On Monday, Stifel adjusted its stance on Profound Medical Corp. (NASDAQ:PROF), upgrading the stock from Hold to Buy and increasing the price target to $12.00, up from the previous $9.00. The firm cites the recent proposal by CMS for a TULSA procedure-specific reimbursement as a key factor for the upgrade.
The proposed reimbursement by CMS, announced on July 10th, is the first of its kind for the TULSA procedure and is considered competitive with existing standard-of-care reimbursements for prostate cancer treatments. Stifel's analyst believes that this development is a critical milestone for Profound Medical, which can significantly influence the company's commercial progress.
The CMS physician payment reimbursement structure for TULSA is expected to be confirmed or finalized in late October or early November. Stifel notes that adequate reimbursement is crucial for early-stage medical technology companies as it fosters physician adoption and supports growth.
Despite the positive outlook on reimbursement, Stifel acknowledges that Profound Medical still faces substantial operational, commercial, and clinical challenges in the future. As noted in the firm's late 2023 initiation, the company must work to build market share for the TULSA treatment.
The analyst from Stifel emphasizes that the CMS reimbursement is among several critical milestones anticipated to propel Profound Medical's commercial uptake in a positive direction. The firm remains attentive to the company's progress as it navigates the next phases of growth.
In other recent news, Profound Medical Corp. reported a 3% rise in revenue for the first quarter of 2024, totaling $1.91 million, and anticipates a significant increase in recurring revenue. Despite reporting a net loss of $6.2 million for the quarter, the company remains optimistic, expecting total revenue for 2024 to be between $11 million and $12 million. Additionally, collaborations with major MR companies are in progress to optimize the TULSA-PRO system, and a new TULSA AI module, the Contouring Assistant, has been submitted to the FDA.
Profound Medical is awaiting the Centers for Medicare & Medicaid Services' decision on the reimbursement rate for TULSA procedures, which is expected to positively impact financials from January 2025. The company's gross margin remains strong at 66%, demonstrating its financial stability amidst ongoing developments. These are recent developments that highlight the company's strategic growth and innovation efforts.
InvestingPro Insights
Following Stifel's upgrade of Profound Medical Corp. (NASDAQ:PROF), it's valuable to consider the financial health and market performance of the company through the lens of InvestingPro data. Profound Medical's market capitalization stands at a modest $226.93M, indicating a smaller company size within the industry. Despite a challenging profitability outlook, as indicated by a negative P/E ratio of -7.19, the company's financials reveal some strengths. Notably, the company holds more cash than debt on its balance sheet and liquid assets exceed short term obligations, which could provide resilience in navigating operational challenges.
InvestingPro Tips highlight that while analysts have tempered their earnings expectations for the upcoming period, Profound Medical has demonstrated strong returns over the last three months, with a 17.34% price total return. This performance may reflect investor optimism following the CMS proposal for TULSA procedure-specific reimbursement. It is important to note that the company does not pay a dividend, which may influence investment decisions for those seeking income-generating stocks.
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