Investors may have been provided a unique opportunity to take advantage of an under-the-radar value opportunity. SANUWAVE’s (OTCMKTS: SNWV) planned acquisition of Celularity’s UltraMIST® Ultrasound Healing Therapy has gone relatively unnoticed by investors despite the agreement being a potentially transformative event to the company. The deal immediately brings revenue-generating assets to SANUWAVE, including more than 900 customer accounts, a trained sales force that creates immediate opportunities to expand its own dermaPACE® device, and exclusive partnership rights for Celularity’s wound care biologic products. The deal is expected to close in less than three weeks and can position SANUWAVE as a leading provider of advanced wound care solutions that improve clinical outcomes across the continuum of care. In a recent podcast with company CEO Kevin Richardson, the deal was described as akin to a minnow swallowing a whale. Here’s why:
The deal will have an immediate impact on SANUWAVE. Specifically, investors can expect that SANUWAVE will be substantially stronger in revenue growth, product placement, and cash flow generation almost immediately after the deal closes. Also, it uniquely positions SANUWAVE to leverage a combined sales force and enhance cross-selling opportunities to capture revenue across the entire advanced wound care patient pathway from the initial stages of treatment to wound closure.
From a valuation perspective, this planned deal, to this point, appears to be an under-the-radar opportunity. On its own, SANUWAVE Health, Inc. is a leading shockwave technology company focused on an estimated $10.8 billion market opportunity by developing and commercializing proprietary regenerative technology to treat tissue, musculoskeletal, and vascular structures. But, when adding in the assets from the Celularity deal, the company is substantially stronger by leveraging the strength of its own FDA cleared technology, dermaPACE®.
The combined assets may position SANUWAVE as the only company that can successfully treat patients in the chronic wound-care market from start to finish. At the same time, it creates an effective all-in-one solution for patients while maximizing potential near-term revenues.
The dermaPACE® Difference
The unique system driving SANUWAVE’s recent growth is dermaPACE®, a non-invasive device that can assist in the repair and regeneration of skin, musculoskeletal tissue, and vascular structures. With treatment sessions lasting less than 7 minutes, the device utilizes the company’s proprietary high-energy focused shockwave technology that promotes quick and effective healing by activating biologic signaling and angiogenic responses. Originally designed to treat chronic wounds, numerous successful clinical studies have granted the system FDA approval to treat diabetic foot ulcers. The device is also being considered for additional applications internationally, including post-operative wound healing defects, deep-partial thickness burns, traumatic wounds, decubitus ulcers, arterial leg ulcers, and venous leg ulcers.
The many advantages of the dermaPACE® system have allowed SANUWAVE to grow their existing relationships with leading medical facilities. The system is now certified for use to over 300 clinicians across the world. Compared to the current standard of care for ailments such as diabetic foot ulcers and other chronic wounds, dermaPACE® is significantly more tolerable, effective, and safe to use with other medications or treatments.
SANUWAVE is poised to complete a milestone development in the organization’s history through the recent acquisition of cell therapeutics company Celularity’s UltraMIST®, a low frequency, non-contact ultrasound energy device that works to promote wound cleansing and healing. The transaction also will include exclusive licensing of Celularity’s wound care biologic products, Biovance® and Interyl®, which are both excellent additions to the scope of dermaPACE® and SANUWAVE’s addressable market. UltraMIST® is already in frequent use in over 900 wound care clinics in the US. Not only does this provide additional relationship connections for SANUWAVE’s products, but the disposable applicators for the device will create a steady stream of reoccurring revenue.
The Accretive Value Behind Celularity’s UltraMIST®
With the addition of UltraMIST®, SANUWAVE is in a better position than ever to capitalize on its momentum. Along with UltraMIST® and its other wound care products, Celularity also brings a 25-person team of wound-care professionals and customer base of nearly 900 registered accounts. Importantly, the effective combination of UltraMIST® with SANUWAVE’s dermaPACE® has a very high potential to provide improved patient outcomes over the current standard of care.
Additionally, the products that will be gained from the Celularity transaction will grant SANUWAVE the ability to provide a comprehensive healing platform that can address the entirety of the healing process. Not only does this help to maximize revenues for the company, but it also offers clinicians and patients a proven suite of treatments that have been carefully designed to safely work with each other from initial wound discovery to closure.
The main product driving the value behind the deal is Celularity’s UltraMIST® therapeutic device. Already approved for use in the US for all acute and chronic wound indications, the system uses a low frequency, non-contact ultrasound energy that works to remove bacteria and inflammatory cells and promote healing.
