SANUWAVE (OTCMKTS: SNWV) shares are attracting investor interest following the announcement that the company completed its asset purchase of Celularity’s UltraMIST® Ultrasound Healing Therapy. While the initial 3% bounce in share price is respectable, investors expect higher returns as the benefits of this immediately accretive deal become more understood. A conference call on Wednesday explained how and why this acquisition can play a pivotal role in the company’s near and long-term growth strategies. (Click HERE to register and listen to the conference call)
During the informative presentation, SANUWAVE management referred to the closing of the Celularity asset purchases as a transformative event. For the chronic wound-care sector, it may be just as important. That’s because the combination of dermaPACE® and UltraMIST®, along with the biologic, Biovance, shows potential best-in-class treatment results when combined for specific wound-care treatment applications.
Already, impressive treatment results using these devices have taken place in private clinical settings. Still, SANUWAVE notes the importance of taking a more formal clinical approach to proving the value of their assets. With that, they guided toward initiating more formal studies to show that the complementary nature of these two innovative devices can provide meaningful relief to patients suffering from a variety of chronic wound conditions, including diabetic foot ulcers, pressure ulcers, venous leg ulcers, deep tissue pressure injuries, and surgical wounds. At this point, though, these already FDA-approved devices are being validated by real-time clinical use, and patients are benefiting from a treatment option that can deliver exceptional end results.
Also impressive is that SANUWAVE may now be the first to market with an all-inclusive healing platform that can provide the best possible care to patients using a pain-free, short treatment regimen. And that combination therapy may penetrate new markets quickly, with SANUWAVE well-positioned to leverage its combined sales force of roughly 100 people to introduce the benefits of using both devices in a single treatment session. Hence, the acquisition of Celularity’s UltraMIST®, which is a significant asset in and of itself, can help to immediately expand SANUWAVE’s addressable market into additional wound indications while also increasing cross-selling opportunities across a broad range of clients.
Moreover, as perhaps the only company equipped to provide end-to-end wound care solutions with a tested and effective treatment package, SANUWAVE is exceptionally well-positioned to become a leader in providing the tools necessary to treat hundreds of thousands of patients nationwide. And that patient population can help deliver millions in new revenues.
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An Effective, All-Encompassing Wound-Care Solution
Optimism for SANUWAVE’s near and long-term growth is rising based on the combined effect of its devices and biologics. Plus, the UltraMIST® acquisition is more than just an immediate revenue-generating asset- it’s a platform enhancing addition that brings lucrative near-term growth potential and the power to develop a new standard of care. And while UltraMIST® is an excellent treatment device on its own, SANUWAVE can take it to the next level by leveraging its expertise in developing wound care technologies since 2004.
To enhance the power of UltraMIST®, SANUWAVE will combine it with its flagship product, dermaPACE®, a shockwave technology based on orthopedic and lithotripsy procedures that are FDA approved for the treatment of diabetic foot ulcers. Beyond the US, dermaPACE® is licensed for chronic wound-care indications, including postoperative wound healing defects, deep-partial thickness burns, and arterial ulcers. While there are additional indications for dermaPACE®, the enthusiasm about the future of SANUWAVE stems from the combination of the two innovative treatment devices.
Moreover, treatment providers are quick to suggest that properly caring for a wound requires many different treatments throughout the healing process. The SANUWAVE platform may win that challenge by providing the first meaningful combination therapy that can reduce the reliance on long-term medications, provide fast pain-free treatment options, and potentially reduce amputations in as few as two treatments per week during a sustained period of treatment.
Further, by having access and ownership to UltraMIST®, SANUWAVE can provide wound care treatment from discovery to closure- a statement that not many, if any, competing companies can claim.
UltraMIST® Transforms SANUWAVE In A Win-Win Deal
Although SANUWAVE also acquired two important biologics in the deal with Celularity, Biovance, and Interfyl, the star of the show is the acquisition of Celularity’s UltraMIST® Ultrasound Healing Therapy. It adds a massive amount of revenue and EBIDTA earnings to SANUWAVE for starters. It’s an asset worthy of far greater attention than what the market has so far offered. But, savvy investors are enjoying the value opportunity at current levels.
On day one, UltraMIST® adds to the SANWAVE treatment arsenal by utilizing ultrasound energy technology to create microstrains that promote rapid, touch-free healing. The device is FDA approved for the treatment of diabetic foot ulcers, pressure ulcers, venous leg ulcers, deep tissue pressure injuries, and surgical wounds. Those indications create new opportunities to complement dermaPACE®.
Actually, when used in combination with SANUWAVE’s dermaPACE®, the platform can encourage healing at different stages of the wound care process. Additionally, as noted above, SANUWAVE also purchased exclusive partnership rights for wound care biologic products developed by Celularity, including BIOVANCE and Interfyl. These important biologics will help SANUWAVE establish, design, and deliver to the markets, a comprehensive treatment platform that can address every essential aspect of treating a wounded patient. Physicians that have used the products in private practice have been encouraged by the combined ability to promote rapid healing in patients needing care for chronic wounds. And if those results continue, there is little doubt that the combination of dermaPACE® and UltraMIST® can become a preferred treatment option when caring for patients.
