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SANUWAVE (OTCQB:SNWV) is a public biotech company from Alpharetta, Georgia that has a pending FDA approval. Their story is starting to become more known to both the medical and investment communities. As some of you may know, I have been following the company because in the past, I have also covered some of their competitors and am particularly familiar with the segment of the medical device space that deals with wound care.

SANUWAVE’s proprietary Pulsed Acoustic Cellular Expression (PACE™) technology delivers high energy, acoustic shockwaves to activate biologic signaling at the cellular level restoring normal healing processes and regeneration of bone and tissue.

Source: 2011 Rodman&Renshaw Healthcare Conference Presentation

Last December, SANUWAVE released top-line data from its pivotal trial investigating the use of dermaPACE® for the treatment of diabetic foot ulcers (DFUs). The initial results clearly show that the dermaPACE treatment heals diabetic foot ulcers.

206 patients participated in a randomized, double-blind, parallel-group, sham-controlled, multi-center, 26 week trial that was intended to quantify the effectiveness of four 20 minute, non-invasive procedures with dermaPACE. The double-blind (patient and principal investigator) format served to eliminate human bias. The study did not allow the surgical closure of the wounds so that the trial will provide a clear view of the epithelialization process attributed solely to the dermaPACE treatment. Surgical closure of wounds is standard procedure for most treatments when the wounds reach about 90% closure to assist the healing process.

Source: 2011 Rodman&Renshaw Healthcare Conference Presentation

The primary endpoint of the trial was 100% wound closure. This endpoint was not achieved by a statistically significant margin versus the sham group in the first twelve weeks; however, the primary endpoint was met at the 20-week mark (p=0.018). What is of importance is the treatment group showed a positive trend to the primary endpoint throughout the 12 weeks period. This trend was evidenced by the average percent reduction of the target DFU in the patient group treated with dermaPACE at 12 weeks of 56%, compared to 7% in the sham group. It should also be noted that the treated group began with a wound area 58% larger than the sham group.

The secondary endpoint of wound closure of less than or equal to 90% reached statistical significance (p=0.0161) at the twelve-week mark. This is clinically highly significant since treating physicians will typically close the wound surgically, with a stitch normally, at this point to assist the in the healing of the wound. 48% of the treated patients achieved wound healing of less than or equal to 90% versus 31% of the sham group in the 12 week period. Dr. Robert Galiano, a principal investigator in the dermaPACE study and an Assistant Professor, Division of Plastic Surgery, Dept. of Surgery at the Northwestern University Feinberg School of Medicine, said, “The overwhelming clinical utility demonstrated in this study means I can expect that at least half of my patients over a 12 week period will be either fully healed or less than or equal to 90% healed. I consider this to be clinically relevant wound closure since most will continue to full closure with basic dressing and minimal intervention."

Source: 2011 Rodman&Renshaw Healthcare Conference Presentation

Also mentioned in the 12 week study was the fact that there were no serious and related adverse events associated with the dermaPACE® treatment and more importantly only 4.5% in the treated group compared to 20% of the sham group had a recurrence of the DFUs. This demonstrates that wounds stay healed with the dermaPACE® treatment.

On July 12th, 2011 SANUWAVE released results of its 24 week look-back on the patient population of the study. The Company found that it reached statistical significance (p=0.047) of its primary endpoint of 100% wound closure at the 20-week mark. At 12 weeks 22 of 107 (21%) of the treated group had 100% closure. At 20 weeks the treated group progressed to 39 of 107 (36%) had 100% wound closure. This compares to the sham group results of 15 of 99 (15%) at 12 weeks and 23 of 99 (23%) at 20 weeks. This shows the dermaPACE® treatment has long-term healing ability with just one treatment regimen. The recurrence rate at 24 weeks also remained at 4.5% for the patient population that achieved complete closure at 12 weeks further quantifying the durability of the treatment.

Source: 2011 Rodman&Renshaw Healthcare Conference Presentation

The important question is, where does this clinical data leave SANUWAVE in their approval process with the FDA?

SANUWAVE announced they submitted the final module of their FDA application on July 7, 2011. The data from both the 12 week and 24 week releases demonstrate that the dermaPACE treatment works significantly better than ‘best of care’ (treatment provided the sham group) in healing DFUs. The results also show that the treatment is durable with a very low recurrence rate. Other available and approved treatments are significantly more expensive than dermaPACE and have higher recurrence rates than dermaPACE. While it is harder to read the FDA these days, the available data indicates the SANUWAVE has a high probability that dermaPACE will receive its PMA approval from the FDA in a timely manner and become a first line treatment for patients with diabetic foot ulcers.

Source: 2011 Rodman&Renshaw Healthcare Conference Presentation

With the promise and pending FDA approval of the dermaPACE treatment for DFUs, SANUWAVE’s stock look inexpensive with a market cap of just over $60 million. About 27 million Americans have diabetes and 2 million new cases are diagnosed each year, approximately 25% of these patients will develop DFU’s. This means there are about 3 million cases of diabetic foot ulcers each year. SANUWAVE estimates the cost of their treatment will be $3,500 leaving an available market size of around $10.5 billion for SANUWAVE. If SANUWAVE captures just 10% of the US market the annual revenues for the DFU treatments would be over $100 million annually.

Also, dermaPACE is currently approved for use in Europe, which has a similar market size to the US. Considering the other areas where SANUWAVE may use their PACE technology, such as pre and post-operation incision care, burn and fracture healing, to name a few, SANUWAVE has multiple billion dollar markets that they can and will participate in over the coming years.

Considering the scope of the markets that SANUWAVE can access with their technology, the valuation is significantly under-valued and underappreciated by the market. In fact, the Wm%R indicator shows that SNWV stock is currently oversold, due to what looks like someone attempting to short the stock ahead of some key FDA feedback. We believe firmly that those shorts will have to cover and that will only add to the momentum and a stock price that should be significantly higher in the short term. As we are told, key members of SANUWAVE's management team are about to embark on a road show to tell their story to institutional investors and funds. They know that until now, their story has not been widely publicized and that recent market conditions have put at risk some plans to uplist the company to a bigger exchange.

That bodes well for investors who are considering taking a position in the company ahead of the run up that is seen prior to FDA decisions. Given what they have been able to accomplish with this technology thus far, SANUWAVE and the management team have their best days and years ahead of them.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Odds Look Good For Sanuwave's Pending FDA Decision