SANUWAVE Health (OTC: SNWV) is showing that its transformational acquisition of Celularity’s UltraMIST ultrasound healing therapy is paying off. The company just posted a blowout third quarter with revenues surging by more than 895% compared to the same quarter last year. Better still, with its more than 100 person sales force penetrating new markets, revenues are expected to reach $3 million in this quarter, helping to push a more than 415% gain in year-over-year revenues. And revenues beyond 2020 are expected to surge.
Analysts covering the stock expect a massive increase in revenues during 2021. In fact, their models project another round of record revenues with a climb to $25 million in next year’s revenues. If their models are correct, it will deliver yet another consecutive triple-digit gain to its yearly run-rate.
In their own words, Lake Street Capital Markets says:
“Following record Q3 revenue, SNWV expects Q4 product revenue up approximately 50% sequentially. As a result of the strong Q3, we are increasing our FY20 revenue estimate to $5.2M vs. our previous $4.3M…We are leaving our FY21 revenue estimate unchanged at $25.1M.”
The great news is that unlike most small-cap companies that are hoping for their products to gain sales traction, SANUWAVE is working from a historical perspective. Its recently acquired diabetic wound-care asset, UltraMIST®, delivered more than $15 million in sales last year and provided more than $4 million in EBITDA earnings.
But, SANUWAVE has more firepower to add to the millions in historical UltraMIST® revenues. SANUWAVE’s FDA-cleared DermaPACE® is another winner. Moreover, when added with UltraMIST®, the two may combine to deliver best-in-class painless treatment alternatives to patients with chronic diabetic wounds. More importantly, it positions SANUWAVE as one of the only companies that can provide diabetic wound-care treatment along the entire continuum of care. That’s a significant advantage.
And those advantages may be the ingredients to scoring big in a multi-billion dollar market.
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An $11.4 Billion Market In-Play
SANUWAVE is actively targeting a substantial diabetic wound-care market where tending to foot ulcers alone is an $11.4 billion opportunity. Thus, if SANUWAVE can capture even a small percentage of that opportunity in the next few quarters as part of its penetration strategy, the proceeds would provide far more value than its current $78.4 million market cap suggests. Lake Street Capital recognizes that opportunity.
In its initiation report that covered SANUWAVE with a BUY recommendation, Lake Street Capital calls for a more than 114% increase in price from current levels. In it, they value the impact of the UltraMIST® acquisition, its enhanced competitive position, and the company’s imminent plan to uplist to a more senior exchange as reasons for the company to record sharply higher revenues and stock prices over the next twelve months. They see other reasons as well.
They further point out that SANUWAVE is well-positioned to increase the already substantial revenues from UltraMIST® by utilizing the strength of the more than 100 trained salespeople already in the market selling UltraMIST®. Just as important, they recognize the significant and positive impact of SANUWAVE having an experienced reimbursement team already seated to get its devices covered by the largest Medicare/Medicaid Administrators in the country.
Although already offering a compelling and bullish argument in favor of SANUWAVE, the Lake Street coverage provided an additional supporting analysis that points toward higher revenues and share prices.
Biologics Add Additional Revenue Stream
As part of the UltraMIST acquisition, SANUWAVE also secured licensing rights to two valuable and important biologics, BIOVANCE® and Interfyl®. Both will add value.
In fact, these biologics, especially BIOVANCE®, in the near term, can help develop additional diversified revenue streams to SANUWAVE. Factoring in that the company’s third-quarter results were record-setting without these biologics, their addition makes the trend decidedly bullish. Now, with the trained sales force pushing dermaPACE as a complementary device to UltraMIST, the combination-therapy potential of its DermaPACE® and UltraMIST® diabetic wound-care devices may penetrate markets faster than anticipated. The evidence to make that claim is compelling.
Clinical evidence shows that these devices can be best-in-class alternatives to current and painful treatments, which opens the door to substantial front-line opportunities from treatment providers that aim to effectively treat their patients. Moreover, the therapeutic value of UltraMIST® and dermaPACE® is achieved with minimal to no wound contact. That critical distinction compares to scraping or digging into a chronic wound to maximize potential benefit. Thus, faster, better, and painless treatment may be just what the doctor orders. And those orders should benefit SANUWAVE.
While all of the above is great news for the company, more value-creating firepower is expected to come from the company’s expansion into the Latin markets.
Marketing Approvals From Mexico And Brazil
The recent marketing approvals outside of the United States certainly adds more firepower to the pipeline arsenal. Keep in mind, the surge in revenue during the third quarter was driven by sales in the USA. That’s about to get a boost as the company expands beyond the U.S. borders.
SANUWAVE announced receiving regulatory approval from COFEPRIS, the Mexico equivalent of the FDA, to market and distribute dermaPACE® to treat chronic wounds. Even better, the company has said they can maximize opportunities by leveraging Joint Venture opportunities that may deliver substantial, non-dilutive revenues.
SANUWAVE also announced it received ANVISA approval to market dermaPACE® to treat chronic wounds in Brazil. Both markets are substantial and significantly increase the near and long-term prospects of capturing market share across the globe.
Therefore, while the street guidance for $25 million in revenues in 2021 points to massive growth, it may still underestimate the global opportunities. And, with stocks getting valued on forward-thinking models, these emerging international opportunities can add substantial value and push analysts to re-evaluate their targets.
And, while 2021 estimates look out longer term, the next move higher may come in the next few weeks. That’s because SANUWAVE has already guided for a $3 million record-setting fourth-quarter. If they succeed in reaching or beating that guidance, it could set into motion a revisit to pricing models and a recalculation of future expectations. An additional record-setting quarter would also show, through consecutive quarters, that the acquisition of new assets is proving their value to significantly accelerate the growth curve.
Undoubtedly, accelerating growth gets rewarded.
Multiple Catalyst Potential
SANUWAVE certainly enjoyed a transformational third-quarter, and near-term catalysts present themselves in the fourth quarter. The addition of UltraMist®, BIOVANCE®, and Interfyl® to its portfolio was indeed transformational to the company. In fact, those three assets alone position the company to become a market leader in providing advanced wound care solutions.
Investors should also pay attention to the five additional patents awarded during 2019- 2020. One, in particular, protects claims to treat blood clotting and occlusion. That asset can target a market in dire need of better treatment for conditions that affect roughly 900,000 patients and kills more than 100,000 in the U.S. market alone. In presentations, the company suggested the potential to partner with cardiac-related firms to leverage its allowances, perhaps as early as the first part of 2021. That strategy can save resources and monetize an asset. It’s a win-win scenario.
Indeed, the most anticipated next move will be for SANUWAVE to consummate its expected uplist to a more senior exchange- which is said to be imminent. An uplist can immediately open the door to institutional investors taking a stock position and attract additional analysts coverage. Following that, the next catalyst could come from bottom-line earnings- which may be close. As a result, positive cash flow could put significant upward pressure on the shares.
The bottom line is this. The pieces are in place to maximize the potential of their UltraMIST®, dermaPACE, and biologics assets. And, noting that Lake Street’s coverage was initiated months ago, the models that expect a more than 100% gain in price may be conservative.
The sum of the parts equates to likely gains. An uplist, expansion into the Mexican and Brazilian markets, and its portfolio of product’s ability to offer best-in-class therapeutic value should generate greater company interest.
The great news is that the next earnings report is close. And, with another record quarter expected, the valuation for SANUWAVE should be headed higher.
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