AbbVie (NYSE: ABBV) may have ignited a consolidation war in the shockwave therapy sector after announcing its planned acquisition of Soliton (NASDAQ: SOLY) for $550 million. The news sent class-action lawyers into a frenzy, seeking clients who feel the offer substantially undervalues the SOLY assets. But for SANUWAVE Health, Inc. (OTC: SNWV) and its shareholders, learning the motive and calculus behind the bid could generate a tsunami of interest in what could become a race to consolidate the sector.
The excellent news for SNWV is that on a comparative basis, it could justify a valuation of over a billion dollars, or 1280% higher than its current share price. Don't be shocked by the presumptive price tag. It could be conservative.
Remember, Big Pharma doesn't sit idle when multi-billion-dollar markets are at stake. Instead, expect them to jump into action to either protect or purchase assets needed to stay relevant. And with ABBV validating the shockwave therapy market, it likely inspired others to find ways of staying competitive in the emerging shockwave therapy sector. In fact, with ABBV's secret out, expect deals to ramp during the remainder of 2021.
By the way, no one said SNWV is up for sale. However, it's logical to assume that with its two shockwave therapy devices well-positioned to take business from competitors in the diabetic wound care and skincare markets, there will be interest. And with market share equating to shelf space, don't think Big Pharma isn't paying attention. Even without a buyout, SNWV shares can surge from partnerships and licensing agreements. Thus, they are in an enviable position in any scenario.
Better still, they can maximize all its opportunities and simply go it alone.
Substantial SANUWAVE Asset Portfolio
Indeed, with ABBV spending half a billion dollars purchasing what appears to be a single non-revenue generating shockwave asset from Soliton, SNWV should be worth considerably more by having TWO FDA-cleared shockwave technology devices already in the market. Its case gets better.
Not only are its devices already commercialized, but they drove record-setting revenue in its latest Q-report, earned an additional 11 patents in the past fifteen months, and extended its reach by developing several international markets. Considering those advantages compared to a non-revenue generating SOLY device, SANUWAVE's value could soar once investors recognize that while the ABBV deal might be priced right for Soliton, SANUWAVE can be worth substantially more.
Indeed, SNWV stock has been in a holding pattern ahead of what could be another set of record-setting revenues when its latest quarterly and year-end reports get filed. And despite the churning in price, SNWV has been able to drop hints about the pace of growth. And it's all good.
In fact, even without the numbers, SNWV is providing compelling reasons to consider owning the stock at current levels. Their confidence is echoed by analysts at Lake Street Capital, whose models call for share prices to move substantially higher by the end of 2021. Their lofty valuations are based on expectations for accelerated revenue growth, increased market penetration for UltraMIST and dermaPACE, and expansion into additional international markets. Thus, the imminent filings could prove Lake Street as prophetic, and at the same time, show SNWV to be in is in the best operating position in history.
Undoubtedly, the bullish sentiment is well-placed. Other than a late filing, it's hard to argue against SANUWAVE being a compelling investment proposition. And ABBV helped make the case. Here's why:
Shockwave Technology Earns $550 Million Spotlight
For AbbVie's Allergan Aesthetics, the prize from its acquisition of SOLY is its Rapid Acoustic Pulse device. Interestingly, ABBV is paying a substantial amount of money for a device that was only recently approved by the FDA for use in body contouring and tattoo ink removal.
Don't misunderstand; its RAP device might be a great one, but no one truly knows that answer since it has never generated revenues. But, assuming it's not good would show ABBV naïve about the markets; that's a mistake. In fact, if ABBV is willing to pay $550 million for a device that helps fade unwanted tattoo ink and reduce the appearance of cellulite, they likely expect multi-billion dollar returns in the long term. And that's for two known indications.
