Future Procedure Volume Risks May Limit Drug Delivery Adoption Yet Long-Term Tailwinds Remain

Catalysts

About TriSalus Life Sciences

TriSalus Life Sciences develops pressure enabled drug delivery technologies and specialized infusion systems to improve the treatment of solid tumors and other vascular driven conditions.

What are the underlying business or industry changes driving this perspective?

• Although expanding indications such as uterine artery embolization and genicular artery embolization could materially broaden procedure volume, execution risk in physician training and workflow integration may limit the expected lift to revenue growth and delay operating leverage.
• While demographic tailwinds from an aging population and rising incidence of liver and knee osteoarthritis support a larger long term addressable market, slower than anticipated guideline inclusion and reimbursement alignment could cap near term utilization and constrain top line expansion.
• Although the growing preference for minimally invasive, catheter based interventions over surgery favors TriNav powered procedures, competitive innovation in alternative embolization tools and drug delivery platforms could pressure pricing and prevent the sustained gross margin improvement management is targeting.
• While the shift of nelitolimod to prospective partners should substantially reduce internal R&D spend and support earnings improvement, dependence on third parties for development progress and milestones introduces uncertainty around future royalty streams and limits upside to net margin.
• Although expanding the TriNav portfolio with FLX, LV, XP and upcoming Advance SKUs positions the company to capture more vascular anatomies and cases, the rising complexity of manufacturing and inventory mix may offset scale benefits and slow improvement in gross margin and EBITDA.

Assumptions

This narrative explores a more pessimistic perspective on TriSalus Life Sciences compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming TriSalus Life Sciences's revenue will grow by 42.1% annually over the next 3 years.
• The bearish analysts are not forecasting that TriSalus Life Sciences will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate TriSalus Life Sciences's profit margin will increase from -176.2% to the average US Biotechs industry of 16.0% in 3 years.
• If TriSalus Life Sciences's profit margin were to converge on the industry average, you could expect earnings to reach $18.5 million (and earnings per share of $0.3) by about December 2028, up from $-70.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $34.7 million in earnings, and the most bearish expecting $-9.8 million.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 36.7x on those 2028 earnings, up from -5.2x today. This future PE is greater than the current PE for the US Biotechs industry at 18.6x.
• The bearish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.2%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• TriSalus is deliberately extending the time line to reach EBITDA positive and cash flow breakeven in order to fund commercial expansion and multiple clinical programs. If revenue growth decelerates from the current 50 percent trajectory, the company may face renewed pressure on cash balances and potentially higher cost capital requirements, which would weigh on earnings and net margins over the long term.
• The growth strategy relies heavily on broadening use of TriNav into new indications such as uterine fibroids, thyroid nodules and genicular artery embolization. However, slower than expected adoption, negative or inconclusive clinical data, or stronger than anticipated competition in these emerging markets could limit procedure volume expansion and reduce the long term revenue opportunity that is currently implied in the narrative.
• Manufacturing complexity is rising with four new products and eight new SKUs launched in a single year, and management has already cited near term gross margin compression from lower manufacturing efficiency. If product mix volatility and operational challenges persist longer than expected, structural gross margins could remain below current mid 80s levels and constrain future operating leverage and net margins.
• The plan to shift nelitolimod into partnerships removes a large portion of near term R and D spend but also pushes the future of that asset outside the company’s direct control. Delays in securing attractive partners, unfavorable deal terms or partner deprioritization of the program could erode anticipated royalty and milestone inflows and thereby reduce longer term earnings potential that may be embedded in bullish expectations.
• TriSalus’ growth is closely tied to interventional radiology procedure volumes and reimbursement stability, including the recently introduced CMS HCPCS code C8004 that effectively doubled reimbursable radioembolization use. Adverse changes in reimbursement policy, slower physician education on new codes or macro driven declines in elective procedure volumes could dampen utilization trends and materially impact revenue growth and operating profitability over time.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for TriSalus Life Sciences is $9.0, which represents up to two standard deviations below the consensus price target of $11.36. This valuation is based on what can be assumed as the expectations of TriSalus Life Sciences's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $16.0, and the most bearish reporting a price target of just $9.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2028, revenues will be $115.3 million, earnings will come to $18.5 million, and it would be trading on a PE ratio of 36.7x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of $7.42, the analyst price target of $9.0 is 17.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.