Executive Summary / Key Takeaways

• Profound Medical Corp. (NASDAQ:PROF) is at an inflection point, leveraging its differentiated MR-guided TULSA-PRO ablation technology to offer superior patient outcomes and broad applicability across prostate diseases.
• The implementation of CMS Level 7 reimbursement for TULSA-PRO, effective January 1, 2025, significantly enhances its economic appeal and market access across hospitals, ambulatory surgical centers (ASCs), and office settings.
• Strategic initiatives, including the TULSA-AI BPH module and the TULSA Plus program, are poised to substantially expand the total addressable market and streamline technology adoption.
• Management's confidence in a stabilized sales team and a robust pipeline underpins guidance for 70-75% revenue growth in 2025, with expectations for triple-digit growth from late 2025 into 2026 and beyond.
• Positive initial perioperative data from the CAPTAIN randomized trial, with further 1-year outcomes anticipated in December 2025, are critical catalysts for inclusion in professional guidelines and broader private payer coverage.

A New Era for Prostate Disease Management

Profound Medical Corp., incorporated in 2014, stands as a commercial-stage medical device company dedicated to developing and marketing incision-free therapeutic systems for the image-guided ablation of diseased tissue. At its core, Profound leverages existing MRI infrastructure with its flagship TULSA-PRO system for prostate tissue ablation and the Sonalleve platform for uterine fibroids, bone metastases, and osteoid osteoma. The company's journey has been marked by a strategic evolution, transitioning from an initial placement model to a recurring revenue-only model, particularly for cash-pay patients, which proved effective in the early stages of a novel technology.

The medical landscape for prostate disease is undergoing a dynamic transformation, ushering in an "era of interventional MR" driven by increasing patient demand for rapid recovery, minimal blood loss, and AI-based high-precision treatments. This shift towards an MRI-centric approach to prostate management is a significant tailwind for Profound. Within this evolving industry, Profound occupies a specialized niche, distinguishing itself from larger, more diversified medical device giants such as Medtronic plc (MDT), Boston Scientific Corporation (BSX), Johnson & Johnson (JNJ), and Siemens Healthineers (SHL). While these competitors offer broad portfolios, Profound's strategic focus on highly precise, non-invasive MR-guided therapies positions it uniquely, particularly as the industry increasingly values advanced imaging integration for complex procedures.

The TULSA-PRO Advantage: Precision, Flexibility, and Patient-Centric Innovation

Profound Medical's core competitive advantage lies in its TULSA-PRO system, a technological marvel that combines real-time magnetic resonance imaging (MRI), robotically-driven transurethral sweeping-action thermal ultrasound, and closed-loop temperature feedback control. This sophisticated integration allows for pixel-by-pixel precision, gently heating targeted prostate tissue to a therapeutic temperature of 55-57°C. The procedure is incision- and radiation-free, typically completed in a single session lasting a few hours, and is versatile enough to treat virtually all prostate shapes and sizes.

The tangible benefits of TULSA-PRO are substantial and quantitatively supported. Initial perioperative data from the CAPTAIN randomized controlled trial, a Level 1 study comparing TULSA to robotic radical prostatectomy, demonstrated statistically significant improvements in patient experience. TULSA procedures resulted in no procedural blood loss and eliminated the need for an overnight hospital stay, effectively reducing hospital time by nearly 24 hours compared to robotic surgery. Patients also reported statistically and clinically significant less pain during the first week post-procedure and better overall health for the first 30 days, essentially "giving 2 weeks back to the patient" in terms of recovery. This level of patient-centric outcome is a powerful differentiator. Furthermore, the technology boasts a 1.3-millimeter ablation accuracy, validated by whole-mount histopathology.

Profound's technological edge extends beyond patient comfort. Unlike competing ablative technologies such as HIFU, which often struggle to reach the anterior prostate (where 30-40% of cancers reside), TULSA-PRO's transurethral approach allows comprehensive treatment. Its flexibility enables both whole-gland ablation for diffuse or multifocal disease and targeted ablation for discrete tumors, even those at the outer edge of the prostate, without the risk of perforating the capsule. This broad applicability means TULSA-PRO is uniquely suited for "at least two-thirds or more of the prostate cancer market."

