SANUWAVE Health (OTC: SNWV) is more than under-the-radar; it appears to be off the screen of value-minded investors as well. That’s a huge mistake. Why? Because the company just posted a blowout third quarter that showed revenues rising by more than 895% compared to the same quarter last year. And that trend is expected to continue into and after the fourth-quarter, with SANUWAVE already saying it expects revenues to reach $3 million, which would have the company record a more than 415% gain in year-over-year revenues. But it gets better.
In fact, it gets much better. Guidance for 2021 is expecting revenues to increase to $25 million, which would deliver another triple-digit gain of 371% gain to its yearly run-rate. The good news is that unlike small-cap companies that are hoping for new product 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, the addition of UltraMIST® revenues is not the sole provider for growth. SANUWAVE’s FDA-cleared DermaPACE®, wound-care device, when combined with UltraMIST®, is expected 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.
Targeting An $11.4 Billion Diabetic Foot Ulcer Market
The diabetic wound-care market for foot ulcers alone is an $11.4 billion opportunity. That opportunity in and of itself exposes the value-opportunity compared to the current market cap of only $78.4 million. But, not everyone is missing the point.
Lake Street Capital analysts’ research report calls for a more than 114% increase in price from current levels. They note the impact of the UltraMIST®, acquisition, its enhanced competitive position, and the imminent uplist of the shares to a more senior exchange will supply ample fuel to drive revenues sharply higher over the next twelve months.
Moreover, they highlight that SANUWAVE will benefit from more than just the historical sales of UltraMIST®. In their report, they recognize the value of the more than 100 trained salespeople already in the market selling UltraMIST®. They also highlighted the positive impact of having an experienced reimbursement team already seated to get these devices covered by the largest Medicare/Medicaid Administrators in the country. Undoubtedly, a knowledgeable sales and reimbursement team are crucial ingredients to every medical device company’s success. SANUWAVE has both.
Still, the company has more to offer.
Video Link: https://www.youtube.com/embed/hjPSdaKJP5w
Important Biologics Add More Firepower
Lake Street was wise to point out that the company is exceptionally well-positioned to add immediate and accretive revenue streams from its acquisition of UltraMIST®,. They are also correct to value the addition of two important biologics, BIOVANCE®, and Interfyl®,, licensed from Celularity in the same deal.
In fact, these biologics, especially BIOVANCE®, in the near term, are expected to boost revenues even higher. Keeping in mind that the company’s third-quarter results were record-setting, the trend is therefore decidedly bullish. And, while record-setting performances are always embraced, investors are expecting more gains in the current quarter from the combination-therapy potential of its DermaPACE® and UltraMIST® diabetic wound-care devices.
Clinical evidence shows that these devices can be best-in-class alternatives to current and painful treatments. That, of course, opens the door to substantial front-line opportunities from treatment providers that aim to effectively treat their patients and, at the same time, offer a procedure that patients will continue. Keep in mind, the therapeutic value of UltraMIST® and dermaPACE® is achieved with minimal to no wound contact. Compare that to scraping or digging into a chronic wound to maximize potential benefit, it’s understandable that treatment providers may migrate toward these powerful SANUWAVE solutions.
Indeed, what matters most is that SANUWAVE’s FDA-cleared combination treatment is proven as effective. For that reason, the devices and therapy are earning reimbursement coverage from the largest insurance administrators in the country. BIOVANCE®, too, is achieving its share of reimbursement inclusions, which all combine to drive value well beyond the already record-setting numbers.
Now, add into the mix the value of expanding into the Latin markets.
Latin Markets In-Play
Notably, the surge in revenue during the third quarter was driven by sales in the USA. Now, the market presence for its products has expanded into other countries. SANUWAVE reported receiving regulatory approval from COFEPRIS, the Mexico equivalent of the FDA, to market and distribute dermaPACE® to treat chronic wounds. The company says they expect to leverage Joint Venture opportunities to maximize this approval.
Further, the company announced it received ANVISA approval to market dermaPACE® to treat chronic wounds in Brazil. Both markets are substantial. More importantly, it allows SANUWAVE to expand beyond U.S. borders in its mission to becoming a global diabetic wound-care treatment company. That deserves value now- it’s happening already.
Therefore, using real-time numerations to model a more just valuation, utilizing the $25 million guidance is only one part of the equation. Earning approvals in other countries can systematically enhance revenue opportunities. For that reason, looking only to an expected 371% increase in next year’s revenues may be selling the opportunity short. Global opportunities can enhance those numbers.
Thus, while the street guidance for $25 million in revenues in 2021 is appreciable, SANUWAVE may certainly surprise to the upside. And, with markets doing a valuation using forward-thinking models, analysts will likely notice the broader opportunities and rethink their current valuations. Combine that logic to a completed uplist to a senior exchange, the company’s share price may benefit significantly from both institutional interest and revenue-based valuation models.
The first move higher may come soon. SANUWAVE has already guided for a $3 million record-setting fourth-quarter, and if they indeed post that number, could set into motion a recalculation of future expectations. It would also show, through consecutive quarters, that the acquisition of new assets is helping to significantly accelerate the growth curve.
Importantly, the markets are likely to reward enhanced visibility.
End Of Year Rally
SANUWAVE certainly enjoyed a transformational third-quarter. They added UltraMist®, BIOVANCE®, and Interfyl® to its portfolio. Those three assets alone position the company to become a market leader in providing advanced wound-care solutions. Moreover, as perhaps the only company that can treat and improve patient outcomes across the continuum of care, the company may soon grab traction in the industry as a preferred option for treatment.
The assets already combined to deliver record revenue in the third quarter of 2020. However, the coming quarters may show a more representative presentation of the assets as the sales team includes dermaPACE® as a complementary device to UltraMIST®. That initiative may not have been clearly reflected in the third-quarter since the team was still learning about the dermaPACE® device. Three months in, that is no longer the case.
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.
Clearly, the next step for SANUWAVE is to consummate its most-watched objective- an uplist to a more senior exchange. Although that comes with a reverse stock split, it simultaneously opens the door to institutional investors and additional analysts’ coverage. Moreover, the valuations for stocks are done on revenue and earnings multiples, which SANUWAVE can deliver. In fact, they are setting records on the revenues front. Bottom-line earnings may be close- that could generate a massive move to the upside.
The bottom line is this. The legwork needed to get completed to maximize the potential of its UltraMIST® and biologics assets is done. Lake Street’s coverage was initiated months ago and expects a more than 100% gain in price.
Now, with an uplist on the cusp of happening and with new market opportunities in Mexico and Brazil, it’s likely they will re-evaluate their targets by using revenues generated from the active first month of SANUWAVES acquisitions.
And, with the forecast for more record-setting sales, that valuation can only be higher.
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