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SNWV: Record Revenue As International Strategy Builds Momentum

02/01/2017
By Brian Marckx, CFA

OBB:SNWV

Q4 Revenue Preannouncement:  Record Revenue As International Strategy Builds Momentum…

In December SANUWAVE (OBB:SNWV) provided a fourth quarter update which included an expectation that Q4 revenue would come in at a relatively strong $450k - $650k, bolstered by a more than doubling of units shipped during 2016 as compared to the prior year.  Then last week (1/26) the company narrowed that Q4 revenue guidance to $640k - $650k, which is not only well ahead of our $425k estimate but also an all-time record.  Full-year 2016 revenue, of approximately $1.4M will also be a new record and more than 40% higher than the prior best of $966k (2015).

As we have noted in recent updates, management has been aggressive in implementing a strategy aimed at reigniting more significant growth of their international business as they continue to navigate the FDA regulatory pathway seeking U.S. marketing clearance of their flagship dermaPACE device.  And while their OUS efforts had shown promise as reflected by the 23% yoy revenue growth through the first nine months of 2016, the Q4 number may indicate the bounty of their newly implemented international strategy is about to grow much larger and faster.

As a reminder, the company recently adopted a more interactive role with their distribution partners in order to better understand and respond to the dynamics and intricacies of each of their OUS markets with the ultimate goal of growing international revenue.  Earlier in 2016 management visited their distribution partners in Asia, the Middle East and several countries in Europe and came away with a better understanding of how to meet the needs of their distributors.  Included in the take-aways was certain distributor contract modifications and lowering pricing, the latter facilitated by updates to their supplier arrangements.

Indications are that this momentum is carrying into 2017, with SNWV noting in last week’s press release that they entered the current year with a significant order backlog.  Additional growth is expected to come from entry into other international territories as well as from relaunch in others.

Another, more recent, component of their international marketing strategy is to build on the clinical evidence supporting the efficacy and utility of dermaPACE.  In that regard the company has partnered with Ortho-Medico, their distribution partner for the Benelux region, in sponsoring a clinical trial evaluating dermaPACE in the treatment of diabetic foot ulcers in the home-care setting.  The trial, expected to commence in early 2017, will be conducted by the Free University of Brussels and UZ Brussel (University Hospital) and will include 100 DFU patients who will be randomized to either dermaPACE or standard-of-care.

As all patients will be treated in-home (i.e. outside the clinic/hospital), we believe results of the study are expected to help broaden the potential international customer base to users such as home-health professionals and related organizations.  As DFU patients often have significant mobility limitations and challenges, trips to the hospital for treatment can present substantial hardship.  As such, we think home-health could be a particularly attractive segment for dermaPACE and one that results of this study, assuming positive, could help SNWV to exploit.

The company has also indicated that they have other clinical and case studies that they also expect to help support their renewed international focus and strategy.  We look forward to hearing more about these studies on future conference calls.

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