It’s been a long way down over the past year for Spectral Medical (Spectral Medical Stock Quote, Charts, News, Analysts, Financials TSX:EDT) but Paradigm Capital analyst Scott McAuley sees plenty of upside from the stock’s current levels. McAuley delivered a research note to clients on Thursday where he retained his “Buy” rating while dropping his target price after a look at the company’s recent earnings and clinical updates. Spectral Medical is a clinical stage medical device company whose lead product is PMX, a therapy that filters septic shock-causing endotoxins from the blood, with PMX currently in a Phase 3b trial. If successful, PMX would be the FDA-approved treatment for septic shock patients, a market representing over $2 billion. Spectral is also commercializing a new generation of dialysis devices in SAMI, focused on the acute renal replacement therapy market (RRT), and DIMI, aimed at the chronic RRT market. The company released its fourth quarter and full 2021 financials on March 24, with revenue coming in at $0.5 million compared to the same a year earlier and an EBITDA loss of $2.4 million versus negative $7.2 million a year ago. The company ended the year with cash of $8.9 million and with an overall cash burn of $2.0 million in the quarter. For comparison, McAuley had estimated Q4 revenue and EBITDA at $0.5 million and negative $2.3 million. Spectral called the 2021 year a foundational one for the company both clinically and operationally despite the challenges brought on by COVID, including those to clinical enrolment. Spectral said its Tigris study on PMX is now “well positioned for an expedient and positive outcome.” Tigris enrolment now stands at 30 patients randomized out of the 150 total patients to be enrolled. While the sample size is small, we remain highly encouraged by the preliminary mortality outcome data, which continues to exceed expectations. Assuming there is no significant recurrence of COVID-19 variants, we remain committed to completing Tigris trial enrolment in mid-2023,” said CEO Chris Seto in a press release. For the PMX Phase 3b trial, 30 septic shock patients have been recruited, which is flat since the company gave a mid-February update. The company now expects interim recruitment of 90 patients in the fourth quarter of this year with full enrolment of 150 patients in quarter two of 2023, effectively one quarter later than previously expected, according to McAuley, who said that on the current timeline and depending on the time it takes to compile and review the FDA submission, PMX could have marketing approval by late 2023. “EDT has partially recovered from its multi-year low in early 2022; however, it continues to suffer from the need to accelerate recruitment into its clinical studies and an overhang from the need for additional financing. However, we continue to see EDT as a significant risk-reward opportunity given the prior efficacy data of PMX in reducing mortality in patients with endotoxemic septic shock, the commercial agreement with Baxter and the added optionality on the DIMI/SAMI dialysis opportunity,” McAuley wrote. On the dialysis front, McAuley noted that COVID has impacted staffing and operations at dialysis clinics which has in turn delayed the signing of patients to participate in the study. Spectral management is expecting the first patient enrolled in the DIMI home-use study in the third quarter of this year, with the study completed in about 18 months. McAuley said this is about six months longer than previously expected. The delay effectively pushes potential expansion of the products’s FDA clearance from the second half of 2023 to mid-2024. “On a positive note, a new world-class Medical Advisory Board will help advise the company on the study and ensure that the products are properly positioned for the medical community,” McAuley wrote. As for SAMI, its distribution agreement is on hold as discussions around a potential strategic distribution partner have been put on pause due to internal restructuring. “We had previously speculated that this could be either Medtronic (MDT-USA) or B. Braun (private), since they both sell related kidney-care products but do not have a U.S. adult CRRT system of their own,” McAuley said. “We are maintaining our Buy rating but lowering our target to $2.10 (was $2.40) mainly owing to increasing our assumed dilution from additional financings,” McAuley said. At press time, McAuley’s new $2.10 target represented a projected one-year return of 527 per cent.