price target of $14.00 per share, implying a one-year return at the time of publication of 22.6 per cent.