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OpSens keeps Outperform rating with Raymond James

Raymond James analyst Rahul Sarugaser reviewed the latest quarterly results from medical tech company OpSens Inc (OpSens Stock Quote, Charts, News, Analysts, Financials TSX:OPS) and reiterated an “Outperform” rating on the stock, saying in a Thursday report he’s impressed with the commercial rollout so far on OpSens’ SavvyWire optical device.

Québec City-based OpSens released its third quarter fiscal 2023 financials on Thursday for the period ended May 31, 2023, coming in with consolidated revenues of $13.2 million, up 31 per cent year-over-year. Gross margin his 58.8 per cent compared to 51 per cent a year ago and EBITDA was a loss of $3.2 million.

“We delivered growth in all three key categories of our medical segment, including the OptoWire for coronary artery disease, optical medical products, and the SavvyWire solution for structural heart TAVR procedures, which combined to drive 36 per cent growth in revenue,” said Louis Laflamme, President and CEO, in a press release.

On the Q3 numbers, Sarugaser said the $13.2 million topline was a big beat of his estimate at $11.0 million and the consensus at $11.5 million, while EBITDA at negative $3.2 million and net income at negative $4.2 million were misses of both his estimates at negative $2.8 million and negative $3.0 million, respectively, and the Street’s forecast at negative $2.4 million and negative $3.4 million, respectively.

The analyst said escalating margin growth is being driven by an increase in direct sales activity, economies of scale in manufacturing and structurally superior economics in SavvyWire sales. He said management sees more sales growth for the fiscal Q4 although at a more moderate rate, but he also pointed to increases in sales & marketing and research & development costs. 

“We’re impressed by OPS’s methodical and intentional launch of the SavvyWire, with a full US launch precipitating in the coming weeks alongside a roll-out of key software upgrades to further improve usability and motivate adoption,” Sarugaser wrote.

“OPS has successfully driven sales at 45 hospitals (up from 30 in 2Q23), and aims to add another 20 accounts during 4Q23, landing in ~65 accounts by FYE23 (exceeding its 60-hospital target),” he said.

“We’re also impressed by OPS’s capacity to find real operating and sales synergies between its SavvyWire and OptoWire products, driving escalating revenue and margins in each product an account of the other’s availability and compatibility,” Sarugaser said.

Sarugaser has revised his financial projections and is now calling for full fiscal 2023 revenue of $46 million (previously $44 million) and EBITDA of negative $11 million (no change). For fiscal 2024, the call is for $62 million in revenue (previously $60) and negative $9 million in EBITDA (no change).

With his “Outperform” rating, Sarugaser maintained a target price of $3.50 per share, which at press time represented a projected one-year return of 110 per cent.

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