The technology is easy to administer in any type of clinical environment and is especially unique because, as the device never touches the wound surface, the treatment is entirely pain-free.
Also, patients who are already suffering from painful chronic ailments would no longer need to dread visiting the clinic. Considering the device is already FDA approved for diabetic foot ulcers, pressure ulcers, venous leg ulcers, deep tissue pressure injuries, and surgical wounds, there is a substantial addressable market that would likely appreciate the alternative to currently available treatment options.
How Celularity’s Wound Care Biologics Will Bolster SANUWAVE’s Potential
Along with UltraMIST®, Celularity is also bringing two additional products to the SANUWAVE arsenal that will help to further solidify the company’s potential to provide an all-in-one wound care platform.
Biovance® is a flexible human amniotic membrane allograft that adheres to a wound and provides a natural foundation that can jumpstart wound healing. The technology makes use of cells and proteins that work to create a functional extracellular matrix that can significantly expedite tissue regeneration. The flexible adaptability of Biovance® makes the treatment easy to use with wounds of any size or type. Also, with a room-temperature shelf life of five years, the technology could provide physicians with a practical, effective, and preferable treatment.
Able to work in tandem with Biovance®, UltraMIST®, and dermaPACE®, Celularity’s Interfyl® is another wound care biologic the company is bringing to SANUWAVE. Interfyl® is designed to replace damaged soft tissue and assist the healing of insufficiently developed connective tissues. The product is available in both liquid and particulate forms.
Now working with Celularity and gaining access to Interfyl®, Biovance®, and UltraMIST®, SANUWAVE is in a better position than ever to capitalize on its momentum in providing one of the most effective and all-inclusive wound care solutions and take share of the global advanced wound care market.
Those market share increases may come from companies like 3M Company (NYSE: MMM) and Johnson & Johnson (NYSE: JNJ), who primarily treat symptoms or provide antiseptic dressings to cover the wounds. SANUWAVE is taking the opportunity further with complementary energy transfer devices that are proven to be effective and safe.
The Unique Opportunity of a Comprehensive Solution
The main takeaway from the agreement between SANUWAVE and Celularity is that SANUWAVE is now working a portfolio that can effectively address the entirety of the wound healing process. This is an enviable position within the wound care industry as few, if any, competitors can say they can provide the same comprehensive, start-to-finish treatment as SANUWAVE. Through the compatible and complimentary use of dermaPACE®, UltraMIST®, Biovance®, and Interfyl®, SANUWAVE can provide an effective treatment from wound discovery to closure. And, complementary nature aside, each of these treatments has clinically demonstrated improved responses over the current standard of care.
For example, clinical trials have shown that dermaPACE® alone reduces the potential of advanced diabetic foot ulcers requiring amputation by over 2.5x when compared to a control group. With this treatment now able to work in combination with the wound care solutions brought by Celularity, this rate could be decreased even further while providing patients with a relatively painless treatment. Additional clinical trials analyzing the effectiveness of these combined treatments are being planned, and the integration of assets will not only work to help support cross-sales of dermaPACE® into existing UltraMIST® relationships but is very likely to demonstrate an improved patient response rate compared to existing treatments.
The combination of SANUWAVE and Celularity’s wound-care assets not only provide an effective treatment to patients, but will assist in the future growth and scaling of the company as they expand the availability and treatable indications of their portfolio. SANUWAVE has noted that the additional cash-flow from the UltraMIST® therapy will help power the commercialization of dermaPACE®. Importantly, the company also highlighted that the need for additional capital expenditures is extremely low, with a free cash flow conversion of 95-98% from each new placement. This limited overhead will prove an instrumental advantage for SANUWAVE in the planned expansion of its platform to one day becoming the comprehensive standard of care for nearly any wound indication.
Two Great Products-One Transformative Event
SANUWAVE’s benefits from the Celularity deal may ignite a transformative event for the company as its infrastructure can be immediately expanded while offering considerable potential for further near-term growth. The complementary nature of the two portfolios will widely broaden SANUWAVE’s treatable market and grant the company access to the over 900 clinicians using UltraMIST® and Celularity’s biologic products. Notably, the combined portfolio of products requires no technological changes or updates to work with one another. And, with very little need for additional capital expenditure, the focus can be purely set on market expansion.
That can be a game-changer for SANUWAVE and the wound-care market.
The back half of 2020 sets the stage for accretive growth that can expose a market-cap substantially flawed to the low side. Combining the assets from its purchase to its already impressive product portfolio, SANUWAVE may be in the best operating position in its history. It just may take time for others to notice. But, that is what creates opportunity… and at current trading levels, the attraction is compelling.
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