The announcement that SANUWAVE Health (OTCQB: SNWV) has listed to a senior NASDAQ exchange is said to be imminent. The process, which started months ago, could deliver new listing status as early as Christmas, but others speculate the move will more likely happen by mid-January at the latest. And that catalyst may be the first of several potential milestones for the company as it finishes out what has been described as a transformational year. Here’s why:
After SANUWAVE acquired Celularity’s UltraMIST® ultrasound healing therapy device earlier this year, SANUWAVE set itself up to become a leading provider of next-generation healing technology that effectively treats patients with chronic diabetic foot ulcers. It’s an $11 billion market at last check, but growth is expected to increase by roughly 6.8% per year through 2026, which will keep the market a lucrative avenue for exponential growth.
SANUWAVE is already proving it can penetrate this market quickly. In its first-quarter after completing the UltraMIST® acquisition, the company posted record-revenues that increased by 895% year over year. For the quarter ending December 31, 2020, SANUWAVE is expected to best those results by posting revenues of roughly $3 million. If that expectation is met, the company will post an impressive YoY total revenue gain of approximately 415%. That’s in addition to its second set of consecutive quarterly records. As good as that sounds, 2021 calls for considerably higher revenues.
In fact, a research report published by Lake Street Capital has set its 12-month price target roughly 133% higher than current levels and suggests that total income in 2021 could exceed $25 million. They support those estimates by noting the strength of the newly fortified SANUWAVE portfolio of wound-care treatment devices.
Analysts Justify Their Estimates
Lake Street analysts’ didn’t pull any punches in their bullish thesis. And their models estimate exponential growth heading into the new year. They said,
“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.”
Simple calculation then suggests that 2021 full-year revenue growth can increase by roughly 373% YoY. While clearly bullish in terms of growth, some investors believe that those estimates may undervalue other vital assets as well as the company’s developing presence in Mexico and Brazil.
Those over-the-border opportunities may actually get a jump-start after two key approvals were announced by SANUWAVE. Earlier this year, the company reported receiving regulatory approval from COFEPRIS, the Mexico equivalent of the FDA, to market and distribute dermaPACE® to treat chronic wounds. SANUWAVE has already suggested that near-term opportunities to monetize that approval may be close through joint venture opportunities that can deliver substantial, non-dilutive revenues. Upfront fees and royalty agreements with strong third-party partners could be a value driver in that market.
Shortly after, SANUWAVE announced it received ANVISA approval to market dermaPACE® to treat chronic wounds in Brazil. Like Mexico, that market is substantial and positions SANUWAVE to bring next-generation wound-care treatment to markets in need of effective, quick, and pain-free alternatives. Both Mexico and Brazil can be wild-card’s for growth, and if an accretive partnership or licensing deal gets completed, the gains can be substantial without spending excessive capital.
Combining the opportunities, investors don’t need to speculate too far out. Instead, they should keep focused on the company’s substantial achievements that transformed the company from a single-product wound-care company into an expected $25 million diabetic wound-care market leader. And while the markets may be overlooking the massive opportunities already in play, investors can bank on an absolute, almost fool-proof presumption- an uplist, record revenues, expanding sales, and potentially more deals in the making can lead to a higher share price.
Thus, with the stock churning at what many call unjustified “depressed levels,” the momentum heading into the new year is likely to turn decidedly bullish once the company delivers either its uplist confirmation or posts its second consecutive record-setting quarter. Either scenario creates value and could push analysts to revisit their price targets to model a broader inclusion of the companies device and biologics pipeline and its expanding global reach.
To long term shareholders, a correction to the upside is well overdue. To newcomers, the wait may be short-lived for higher prices. Three things can happen soon.
NASDAQ Uplisting Imminent
The most-watched and expected near-term catalyst is for the company to secure its uplisting to a more senior NASDAQ exchange. The great news is that SANUWAVE is well into the process. As stated above, the editorial consensus is that the final approval to uplist will come no later than the middle of January.
Notably, the uplist will be well-supported by surging revenues, a trained 100 person sales team already in the market, a planned reverse-split, and a strengthening balance sheet and shareholder equity ledger that can add fuel to a bullish trend.
The better news is that the pieces needed to expedite growth are already in place. Much of the legwork occurred in Q3 and before. The Q4 is expected to maximize those efforts. That trend has begun.
Record Revenues In Q3, Expected Again In Q4
Revenue growth is now tracking at exceptional levels. In its recent Q3 report, the company posted a record-setting quarter with revenues surging by more than 895% compared to the same quarter last year. Those strong results, though, are expected to be bested in the current quarter, with its more than 100 person sales force expected to drive roughly $3 million in new revenues in Q4. If guidance is met, the company will post an approximately 415% gain in year-over-year revenues. That’s just for starters.
Analyst estimates use a historical perspective that has a high probability of predicting future success. For instance, knowing that UltraMIST® delivered more than $15 million in sales last year and provided more than $4 million in EBITDA earnings allows analysts to set pricing and valuation models that can present more accurate forecasts of the future. Also, the UltraMIST® revenues are immediately accretive and can push the company closer to bottom-line profitability or positive cash-flow status relatively quickly.
The valuation models presented are bullish. But, some believe the estimates may undervalue the contributions expected from the company’s FDA-cleared DermaPACE®, which, when added with UltraMIST®, can combine to deliver best-in-class painless treatment alternatives to patients with chronic diabetic wounds. It’s a tandem treatment that works exceptionally well together. Thus, the company noted in a previous conference call the high likelihood that the devices can be sold as a combination therapy.
The dual therapeutic value is not only quick and virtually painless, but the results are also compelling. Clinical evidence shows tremendous healing effects. Perhaps more important from a logistics perspective, the two devices allow physicians to effectively treat diabetic wound-care along the entire continuum of care. That’s a significant and convenient advantage in a substantial market. Their value also created change at SANUWAVE.
Seizing Catalyst Potential Early
The strategic acquisitions in 2020 were transformational. However, investors have been slow to realize the real-time impact of the company’s recent purchases and licensing agreements. That is evident by the current $81.5 million market-cap that may grossly undervalue the company from a revenue/multiple model. Others suggest that once the uplisting is complete and institutional investors can invest in the company, the floodgates that restrict particular buying interest will open and cause the valuation disconnect to quickly close.
Keep in mind, institutional money helped secure the UltraMIST® acquisition by reportedly arranging for SANUWAVE to receive more than $20 million to close the UltraMIST® purchase. No doubt, they want to see their investment grow. A cynical mind could even suggest that the stock is being held at current levels by design. After all, it doesn’t take much volume to keep the share price range-bound ahead of potential catalysts. And if a particular class of investors wants to partake in the move, it’s not too hard to keep a relatively low-volume stock quiet. If that is the case, that window may be closing.
To those considering a position in SANUWAVE, the set-up for long-term appreciation looks excellent. For those already in, the story has gotten better in 2020. The company just posted record revenues and is expected to do so again in the current quarter. That on its own creates value.
But, if the planned uplist happens on schedule, the response to that news, a repeat of record revenues, and an expansion into global markets could exponentially affect the share price. Even a fair price, using revenue-based multiples, could cause the stock to double. And that would be a great place to start its next move higher.
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