Profound Medical Corp. (TSX: PRN) is a commercial-stage medical device company specialized on the advancement and marketing of customizable, incision-free therapeutic systems, primarily used for the ablation of diseased tissue. The primary products of the company are TULSA-PRO® and Sonalleve®.

Major Highlights and Business Outlook:

• The company received FDA clearance for the TULSA-PRO® systems in August 2019, after that the group launched TULSA-PRO® product in the United States and reported commencement of the first U.S. commercial site.

• The group was generating its revenues from the limited commercialization of its systems in the EU (principally in Germany) and Asia. Following the recent FDA clearance of the TULSA-PRO® system, the group is ready to tap into the vast US market. The group is working on getting regulatory approvals in other international jurisdictions.

FY19 Financial Highlights for the Period Ended 31^st December 2019:  PRN came up with its full-year results, wherein the company reported revenue of CAD 5.53 million, as compared to CAD 2.60 million in the previous corresponding period. The business reported higher revenue due to increased systems and disposables sales throughout the year as well as increased service contracts.  The group’s operating margin rose to ~57% in 2019 against ~32% recorded in the previous year on account of increased disposable and service revenue, both of which contain higher margins. Research and development (R&D) expense stood higher by 21% from FY18 due to higher spending and testing on R&D and FDA regulatory projects. The business reported total operating expenses of CAD 22.93 million, increased from CAD 21.013 million, up 9% on y-o-y basis. The company reported lower finance costs of CAD 0.71 million, as compared to CAD 0.826 million in FY18. The business reported a net loss of CAD19.99 million, as compared to CAD 20.53 million in FY18.

FY19 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: Over the past five traded sessions, its shares bagged approximately 17.25% and outperformed its benchmark index by 10%. Further, on a YTD basis, its shares have relatively outperformed its benchmark index by 19%, which is enormous amid a bearish trend in the broader market. Also, its shares spotting a YoY return of 61.1% and steeply outperformed the benchmark index by 105% in the same period. From the technical standpoint, its shares traded above its long-term crucial support level of 200-day SMA of CAD 12.30. A Price/200-day SMA ratio stood at 1.06x, which is a positive technical trend. Also, a stock’s price above its 200-day SMA considered as a favorable long-term trend in the stock. In a year-over period, its shares have registered a 52-week high of CAD 27.45 and a 52-week low of CAD 6.30 and at the lasts closing level of CAD 13.05, its shares traded approximately 107% above its 52-week low price level, which reflects that PRN shares are hovering far above its 52-week period bottom point, despite broader indices have touched multiyear lows amid free fall in the market led by COVID-19 pandemic. The group has recently received FDA approval to sale its product in the US market which is likely to drive the revenue for the group. However, rising operating expense poses a challenge.  Therefore, based on the above rationale and prevailing technical trends, we have given a “Speculative Buy” recommendation at the closing price of CAD 13.05 (as on 27th March 2020).

PRN Daily Technical Chart (Source: Thomson Reuters)

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