Canaccord Genuity has maintained a Buy rating on shares of TELA Bio, Inc. (NASDAQ: NASDAQ:TELA), with a price target set at $12.00.
The firm's positive outlook is based on the potential for increased adoption of TELA's OviTex hernia mesh products. This sentiment comes in light of recent litigation surrounding the use of permanent polypropylene mesh in hernia surgeries, notably from a competitor.
TELA Bio was highlighted during a conference in August for offering an alternative to the widely used polypropylene mesh, which is currently the subject of legal settlements. This situation could lead to a significant shift in the market if further settlements arise.
Canaccord Genuity suggests that legal concerns over the use of certain types of meshes could push surgeons to prioritize patient outcomes over other factors in their choice of hernia repair materials.
A key opinion leader (KOL) call in July revealed that surgeons are beginning to consider the legal implications of mesh selection. The call also compared the recurrence rates of TELA's OviTex product to Phasix, a resorbable polymer competitor produced by BDX. Data indicated that OviTex has a significantly lower recurrence rate, which could position it favorably among alternatives.
TELA Bio has also introduced a new inguinal hernia repair (IHR) product line in the second quarter, priced competitively with synthetic mesh options. This strategic pricing is aimed at complex hernia procedures and could serve as an additional incentive for surgeons and hospitals to choose TELA's products.
In other recent news, TELA Bio, a medical technology company, has been the subject of several analyst adjustments following its second-quarter earnings report. Piper Sandler cut its stock target from $10.00 to $8.00 but maintained its Overweight rating, citing the company's unique technology and strong international performance.
Similarly, Canaccord Genuity reduced its price target from $14.00 to $12.00, despite maintaining a Buy rating, highlighting the company's robust product portfolio and growing Group Purchasing Organization implementation.
The company faced challenges during the quarter, including cyberattacks and changes in physician staff, which led to its performance falling short of estimates. However, TELA Bio upheld its revenue guidance for the year, with an anticipated success of new product launches and initiatives led by the recently appointed Chief Commercial Officer, Greg Firestone.
The company reported an 11% year-over-year revenue growth in its second quarter, reaching $16.1 million, despite cybersecurity incidents that negatively affected sales. Additionally, TELA Bio projects its annual sales to be between $74.5 million and $76.4 million, indicating a growth of 27.5% over the previous year.
TELA Bio also expects lower operating and net losses in 2024 compared to 2023, with steady or slightly lower operating expenses and reduced cash consumption in the latter half of the year. The company's future expectations include revenue share payments from the divestiture of NIVIS, contributing an additional $3 million to $7 million over the next eight quarters.
InvestingPro Insights
TELA Bio's financial landscape presents a mixed picture that adds context to Canaccord Genuity's optimistic outlook. According to InvestingPro data, the company's revenue growth stands at an impressive 31.64% over the last twelve months as of Q2 2024, with a robust gross profit margin of 69.2%. This aligns with the potential for increased adoption of TELA's OviTex products mentioned in the article.
However, InvestingPro Tips highlight some challenges. The company is "quickly burning through cash" and is "not profitable over the last twelve months," with an operating income margin of -71.72%. This suggests that while TELA Bio is growing its revenue, it's still in an investment phase, which is not uncommon for companies introducing innovative medical products.
The stock price has "fallen significantly over the last three months," with a three-month price total return of -42.07%. This decline could present an opportunity for investors who share Canaccord Genuity's positive outlook on TELA's future prospects.
For a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide deeper insights into TELA Bio's financial health and market position.
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