Thursday, May 16, 2013

•Price Consolidation Positions SanuWave Health (OTC: SNWV) For Catalyst-Based Rebound

Shares of SanuWave Health (OTCBB: SNWV) swiftly achieved a near double in price earlier this year as investor anticipation grew in regards to the initiation of a new Phase III trial testing the company's dermaPACE shockwave therapy in the treatment of diabetic foot ulcers.  A new trial design and an agreement with the FDA to utilize some previous Phase III data added to the enthusiasm and hinted that SNWV shares had the potential to approach price levels seen during the last Phase III trial.  That trial, as previously discussed, ended without the endpoint being met, although the results were convincing enough that success could be easily achieved after the new trial designs were implemented.

Since the quick spike in price, however, SanuWave shares have retreated again after many of the short-term minded day, swing and momentum likely took some profits and moved on in search of another quick winner - although you can never blame anyone for taking some profit from the table - but the result of such action could potentially be another buying opportunity for investors who may have missed out on the last quick run.  Given the encouraging prospects for the upcoming trial and the numerous catalysts that will be slated to unfold - in terms of interim and actual results - once the trial gains momentum, SanuWave shares could quickly rebound once the current phase of consolidation is complete.

On Monday of this week the company announced that it had concluded an "investigator meeting" with 75 representatives from 18 clinical trial sites.  During the meeting, the 75 reps were provided training on the prospective use of the dermaPACE therapy during the trial, while also emphasizing the newly-implemented design protocol that is expected to maximize patient enrollment and follow-up.  Unforeseen variables surrounding patient follow-up during the first Phase III go-round were assessed to have altered the end results, so company officials are taking out all the stops to ensure a smooth and more-regulated operation this time.

With the investigator meeting wrapped up and the clinical sites prepared to start enrolling patients, SnauWave remains on track to get this trial underway within the current quarter.  The latest retreat in share price, as mentioned above, may provide a nice period of consolidation for those looking to play the future catalysts and milestones - and for those looking to accumulate a position with eyes towards the end game.

It's the potential of that end game that could attract the longer-term speculative investors.  While SanuWave eventually plans to target a broad portion of the chronic wound market, its first US-based indication of diabetic foot ulcers provides the company a booming market into which to enter.  Even gaining just a small foothold could return significant share price and market cap gains, given the alarming rate at which cases of diabetes are growing.

Over Twenty-three million people in the United States have been diagnosed with diabetes and it is speculated that millions more have it, but are yet-to-be diagnosed. It is also assessed that fifty seven million people in the US are pre-diabetic, according to statistics posted by the American Diabetes Association. Globally, the diagnosed numbers are much more severe and it's also estimated that a higher percentage of cases go undiagnosed. The burdens placed on the healthcare industry as a result of this growth is obvious.
In relation to SanuWave's initial application of dermaPACE in America, fifteen percent of diabetics will acquire "non-healing" ulcers in their lifetime, including the indication of diabetic foot ulcers. According to the above-linked statistics, this market is quickly approaching two billion dollars annually, which - as mentioned above - positions this company nicely to take advantage of the rapidly-growing numbers.

SanuWave also recently received a patent covering the use of its shockwave therapy for purposes of blood purification.  Although treatment of this indication is still in the very early stages of development, the patent enhances the future prospects of the company and also adds inherent value to the technology.

An investment here is not without risk - such is the case for any still-speculative investment - but the risk/reward profile continues to look more in favor of the potential rewards with each downtick in the share price.  Shares traded significantly higher during the last Phase III and any hints at success this time could quickly rebound shares to those levels.  The technology was already granted approval in Europe and acceptance is likely to grow if the shockwave therapy - which encompasses sending pulsed 'shockwaves' into damaged tissue to spark the regeneration of cells - continues to perform as advertised. 

SNWV is already a proven winner of the early portion of 2013 thus far, but the latest share price dip has positioned the company to potentially repeat its early successes.  Volume has tapered off a bit, too, an indication that the traders may be out for the time being, but with trial catalysts still pending, volume could come back in a hurry on the right news and spark another rally.

Still a story to watch.

Disclosure:  Long SNWV.

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