For 2018, CIBC World Markets is recommending investors hold a basket of healthcare stocks that include a combination of more speculative small and midcap companies with selected large caps.
Analyst Prakash Gowd writes that CIBC’s favored names are Profound Medical (OTCQX:PRFMF; TSXV:PRN), Theratechnologies (TSX:TH) and Knight Therapeutics (TSX:GUD).
Mr. Gowd said he believes Profound Medical is the best medical device company in Canada and is well positioned to be the leader in the MRI-guided ultrasound treatment space.
He recommends investors take advantage of the current valuation in advance of “significant value-generating clinical, regulatory, and commercial milestones over the next 12-to-24 months as Profound prepares for the U.S. approval and launch of [two] platforms while simultaneously building sales outside of the U.S.”
His optimism for Profound is supported by its best-in-class complementary technologies: TULSA-PRO and Sonalleve, which he calls game changers with clear patient benefits; and a compelling capital equipment/disposables business model.
TULSA-PRO is Profound's answer to prostate cancer, combining real-time MR imaging with directional ultrasound to safely and accurately ablate prostate tissue from the inside out. Sonalleve is an MR-guided ultrasound device that can safely and non-invasively treat uterine fibroids, and alleviate severe pain associated with bone metastases. Both technologies are available in select markets outside North America.
“We forecast profitability in three years and total revenue in excess of $100-million in five years” for Profound, he added.
Mr. Gowd said Theratechnologies is on the cusp of an important FDA approval for a key HIV drug. “While the stock had a good run in 2017, we still believe the upside remains attractive, and we recommend risk-tolerant investors take a position now in advance of potential FDA approval.”
His optimism for Theratechnologies is supported by a high likelihood of FDA approval on or before PDUFA date of April 3, 2018 for ibalizumab, a novel antibody for the treatment of multi-drug resistant HIV (MDR-HIV); limited competition in the MDR-HIV category; and a potential upside to assumed pricing for ibalizumab.
Mr. Gowd views Knight as a safe haven in the Canadian healthcare sector, with a strong balance sheet, zero leverage, and strong management team, executing a focused business plan.
“For investors wanting exposure to the specialty pharma sector in Canada, Knight is the preferred name and is ideal as a medium-to long-term holding in an investment portfolio,” he added.