The company is not resting on its laurels, with significant R&D initiatives expanding its technological roadmap. The TULSA-AI Volume Reduction Module for Benign Prostatic Hyperplasia (BPH), which saw a pilot release in June 2025 and is slated for full commercial launch in the second half of 2025, aims to streamline BPH procedures to an estimated 60-90 minutes, regardless of prostate size or shape. Early data indicates procedure times are closer to 60 minutes. This innovation is projected to triple Profound's total addressable market (TAM) from approximately 200,000 cancer patients to 600,000 prostate disease patients annually, enabling physicians to efficiently "stack cases" for a "full TULSA day." Additionally, the Thermal Boost TULSA AI module is routinely used in over 50% of cases for customized dose delivery, and the Automated Contouring Assistant has reduced procedure time by several minutes, enhancing urologist confidence.

Another strategic development is the TULSA Plus Program, anticipated for a soft launch in the second half of 2025. This turnkey solution combines TULSA-PRO with Siemens' interventional MRI (FREMAX), aiming to streamline workflow and provide flexible access to the technology in various settings, including surgical suites, ASCs, or even urology clinics. The economic model is compelling, with Siemens offering FREMAX leases for approximately $14,000 per month, making it financially viable for sites. Profound expects at least one TULSA Plus install by the end of 2025. For investors, these technological differentiators and ongoing innovations translate into a robust competitive moat, enabling superior patient outcomes, expanding market applicability, and driving operational efficiencies for healthcare providers, ultimately supporting higher adoption rates and a strong long-term growth trajectory.

Financial Performance and Strategic Transition

Profound Medical's financial performance reflects its commercial-stage status and ongoing strategic transition. For the three months ended June 30, 2025, the company recorded revenue of $2.21 million, essentially flat year-over-year. However, for the six months ended June 30, 2025, total revenue increased by a robust 32% year-over-year to $4.832 million, driven by a 16% rise in recurring revenue and a significant 90.2% surge in capital sales overseas. The net loss for Q2 2025 was $15.7 million, and for H1 2025, it was $26.419 million.

The company has maintained strong gross margins, reporting 73% for Q2 2025 and 72% for H1 2025. This profitability is attributed to manufacturing efficiencies and a favorable product mix, including higher-margin capital equipment sales.

Operating expenses, however, have seen substantial increases as Profound invests in growth. Research and development (R&D) expenses rose 45% in Q2 2025 and 34% in H1 2025, largely due to increased headcount, higher enrollment and recruitment efforts for the CAPTAIN trial, and investments in MRI scanner compatibility and design efficiencies. Selling, general, and administrative (SG&A) expenses also climbed 84% in Q2 2025 and 78% in H1 2025, reflecting an expanded sales force, higher commission payments, increased travel, and infrastructure costs to support commercialization.

As of June 30, 2025, Profound held $35.2 million in cash. Historically, financing activities, including equity offerings and the CIBC Credit Agreement, have been the primary source of cash. Net cash used in operating activities for H1 2025 was $22.027 million, primarily due to the net loss and increased commercialization efforts. While existing cash and sales are expected to fund operations for at least the next 12 months from the 10-Q filing date (August 14, 2025), the company acknowledges the need for additional financing or strategic options by Q3 2026 to achieve all its future strategic plans.

A significant strategic shift is underway from a recurring revenue-only model to a more traditional medical device business model, incorporating upfront capital sales (anticipated average selling price of $350,000), disposables at a slightly lower price ($5,000-$6,000 ASP), and service agreements. This model is expected to maintain high margins (greater than 70%) while being economically attractive to TULSA users. The transition is supported by increasing predictability in patient treatments, leading some existing sites to express interest in purchasing systems outright.

Competitive Positioning and Market Dynamics

Profound Medical's competitive standing is significantly bolstered by its recent CMS Level 7 APC codes for TULSA-PRO, effective January 1, 2025. This reimbursement level is notably higher than that for any other prostate treatment procedure. In a hospital outpatient setting, the Medicare national average facility payment for TULSA is $12,992, which is 25% higher than for robotic radical prostatectomy, despite the latter's requirement for an expensive surgical suite and at least one overnight stay. The impact is even more pronounced in the ASC setting, where robotic prostatectomy is not on the CMS covered procedure list for Medicare patients. TULSA's Medicare national average ASC facility payment of $10,728 is not only higher than any other prostate procedure performed in an ASC but also exceeds the hospital payment for robotic radical prostatectomy. This broad applicability across hospitals, ASCs, imaging centers, and office settings provides TULSA an unrivaled market access advantage over radical prostatectomy, which is restricted to hospitals.

