Profound Medical Corp. 

Profound Medical Corp. (TSX: PRN) is a commercial-stage medical device company that develops and markets customizable, incision-free therapies for the ablation of diseased tissue. The company is commercializing TULSA-PRO, a technology that combines real-time MRI, robotically driven transurethral ultrasound, and closed-loop temperature feedback control for the ablation of prostate tissue.

Key Highlights

• Net Loss Elevated, Despite Growing Revenues: For the nine months ended September 30, 2021, the company recorded revenue of approximately USD 5.9 million, which increased by about 32.8% from USD 4.4 million in the previous similar period. Even the elevated revenue couldn't support the company in minimizing its net loss as the operating expenses increased to USD 23.0 million from USD 16.3 million in pcp.

Source: Company

• Delayed Customer Payments: During the reported period of Q3FY21, the company experienced delayed customer payments due to its inability to install systems because of hospital restrictions and a lower than anticipated number of TULSA-PRO procedures performed, and related revenue being recognized.
• Lower Operating Margins v/s Industry: In Q3FY21, PRN failed to maintain its pace and witnessed lower performance across the operating matrix against the industry, which pressures the company.

REFINITIV, Analysis by Kalkine Group

Financial Overview of Q3FY21 (In USD thousands)

Source: Company

• In Q3FY21, the company reported higher revenue at USD 2.5 million compared to USD 2.2 million in the previous corresponding period. The higher revenue was because of the increased sales from the US market, which did not exist in the period ended September 30, 2020.
• Under operating expenses, each line item witnessed an elevation. As a result, total operating expenses increased to USD 8.6 million compared to USD 6.6 million in pcp. As a result, the total operating loss increased to USD 7.6 million against USD 5.1 million in pcp.
• Due to the above-discussed rationales, PRN's net loss expanded to USD 6.0 million from USD 6.1 million in pcp, partially benefitted by finance income and lower income tax.

Stock Recommendation 

Despite experiencing sector-wide challenges from the return of the COVID-19 Delta variant, Q3FY21 TULSA procedure volumes in the United States increased 20% sequentially over Q2FY21, which was the primary source of more significant revenue. Operating expenses were USD 23.0 million for the nine months ending September 30, 2021, compared to USD 16.3 million in the previous year. We believe the company's running expenses should be closely monitored and controlled. Furthermore, PRN failed to keep up with the industry, resulting in poor performance across the operating matrix, indicating that it is under stress. It is also dealing with late payments from customers, which is a sign of worry. Therefore, based on the above rationales, we recommend a "Watch" rating on the stock at the closing price of CAD 13.65 on December 01, 2021.

One-Year Technical Price Chart (as on December 01, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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