PROF stock upgraded to “Strong Buy” at Raymond James

After a swoon in its share price that began several months ago, Raymond James analyst Rahul Sarugaser has upgrade Profound Medical (Profound Medical Stock Quote, Chart, News, Analysts, Financials NASDAQ:PROF).

In a research update to clients September 18, Sarugaser upgraded PROF from “Outperform 2” to “Strong Buy 1” and maintained his $20.00 price target on the stock.

The analyst says the company, which also trades on the TSX under the symbol “PRN” compares favourably to its closest comparable, PROCEPT Biorobotics.

“PROCEPT Biorobotics markets its AquaBeam device for treatment of BPH, making it, in our view, one of PROF’s closest comps,” he explained. “The device received FDA clearance in late 2017, with CPT-1 reimbursement commencing 3 years later, in ~Jan. 2021. This first year of full reimbursement coincided with a quadrupling of FY21 Rev. ($34 mln vs. $8 mln in FY20), followed by a further doubling during FY22 ($75 mln), with another near-doubling during FY23 (~$131 mln consensus). While it has taken 2 years longer for PROF’s CPT-1 codes to come into force (FDA clearance Aug. 2019; CPT-1 commencing Jan. 2025)—due, as we saw it, to pandemic-related installation + data delays—we view PRCT’s reimbursement and sales path as highly predictive of PROF’s.

Mapping this trajectory, Sarugaser says he reveals some key insights about PROF.

“1. CPT-1 reimbursement should drive PROF’s 2025 Rev. to ~$40 mln (~6x 2023’s $7 mln Rev.; 2.5x 2024’s $15 mln Rev.).

2. Materially escalating SG&A costs during commercial launch phase are table stakes to drive adoption in med-tech; we anticipate PROF following suit.

3. Similar to how PRCT’s WATER trial data (early 2017; 5-yr data Feb. 2022) was a key driver of adoption, we expect PROF’s interim CAPTAIN trial (TULSA vs. surgery) data readout in early 2025 to be a significant motivator of adoption.”

Shares of PROF closed September 18 at $9.56.