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. 

Why Investors Should Book Profit?

• Net loss elevated, despite growing revenues: For the quarter ended June 30, 2021, the Company recorded revenue of approximately USD 2.6 million, which increased approximately 156% from USD 1.0 million in the previous corresponding period. Even the elevated revenue couldn’t support the company to minimize its net loss as the operating expenses increased to USD 7.6 million compared with USD 4.4 million in second quarter of 2020.

• Delayed customer payments: During the second quarter, the Company experienced the delayed customer payments due to its inability to install systems because of hospital restrictions, and a lower than anticipated amount of TULSA-PRO procedures performed, and related revenue being recognized.
  

• Lower operating margins V/s Industry: In Q2 2021, the Company failed on maintaining its pace and witnessed lower performance across operating matrix and ROE against the industry, which exhibits the pressure on company.

• Stretched Valuation: PRN shares are available at an NTM EV/Sales multiple of 8.2x compared to the industry (Healthcare Equipment & Supplies) median of 5.2x. This implies that PRN shares are overvalued against the industry.

Financial overview of Q2 2021 (In thousands of USD)

Source: Company

• In Q2 2021, the company reported decent growth in its revenue to USD 2.6 million compared to USD 1.0 million in the previous corresponding period. The revenue increased primarily due to USD 1.4 million from the one-time sale of capital equipment and USD 1.2 million from recurring revenue.
• Under operating expenses each and every line item increased. Consequently, total operating expenses increased to USD 7.6 million compared to USD 4.3 million in pcp. Total operating loss also increased to USD 6.3 million against USD 3.9 million in pcp.
• Due to above discussed rationales, the company’s net loss expanded to USD 7.0 million compared to USD 5.3 million in pcp, partially benefitted by lower finance cost and lower income tax.

Stock recommendation

In the second quarter of 2021, the company's sales increased by 156% to USD 2.6 million. Despite its strong success, the firm was unable to reduce its net losses. The losses were exacerbated by an increase in operational expenditures. Furthermore, the Company failed to keep up with the industry, resulting in worse performance across the operational matrix and ROE, indicating that the company is under pressure. It, too, had to deal with late payments from customers. The business would continue to be cautious about the impact of COVID-19 in the future, particularly in certain foreign markets such as China and Japan. In addition, the stock is trading at an overvalued level. Therefore, based on the above rationale, we recommend a “Sell” rating on the stock at the closing price of CAD 21.96 on August 05, 2021.

One-Year Technical Price Chart (as on August 05, 2021). Source: Kalkine, Analysis by Kalkine Group 

ProMIS Neurosciences Inc.

ProMIS Neurosciences Inc (TSX: PMN) is a biotech company. It is engaged in discovering and developing precision medicine therapeutics for the effective treatment of neurodegenerative diseases like Alzheimer’s disease, amyotrophic lateral sclerosis (ALS) and Parkinson's disease (PD).

Why Investors Should Book Profit?

• No revenue visibility: The Company is in the development stage and it has minimal recurring revenues to date and does not expect to have significant revenues until it is able to sell a product candidate after receiving applicable regulatory approvals or until it establishes collaborations that provide funding, such as licensing fees, milestone payments, royalties, research funding, or other means.

• Incurring losses: The Company lost CAD 7.59 million in the three months ended March 31, 2021 and has a CAD 78.84 million cumulative deficit on March 31, 2021. As a result, the Company's ability to continue as a going concern beyond a point is contingent on its ability to earn revenue from its products or acquire further funding to fund its research and development activities.

• Limited liquidity: The operations of the company have been financed through the sale of equity securities, convertible unsecured debentures and the conversion of common share purchase warrants and stock options. On March 31, 2021, the Company had liquid funds available for operating activities (cash, cash equivalents and short-term investments) of CAD 8.82 million, which increased after private placement of Debentures. Additionally, management estimates that the cash on hand is expected to fund operations of the Company into the second quarter of 2022.

Financial overview of the company (expressed in Canadian dollars)

Source: Company

• In the reported period the company failed to generate any revenue and made an operating loss of CAD 0.58 million compared to CAD 1.76 million in the previous corresponding period. The decline in an operating loss was mainly due to lower R&D expenses and lower G&A expenses.
• The company registered higher net loss at CAD 7.59 million against CAD 1.76 million in the previous corresponding period. The increase in net loss was mainly due to change in fair value of derivative liability for CAD 7.0 million.

Stock recommendation

The Company works in a highly competitive market with numerous risks and uncertainties, some of which are beyond its control. It is exposed to the risks associated with the biotechnology sector, such as those connected with research and development, as well as the initiation, completion, and outcomes of preclinical and clinical trials. In addition, the Company's success is contingent on gaining regulatory clearances for its product prospects and achieving profitable operations. The success of future research and development or commercialization initiatives, as well as the Company's capacity to fund these programs, cannot be predicted. Furthermore, the management provided no direction on future revenue recognition. Therefore, based on the above rationale, we recommend a “Sell” rating on the stock at the closing price of CAD 0.23 on August 05, 2021.

One-Year Technical Price Chart (as on August 05, 2021). Source: REFINITIV, Analysis by Kalkine Group

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

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.