Profound Medical (OTCQX:PRFMF; TSXV:PRN) has agreed to expand an existing collaboration with Royal Philips (NYSE:PHG; AEX:PHIA) and acquire Philips’ Sonalleve MR-HIFU business, establishing Profound as a market leader in magnetic resonance (MR) ultrasound ablation therapy.
Sonalleve MR-HIFU is an innovative therapeutic platform that combines real-time MR imaging and thermometry, with thermal ultrasound, to enable precise and incision-free ablation of diseased tissue.
Sonalleve MR-HIFU is CE marked and has been marketed by Philips primarily for non-invasive ablation of uterine fibroids. MR-HIFU, as a technology, has also been shown to have clinical application in other medical conditions, including non-invasive ablation of abdominal cancers, hyperthermia for cancer therapy and palliative pain treatment of bone metastases.
The proposed transaction will result in Profound becoming the only company to provide a therapeutics platform that provides the precision of real-time MR imaging, combined with the safety and ablation power of directional (inside-out) and focused (outside-in) ultrasound technology, for the incision-free ablation of diseased tissue. It also represents an opportunity for Profound to immediately transition from a development-stage to a growth-stage company.
Under the accord, Philips will transfer its Sonalleve MR-HIFU assets to Profound for 7.4 million common shares of Profound at a price of $1.10 each, representing a premium of about 22% over Profound's closing stock price on June 29.
The agreement also includes certain earn-out provisions tied to future revenue levels, which Profound currently expects will result in it paying additional consideration to Philips in a range of 5% to 7% of Sonalleve MR-HIFU product sales, in cash, through to the end of 2020.
On closing, Philips and Profound will expand their non-exclusive strategic sales relationship to include distribution of Sonalleve MR-HIFU.
Philips already distributes Profound’s TULSA-PRO system, which is designed specifically for ablation of prostate tissue and also uses real time MR imaging with thermal ultrasound for precise ablation. Profound is currently conducting a pilot commercial launch of TULSA-PRO in key European and other CE mark jurisdictions. It is also sponsoring a multicenter, prospective FDA-registered clinical trial, TACT, which, if successful, is expected to support Profound's application to the FDA for approval to market TULSA-PRO in the United States.
For a limited time following the transition of the Sonalleve MR-HIFU business to Profound, Philips will also provide other services, including, but not limited to, manufacturing and installation.
“This agreement with Philips is in keeping with our commitment to invest in the powerful combination of real-time MR-guidance as the imaging platform and ultrasound as the energy source for delivering non-invasive ablative technology to clinicians,” Profound CEO, Arun Menawat, said in a statement.
“These key technology pillars, linked with intelligent software and robotics, have the potential to fulfill various unmet needs of patients and clinicians in many anatomies and disease states,” he added.
Dr. Menawat also said that from a commercial perspective, taking this technology platform approach not only benefits Profound by significantly increasing its total opportunity size, but also benefits hospital customers by providing them with the ability to better utilize their MR system assets.
“In addition to the immediate contribution this transaction will make to our revenue base, we believe that it will also help accelerate our growth going forward,” he added.
Rob Cascella, chief business leader, diagnosis and treatment at Royal Philips, said, the company believes that the increased scale of the business, as a result of the transfer of Philips’ MR-HIFU activities to Profound and the resulting enhanced close collaboration, “will accelerate the development of new clinical applications for this promising technology, while better serving the needs of current and future MR-HIFU customers.”
Mr. Cascella added that Philips looks forward to its continued participation in the future of MR-HIFU via both its collaboration with, and minority shareholdings in, Profound.