Echelon ups Diagnos PT to $1.55 (Canadian); maintains top pick


Echelon Capital Markets raised its price target for Diagnos (TSXV:ADK) to $1.55 (Canadian) from 95 cents after it signed a memorandum of understanding (MoU) for a potential worldwide distribution agreement for its CARA AI platform with the Instruments division of Essilor International.

Shares of Diagnos were quoted at 54 cents around mid-day Aug.17.

“We estimate that Diagnos’ CARA AI technology could be installed for use in 8,000-to-10,000 of the combined company’s locations, as they provide eye exams using the fundus cameras necessary to take a digital image of a patient’s retina,” writes analyst Stefan Quenneville. 

“Based on conservative estimates of pricing ($3/exam) and daily exams (seven), we see an incremental $13-million to $67-million-plus in peak sales opportunity, depending on the store count,” he said, adding that a “blue-sky scenario with stronger pricing of about $10/test represents a $220-million-plus opportunity.”

Mr. Quenneville said Diagnos currently expects several weeks of further negotiations, first to establish a global distribution agreement to roll out the current platform across EssilorLuxottica’s retail network and, second, to establish an agreement for the ongoing funding and development of CARA’s future applications. 

“Assuming a positive conclusion to these negotiations, Diagnos hopes to begin the initial commercial roll-out later in the fourth quarter of 2021,” he added.

While the timeline and scale of a potential deal remain uncertain for now, concluding a deal with EssilorLuxottica would be a “game-changer” for Diagnos, given the sizeable financial opportunity and the industry validation of its technology platform, Mr. Quenneville said.