SANUWAVE Health (OTC: SNWV) published a blowout quarter in November that showed revenue increasing by roughly 895% to $1,966,896 compared to the same period in 2019. The report was bullish from a value-trade perspective. But it also detailed how the company is exceptionally well-positioned to add immediate and accretive revenue streams from its acquisition of UltraMIST® along with two important biologics, BIOVANCE® and Interfyl®, licensed from Celularity in the same deal.
The report left little doubt that the quarter was robust on the revenue side- they posted record levels. But, as good as that achievement is, investors are evaluating several new tangibles that can position the company to achieve even greater success in the coming weeks and months. First, a developing revenue stream from its biologics assets, especially BIOVANCE, should not go unnoticed. Second, the combination-therapy potential from its DermaPACE and UltraMIST diabetic wound-care devices can be best-in-class alternatives to current and painful treatments. That, of course, opens the door to substantial front-line opportunities. And, third, an uplist of the stock to a more senior exchange is imminent. The combination of the three made the third-quarter transformational. It may set-up the fourth-quarter as the breakout period.
What matters most is that SANUWAVE’s FDA-cleared combination treatment is effective, which is the most critical part of the equation. As a result, the devices and therapy are earning reimbursement coverage from the largest Medicare/Medicaid Administrators in the country. BIOVANCE, too, is achieving its share of reimbursement inclusions, which adds an additional revenue source to the already record-setting numbers.
Revenue can grow for additional reasons.
Expansion Into Latin Markets
Notably, the surge in revenue during the third quarter was driven by sales in the USA. Now, the geographic markets have gotten bigger after SANUWAVE reported receiving regulatory approval from COFEPRIS that they say can leverage opportunity through a Joint Venture on Mexico to market and distribute dermaPACE® to treat chronic wounds. Further, the company received ANVISA approval to market dermaPACE to treat chronic wounds in Brazil. Both markets are substantial. And it also means that SANUWAVE is on its way to becoming a global diabetic wound-care treatment company. That’s happening already.
Therefore, in trying to determine a more just valuation, adding in the fourth-quarter revenue guidance of $3 million to its other tangibles establish that SANUWAVE may be an attractive value opportunity at current prices. Lake Street capital apparently agrees and recently updated its coverage with a target price that is 112% higher than today’s closing level. That value makes sense. Here’s why.
Heading into the fourth-quarter, SANUWAVE said it expects to generate at least $3 million in revenues. Adding that to the first nine months of the year should position the company to then report roughly $5.3 million in total revenues for 2020. That is a more than 415% increase year over year. That’s an outstanding achievement. However, the street is expecting much higher numbers in 2021.
In fact, street guidance for 2021 is $25 million in revenues. If met, that represents a more than 371% increase in revenue year-over-year, which would be outstanding. Although those estimates are forward-thinking, that’s also how the markets function for valuations. Thus, it’s logical to assess that the current revenues, combined with robust expectations, should express a more appreciable value for shares than their current levels. That may change soon with the company nearing its next filing, which can raise expectations that its trained sales and reimbursement team are accelerating the growth curve.
Robust Growth In Client Interest
More bullish sentiment was aroused from recent corporate presentations that set an optimistic tone with news that more than 500 new customer leads have expressed serious interest in the company’s wound-care product pipeline. Also noteworthy is that the company added five additional patents during 2019- 2020, with a certain one protecting its claims to treat blood clotting and occlusion. Although the company has provided no revenue guidance, the market itself is in dire need of better treatment for a condition that affects roughly 900,000 patients and kills more than 100,000 in the US market alone. The company may be best positioned to partner with cardiac-related firms and 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.
At the very least, reading between the lines of available information offers investors a glimpse into what SANUWAVE expects from its recent acquisition and licensing deals. A telling note is that the company is in hiring mode. And these hirings are in addition to the more than 100 trained sales staff that came with the UltraMIST purchase. Thus, it’s a bullish sign that can be interpreted positively.
And, if the increase in social media presence can offer a clue, SANUWAVE is appearing there as well. On multiple channels, discussions are active with physicians’ and patients’ contributions that show actual footage of how the devices work and the immediate benefits to patients. That can be valuable in the short and long run.
What’s Happening Now
Long-timers at SANUWAVE appear to believe that the third-quarter was transformational for SANUWAVE. They added UltraMist, BIOVANCE, and Interfyl to its portfolio. Those three assets alone help position the company as a market-leading provider of advanced wound care solutions. It also puts them as perhaps the only company that can treat and improve patient outcomes across the continuum of care. No doubt, the assets combined to deliver record revenue in the third quarter of 2020. And, that is the first goal achieved.
Beyond that historical number, the company has guided substantially higher by expecting to increase product revenue by approximately 50% in the fourth quarter, with acceleration starting in the new year.
Now, having surpassed its integration timelines by three months, along with an ability to leverage a cohesive team that is fully aligned and focused on achieving company goals, the company is in its best position ever to drive revenue. It is also prepared to deliver its suite of advanced wound care products to patients in need, extending its combination therapy into additional countries for the first time.
Analysts Are Bullish
Lake Street Capital Markets covered the stock with a BUY rating and a target price that is 112% higher than current levels. The great news is that their target price is based on legwork that needed to get completed. It’s done.
Next step, consummating 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. Experience dictates to not fear the reverse split. Valuations are earned on models that take into account revenues compared to shares outstanding. SANUWAVE is fine in both categories. They will have growing revenues and a relatively small share count post-split.
Lake Street provided early coverage and still expects a more than 100% gain in price. Now, with the benefits from an uplist on the cusp of happening, it’s likely they will revisit their models and plug in the revenues generated from the active first month of SANUWAVES acquisitions.
Keep in mind, too, company guidance implies there is more growth expected. That’s a good thing to bank on.
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