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Treace Medical CEO sees room for growth (Courtesy of the Jacksonville Daily Record) — Treace Medical Concepts Inc. projects revenue to grow by more than 50% this year, but its CEO sees room for bigger growth.

“We are addressing a market where there is a large unmet need,” Chief Executive John Treace said last week in the company’s first quarterly conference call since its initial public offering in April.

“We are addressing a market where there is a large unmet need,” says Treace Medical Concepts Inc. CEO John Treace.

Ponte Vedra-based Treace Medical produces a procedure for bunion surgery. Treace said the company’s system is used in 2.5% of the 450,000 annual bunion surgery procedures performed in the U.S.

However, the potential market is even bigger with 1.1 million annual candidates for the procedure, which uses a combination of instruments, implants and surgical methods to correct bunion deformities.

“We have a long runway ahead of us,” Treace said.

Treace Medical reported first-quarter revenue rose 66% to $18.7 million, and it projects full-year revenue to grow by 52% to 60%.

Treace Medical’s IPO was an immediate hit on Wall Street, with the stock rising $8.53 from its $17 IPO price on the first day of trading April 23 and reaching as high as $34.47 in the following days.

The stock had fallen back into the upper $20s when analysts weighed in on the stock for the first time a week before the quarterly earnings report. Three of the four analysts projected more gains in the stock price.

“Following its 4/23 IPO Treace Medical has scarcity value as the only publicly traded extremities pureplay, with exposure to one of the faster growth orthopedics end markets: lower extremities/foot & ankle,” SVB Leerink analyst Richard Newitter said in his initiation report.

Newitter rated the stock at “outperform” with a $38 price target.

Beyond the scarcity value, analysts say the company’s bunion surgery procedure called Lapiplasty has proved to be a success.

“Despite the fact that bunions are a three-dimensional deformity that occurs at the great toe joint, currently available surgical solutions on the market do not reliably address the root cause and are associated with (a) unpredictable outcomes, (b) high recurrence rates, and (c) low patient satisfaction,” J.P. Morgan analyst Robbie Marcus said in his report.

Marcus, who rates the company at “overweight” with a $37 price target, said Treace Medical’s system is the only one on the market that addresses all three dimensions.

“Additionally, the strong IP surrounding the Lapiplasty kit has created high barriers to entry, offering a long runway to greater penetration within the surgical market for bunions,” he said.

Stifel analyst Rick Wise also is impressed with the system, rating Treace Medical at “buy” with a $35 price target.

“Treace Medical still is in the early stages of commercializing its innovative Lapiplasty system, an easy-to-learn, reliable surgical procedure for more-optimal three-dimensional bunion correction,” Wise said in his report.

Morgan Stanley analyst Drew Ranieri is more cautious, rating Treace Medical at “equal weight” with a $30 price target after the post-IPO surge.

“At this point, it seems clear that investors have looked farther into the future given the significant stock performance since IPO (+20%), suggesting greater comfort in physician adoption and market development initiatives,” Ranieri said in his report.

He said the current valuation “appears to reflect a balanced picture of the significant opportunities ahead and risks.”