Paradigm starts Profound Medical at buy

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Paradigm Capital launched coverage of Profound Medical (TSXV:PRN; OTCQX:PRFMF) with a “buy” rating and price target of $2.25. The stock closed at 95 cents on Sept. 27.

Profound is commercializing the TULSA-PRO medical device for the treatment of early-stage prostate cancer. The device combines real-time MRI with high intensity directional ultrasound to provide precise ablation of the prostate while preserving the sensitive nerve bundles that are in close proximity to the organ.

“If successful in its pivotal Phase 3 trial (TACT), Profound could redefine the market and become the standard of care for treatment of early-stage prostate cancer,” writes analyst Rahul Sarugaser. 
The company expects to complete TACT’s recruitment in the fourth quarter of 2017 or the first quarter of 2018 at the latest, presenting interim data in the third the quarter, with final data in the first quarter of 2019.

“With a significantly better safety profile, it is possible that TULSA-PRO will access a whole new vertical of the market — patients who have avoided surgery, but who would opt for the TULSA-PRO intervention,” Mr. Sarugaser said. “In the best-case scenario, we assume a doubling of the market to 300,000 procedures,” he added.

The average utilization rate of MRIs in the U.S. is estimated at 67%, or 16 hours per day. Mr. Sarugaser said Profound’s sales proposition is that a hospital can use the eight underused hours to generate additional gross revenue of more than $20,000 per treatment, or $80,000 a day.

Mr. Sarugaser said Profound recently acquired the Sonalleve MR- HIFU business from Royal Philips. “Given that Philips executed an all-stock deal at a premium, this is a strong signal that Philips sees this transaction as mutually beneficial,” he added.