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Research Note - Opsens Inc. (OPS:TSX,$2.28|BUY $4.00 TARGET) Record Quarterly Revenue; Catalyst Heavy Back Half

This morning Opsens Inc. announced record Q3/22 financial results that beat our estimates on revenue but missed on profitability. Similar to Q3 last year, OPS was able to rapidly scale medical revenue as COVID restrictions at hospitals dissipated while the extended agreement with Abiomed supported optical medical system sales. Gross margin came in softer than expected based on end-of-life production for the OptoWire 2, supply chain issues, and an increased proportion of revenue coming from distributor sales (vs. direct sales). On the conference call, management guided for gross margins in the low 50s for the coming quarters due to supply chain issues and a normalization in Japan FFR/dPR sales in Q4/22 (leading to a sequential decline in the FFR/dPR segment).

We continue to believe there is a build-up of demand for cardiovascular procedures that will come unlocked through coming quarters, leading to accelerating revenue growth for the FFR/dPR business in 2023. We view the material pullback in OPS shares from highs of $3.50/share as a meaningful buying opportunity ahead of TAVR commercialization and continued resumption of FFR growth.

Additional highlights from the quarter include:

  • Revenue of $10.1M (+24% QoQ, +9% YoY) vs. our estimate of $9.4M. Medical sales came in at $9.2M (including $6.6M from FFR/dPR and $2.6M from optical medical systems), industrial sales came in at $0.9M

  • Gross profit of $5.1M (51% margin) vs. our estimate of $5.3M (56% margin) and $4.2M (52% margin) reported in Q2/22

  • EBITDA of -$2.1M vs. our expectation of -$0.5M and -$1.4M reported last quarter. The miss was driven by the lower gross margin and ramping SG&A/R&D expenses for the SavvyWire

  • The Company ended the quarter with $28.0M in cash

Group Purchasing Agreement: On Monday, Opsens announced that it was awarded a national group purchasing agreement for Interventional Specialty Diagnostics with Premier Inc. Premier is one of the largest GPOs in the industry with a network of 4,400 U.S. hospitals and health systems. Under the agreement, Premium members will be offered pre-negotiated prices and terms for OptoWire III and related system components. OPS now has GPO contracts covering over 90% of U.S. hospitals, an underpenetrated sales channel that we expect to assist in accelerating FFR/dPR sales growth.

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