Quick Thoughts: EDAP Represents An Undervalued Stock With Significant Upside


In a research note issued last week, H.C. Wainwright analyst Swayampakula Ramakanth initiated coverage with a “Buy” rating on EDAP TMS S.A. (EDAP) and a price target of $6.00 a share, representing a potential upside of 34% from where the stock is currently trading.

“In our opinion, EDAP is poised to become a profitable company by the end of 2015 and represents an undervalued stock with significant upside for the long-term value investor”, wrote Ramakanth.

The following bullets contain some highlights from that call:

  • Ablatherm PMA is currently being reviewed by the FDA and is scheduled to undergo an evaluation by the Gastroenterology and Urology Devices Panel of the Medical Devices Advisory Committee on July 30, 2014. We expect the approval of Ablatherm and launch by the end of 2014. With the potential approval of Ablatherm in the US we expect HIFU related revenues to grow from €10.7 million in 2015E to €62.7 million in 2025E.
  • The 2014 edition of European Association of Urology (EAU) recommended HIFU for primary
    treatment of localized prostate cancer and for salvage therapy following failed radiation treatment.
    Recently, the French Health Authority announced its acceptance to reimburse HIFU procedures for
    the treatment of prostate cancer. We believe these two events further validate HIFU as an accepted
    clinical practice for treating prostate cancer as the EAU guideline is a primary reference for urologists
    in Europe. We anticipate the guidelines to increase adoption in the EU.
  • EDAP is currently testing the HIFU technology in liver metastasis and planning to conduct studies in pancreatic cancer. We believe approval for treatment in these two cancers will provide further upside to our current valuation.
  • EDAP also operates in the $500 million US kidney stone removal market. The ESWL devices, Sonolith i-sys and Sonolith i-move received CE Marking in 2007 and 2010, respectively. EDAP maintains leadership in this market with an installed base of 600 machines. We expect revenues related to ESWL devices to grow from €21.7 million in 2015E to €42.7 million in 2025E.

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