Leede Financial Inc. analyst Dr. Douglas Loe, in a research report published on November 4, 2024, maintained a Buy rating on Profound Medical Corp. (PROF:NASDAQ; PRN:TSX) with a price target of US$18.00. The report follows Profound's announcement that its TULSA-PRO device will receive a Category One CPT code from the U.S. Centers for Medicare & Medicaid Services (CMS).
Loe highlighted the significance of the reimbursement update, stating, "We have long viewed device-specific U.S. reimbursement codes for TULSA-PRO to be integral to its broader adoption in urology/oncology markets, and today's update thus solidifies TULSA-PRO's status on that theme."
The analyst emphasized the favorable reimbursement rates, noting, "Hospitals/ASCs will be reimbursed at the Medicare average of US$12,992/US$10,728 per procedure. This is sufficient economic incentive in our view to drive TULSA-PRO installed base and procedure volume growth in F2025 and thereafter."
Regarding growth projections, Loe stated, "Our model assumes that consolidated revenue/EBITDA/EPS in F2025 of US$34.9M/(US$3.9M)/(US$0.20/shr), but then lifting substantially on all metrics to US$59.1M/US$14.7M/US$0.10/shr in F2026 and then to US$95.5M/US$38.1M/US$1.05/shr in F2027."
The report highlighted potential strategic interest, with Loe noting, "We expect urology-focused suitors to show tangible interest in Profound as the annual top-line performance approaches US$100M on a run-rate basis, which our model projects by FH227."
Leede Financial's valuation methodology combines multiple approaches. Loe explained, "Our valuation still based on NPV (20% discount rate) and multiples of our F2027 EBITDA/fd EPS forecasts (US$38.1M & US$1.05/shr, respectively), with our EV calculation incorporating FQ224 balance sheet data (cash of US$34.1M, total debt of US$6.0M) and fully-diluted S/O of 26.0M."
The analyst also noted that while F2024 is a transition year, F2025 is expected to be transformative for U.S. TULSA-PRO adoption rates.
In conclusion, Leede Financial's maintenance of its Buy rating and US$18 price target reflects confidence in Profound Medical's growth potential following the favorable reimbursement update. The share price at the time of the report of US$7.35 represents a potential return of approximately 145% to the analyst's target price, highlighting the significant upside potential as the company advances its commercialization efforts.
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Disclosures for Leede Financial Inc., Profound Medical Corp., November 4, 2024
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