Utilizing shockwave therapy at a much higher level, SANUWAVE's devices target a massive diabetic wound-care market by treating chronic foot, venous leg, and pressure ulcer markets. And while those indications bring a more than $45 billion market into play, SNWV recently announced an expansion into the skincare market, with UltraMIST now FDA-cleared to treat additional indications, including facials and other skin-related treatments.
Thus, while Soliton's asset targets the relatively narrow tattoo ink removal and cellulite appearance markets, UltraMIST is extending its reach by tapping into a substantial mainstream skin-treatment market that creates a new and significant near and long-term revenue stream. Better still, UltraMIST is seizing upon a new market that benefits from massive global demand and one that won't have diminishing potential over time. Best of all, with a substantial sales force already in the market, investors won't need to wait long for SNWV to maximize its opportunities and deliver potentially exponential growth in the back half of this year.
Moreover, beyond the skincare applications, UltraMIST and dermaPACE are combing to deliver a one-two punch in the diabetes sector with a combination therapy that provides treatment across the entire continuum of care. Very few, if any, other shockwave therapeutics companies can make the same claim.
A Billion-Dollar Portfolio?
Investors should be happy for Soliton, and its investors, for inking a $550 million deal. Now, with that deal done, investors should be looking for the next logical move to further consolidate or partner in the sector. And SNWV could be the shining star, especially with its assets already generating record revenues and expected to penetrate multiple US and international markets this year.
SANUWAVE's devices are also unique. They use PACE® technology, a TRUE focused shockwave treatment generating therapeutic shockwaves from the source generator to the targeted area for treatment. Its dermaPACE® System is used to repair and regenerate skin, musculoskeletal tissue, and vascular structures. It utilizes a proprietary form of extracorporeal focused shockwave technology to treat chronic wounds, is non-invasive and painless. Best of all, a typical treatment lasts only 5-7 minutes and can be performed using standard wound care procedures at a physician's office. From a therapeutic perspective, dermaPACE stimulates local wound and periwound endogenously and restarts the body's natural wound healing process and can complement Standard of Care or be used independently.
Its other device, UltraMIST, uses a low-frequency, non-contact, and painless ultrasound delivered through a fluid mist that utilizes ultrasound energy to promote wound healing through tissue stimulation. In parallel, it enhances wound cleansing and maintenance debridement. Best of all, from a treatment perspective, UltraMIST never touches the wound surface, is pain-free, and is self-contained, making it easy to set up, operate and store. The device is also portable, using only a generator, treatment wand, and disposable applicator. Notably, more than 65 US and international patents protect its approved applications and cover method of use, device construction, and specific indications related to advanced wound care.
As noted, before entering the skincare market, the two devices target a more than $45 billion diabetic wound care market. But, with new skincare indications added to UltraMIST, the total market potential could more than triple. Grandview Research, in fact, pegged that market at $94.2 billion back in 2018. It's bigger now.
Best of all, with filings imminent, investors won't wait long to get an update on how the company is planning to capitalize on its global opportunities. And a cloud of uncertainty will likely evaporate at the same time.
Value Could Soar After Filings
As noted, SNWV's prior quarter and year-end results are imminent. And while they will likely deliver another set of consecutive record results, investors and analysts will be paying particular attention to management commentary. Rightfully so.
AbbVie made a statement last week and set the market high for companies in the shockwave sector. Moreover, they were attracted to a single, non-revenue generating asset. Thus, investors should be anxious to hear SNWV's CEO discuss the advantages that his TWO products have in comparison. Those comments could ignite a rally of massive proportions, especially if supported by record-setting quarterly performances.
Undoubtedly, the coming days and weeks could be a compelling period of growth for SNWV stock. And with the cloud of uncertainty lifted after its filings, its operational performance and guidance should again earn investors focus.
Further, with proof that companies are willing to pay a massive price for shockwave technology, expect a compliant SNWV share price to surge. And as one of only a few shockwave therapy companies in the sector, investors could be better positioned than ever to earn exponential returns from SNWV at current share price levels.
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