Leede Jones Gable analyst Douglas W. Loe says a key risk factor to his investment thesis on medical device company Profound Medical (Profound Medical Stock Quote, Charts, News, Analysts, Financials NASDAQ:PROF) has now been removed. In an update to clients on Monday, Loe reiterated a “Buy” rating on the stock while upping his target price from $14.00 to $18.00, saying Profound is expected to drive unit sales and procedure volumes for its TULSA-PRO technology for treating prostate cancer.
Commercial-stage medical device company Profound announced on Friday the American Medical Association has established three new Current Procedural Terminology (CPT) Category 1 reimbursement codes for its MRI-monitored transurethral ultrasound ablation (TULSA) of prostate tissue tech.
“The establishment of these permanent codes specific to TULSA is a critical milestone for the broader adoption of the technology to treat prostate diseases in the United States. The application was independently sponsored and submitted without the direct involvement of Profound, which is a testament to the level of physician support for this new procedure,” said CEO Arun Menawat in a press release.
Loe said he’s encouraged that the three new codes specifically ascribed to “MRI-monitored transurethral [ultrasound] ablation prostate” will be uniquely applicable to TULSA-PRO procedures and that by definition the new codes aren’t limited to ablating prostate and could thus be feasibly applied to benign hyperplasia (BPH), a separate pathology for which early TULSA adopters in Europe have already generated positive patient outcomes.
“[It’s] no major surprise that the AMA saw TULSA-PRO’s utility as positively as we do, and thus recognizing that device-specific reimbursement codes were warranted,” Loe wrote.
“The new codes will be effective at the beginning of FQ125 and so will not have a direct impact on our F2023/24 TULSA-PRO revenue forecasts. With the codes squarely now in sight and AMA-endorsed, we believe that unit sales could dramatically accelerate in the next seven quarters, including to Profound’s existing strategic imaging partners in CA-based RadNet and FL-based Akumin,” he said.
Loe has in turn revised the discount rate that factors into his net present value determination on Profound along with his 2026 EBITDA and EPS forecasts on which he separately bases his valuation. The result is a projected 2026 revenue of $103.2 million and EBITDA of $43.2 million and EPS of $1.41 per share. For the current 2023 year, the analyst has forecasted $26.8 million in revenue and negative $8.5 million in EBITDA. At press time, Loe’s $18.00 target represented a one-year potential return of 34.4 per cent. (All figures in US dollars.)
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