In the competitive landscape, Profound's specialized MR-guided ablation precision and innovation speed for niche therapies provide a distinct edge over larger, more diversified players like Medtronic, Boston Scientific, and Johnson & Johnson. While these larger entities benefit from extensive market reach, greater resources, and established financial health, Profound's technological focus allows for superior precision and patient outcomes. For instance, Medtronic's consistent revenue growth and stable margins reflect its scale, while Boston Scientific's strong revenue growth and solid cash flow are indicative of its diversified portfolio. Johnson & Johnson, with its strong profitability and global reach, represents a formidable competitor. However, Profound's TULSA-PRO technology, particularly its ability to treat the entire prostate and offer both whole-gland and focal ablation, surpasses the limitations of competitors like HIFU and even offers competitive advantages against Aquablation in the BPH space, with the TULSA-AI BPH module aiming for higher absolute payments and comparable speed.

Profound's strategic response to this competitive environment involves leveraging its reimbursement advantage, aggressively expanding its sales force (aiming to grow from 13-15 to approximately 40 salespeople), and increasing patient education programs. Partnerships with industry leaders like Siemens and Cook Medical for interventional MR solutions further enhance its market positioning and adoption potential. The company's ability to offer a "healthy economic model" for both facilities and physicians, combined with a superior patient experience, is central to its strategy to drive mainstream adoption.

Outlook and Growth Catalysts

Profound Medical's management has reiterated its guidance for 70-75% revenue growth in 2025 over 2024. This outlook, while acknowledging short-term delays in Q2 2025 capital sales, is underpinned by a stabilized sales team and a "large and growing TULSA-PRO pipeline." The sales funnel currently boasts close to 500 prospects in the targeting stage, over 100 engaged leads, and 80 qualified leads, with 14 already in the contracting phase. Management anticipates a "significantly and materially better" second half of 2025, driven by the conversion of these opportunities.

Key catalysts for this projected growth include the ongoing impact of CMS Level 7 reimbursement, which is expected to accelerate adoption. The CAPTAIN trial, having completed patient recruitment, is set to release final perioperative results at the RSNA and SUO meetings in early December 2025, with initial 1-year outcome data also expected then. More complete results will follow at AUA in 2026. These data are anticipated to drive favorable recommendations from professional society guidelines, effectively requiring TULSA to be presented as a treatment option, and to secure broader private payer coverage. The TULSA-AI BPH module's full commercial launch in the latter half of 2025 is another significant growth driver, expanding the TAM and enabling greater procedural efficiency. Furthermore, the TULSA Plus program, with its soft launch in H2 2025, is expected to facilitate new site installations, with at least one anticipated by year-end. Profound currently has 60 active TULSA sites and is installing 3 more, with confidence in reaching at least 75 sites soon after the end of 2024. Looking beyond 2025, the company projects "triple digital growth" from late 2025 into 2026 and beyond, envisioning a "proverbial hockey stick of rapid accelerated growth."

Risks and Challenges

Despite the compelling growth narrative, Profound Medical faces several pertinent risks. The company's ability to achieve all its future strategic plans is dependent on obtaining additional financing or executing other strategic options by Q3 2026, with no assurance of securing these objectives. Furthermore, Profound projects a potential violation of a CIBC Credit Agreement covenant by December 31, 2025, related to unrestricted cash levels. While management believes the company has sufficient unrestricted cash to repay the outstanding debt if a waiver is not obtained, this highlights ongoing liquidity management challenges.

The transition to a capital sales model introduces longer and more complex contracting phases, typically spanning 3-4 months, which can impact the timing of revenue recognition. Operationally, a material weakness in internal control over financial reporting was identified for 2024, specifically concerning contract terms and revenue recognition. While remediation efforts are ongoing and expected to be completed in 2025, this poses a risk of potential financial misstatements. Lastly, while Profound's technology is differentiated, it operates in a competitive landscape dominated by larger players with significantly greater resources, market reach, and established financial health, which could pose challenges to its long-term profitability and market share expansion.

Conclusion

Profound Medical Corp. stands at a pivotal moment, poised to capitalize on its technologically advanced TULSA-PRO system and favorable market dynamics. The confluence of superior patient outcomes, robust clinical data from the CAPTAIN trial, and transformative CMS Level 7 reimbursement has created a compelling investment thesis. The company's strategic initiatives, including the TULSA-AI BPH module and the TULSA Plus program, are designed to significantly expand its addressable market and accelerate adoption.

While challenges related to liquidity management, sales cycle complexities, and internal controls exist, Profound's strengthened commercial organization and clear technological leadership position it for substantial growth. The anticipated 70-75% revenue growth in 2025, with projections for triple-digit expansion thereafter, underscores the potential for TULSA-PRO to transition from a niche offering to a mainstream treatment modality in prostate care. The company's ability to effectively execute its commercial strategy and leverage its differentiated technology will be paramount in realizing this ambitious long-term vision.