While most users recognize each device’s unique abilities, it’s the combination of the two that bring a perfect storm of opportunities to SANUWAVE. And these opportunities deliver significant competitive advantages and substantial revenue-generating opportunities. Best of all, these events are starting to happen now despite a massive economic disruption caused by the COVID-19 pandemic.
The Benefits of a Newly Bolstered Platform
Along with the substantial benefits a comprehensive wound care platform can offer to physicians and patients, there are additional aspects of this acquisition that help create a considerable business opportunity by circumventing the treatment barriers faced by competitors. In fact, from a competitive perspective, the deal immediately expands SANUWAVE’s addressable market to treat a variety of chronic wound indications.
Moreover, to attack new market opportunities, SANUWAVE can utilize it’s newly adopted and trained sales force to penetrate existing client and clinic relationships. Most important, SANUWAVE inherits a unique opportunity for its combined sales force to leverage cross-selling opportunities for its brand.
Better still, the combined technologies’ synergistic mechanisms are expected to accelerate the commercialization of this enhanced product portfolio, focusing on the growth of dermaPACE®, UltraMIST®, and BIOVANCE. Relevant to that point, the accretive and complementary nature of the combined assets should significantly decrease the costs of marketing and commercialization by reducing the need for overlapping trade show attendance and investor presentations. Other factors that are expected to contribute to bottom-line profitability come from optimizing shipping costs and reducing other collateral expenses related to marketing and distribution.
However, a massive advantage from this deal deserves more attention. And that’s SANUWAVE’s new ability to refinance dermaPACE® leases through working capital financing. That initiative is expected to significantly assist in further commercialization efforts of the platform. The sum of the parts, too, shows that everything about this asset purchase is designed to be accretive toward near-term growth.
Two Sales Forces Combined; Approaching 1000 Client Accounts
Revenue growth is expected to happen immediately. SANUWAVE will be leveraging an enhanced sales force to target new sales opportunities created by a cross-selling strategy. Firstly, the combination of a direct and outsourced sales team and international partnerships offer a unique sales opportunity that allows SANUWAVE to sell dermaPACE® to UltraMIST® customers and vice versa. The company can immediately target its roughly 1000 existing UltraMIST® customer relationships that would benefit from the therapy offered by SANUWAVE’s dermaPACE®. Those introductions can help drive its market penetration across a broad client spectrum and facilitate fast growth through domestic and, in some cases, the international markets.
The addition of former Celularity sales team members also brings meaningful, established relationships with national GPOs and wound care centers that can be immediately accretive to revenue growth. And with SANUWAVE’s newly gained access to biologics, BIOVANCE and Interfyl, the company is setting up a well-orchestrated plan to appeal to new customers and patients with its end-to-end product offering. Moreover, SANUWAVE is already positioned to utilize their expert clinical account managers to drive the commercialization of its entire wound-care portfolio to existing accounts that are not yet taking advantage of the newly expanded treatment devices and biologics.
Skeptics may have a hard time arguing against this SANUWAVE benefit. Year-end revenue numbers and the historical success of the pipeline are indisputable. The assets acquired by SANUWAVE generated over $15M in revenue and $4M in EBITDA in 2019. Combine that strength with the cross-selling opportunities created, and the end result is likely to generate even more growth for its product portfolio. Moreover, the company identified over $2M of cost savings by eliminating redundant tradeshows, streamlining personnel costs, and consolidating manufacturing and distribution processes.
Additionally, SANUWAVE’s own arsenal of FDA-approved products has increased from one to four, positioning the company to sell an entire wound-care solution rather than only a piece of that process. Of further benefit is that this massive potential to expand its market presence comes from a combined sales team that can sell its comprehensive wound-care platform to approximately 1000 existing customer accounts, only 15 of which are currently overlapping.
Finally, SANUWAVE is bringing to market a combined treatment opportunity that is attractive to clinicians. Under established reimbursement programs, clinics and treatment facilities will benefit from already established reimbursement rates between $320 and $550 per treatment. This removes uncertainty about the revenue-generating impact that these products can deliver to treatment professionals. And with the units put into the market through leasing arrangements, the net-profit to providers can be lucrative on a cost of services basis. For providers, they establish a new revenue stream. And for SANUWAVE, they will benefit by selling the components necessary for treatment. Their revenue, too, remains consistent using the razor-razorblade sales model along with long-term leasing programs.
2020 Is The Transformation of SANUWAVE
Although gaining a comprehensive wound care portfolio is reason enough to see the value in SANUWAVE, the completion of the acquisition helps the company to leverage the important technological developments made by both companies over the past few years. For SANUWAVE, their reward is to offer physicians and patients an end-to-end wound care treatment platform. Maybe even the best treatment option available.
The known variable, and perhaps the most important, is that SANUWAVE now owns and markets an asset that generated $15 million in sales last year. Thus, speculation about how well it can do in tandem with an aggressive sales force that can offer a better-combined treatment option is decidedly bullish. And with a large customer count with very few overlapping relationships, SANUWAVE management is in an optimal position to spearhead company growth.
Although the deal was announced just days ago and investors are still digesting a large amount of information, a promising assumption can be made. SANUWAVE made an excellent deal for a product that can contribute millions in revenue, can help to accelerate positive earnings, and potentially position the company as the best-in-class provider for wound-care treatment to a large number of patients. At the end of the day, this micro-cap stock may be ready to run based on performance, not hype.
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