SWAV seeks to establish a new standard of medical treatment through its differentiated and proprietary intravascular lithotripsy (IVL) system, which utilizes sonic pressure waves to treat calcified plaque that cause heart disease in a minimally invasive, safe and effective manner.
This type of treatment is superior to current and longstanding technologies like angioplasty and bare medical stents, which do not reduce plaque, but use balloons to expand the diseased artery. While effective, these treatments are not optimum because the arteries sometimes fail to expand when the heart is placed under certain pressures.
The company’s products consist of a small portable generator, a connector cable and a catheter used to remove calcified plaque. SWAV’s number one product, which accounted for $47.2 million of its revenue in the third quarter, is the Shockwave C2 which was just approved in the U.S. in February for treatment of coronary artery disease (CAD).
The company also has products to treat peripheral artery disease (PAD). Shockwave M5 is used in the treatment of above the knee PAD and was approved in July 2018. The Shockwave S4 IVL catheter is used in the treatment of below the knee PAD and was approved for use in August 2019.
The effectiveness of these products is backed by meaningful clinical data. There have been 4 completed studies in CAD studying 1,859 severely calcified patients, and 6 completed studies in PAD involving 925 patients with complicated cases. These studies also showed IVL to have a strong safety profile, and superior results in treating calcified lesions versus angioplasty.
The regulatory approval and subsequent commercial acceptance of the company’s products has allowed SWAV to realize significant growth. From total sales for only $1.7 million in 2017, the company is guiding to total sales of $227 million to $228 million. Management believes there is an opportunity for significant additional growth, given the company’s total addressable market of $8.5 billion.
In addition to continued domestic market acceptance, growth will come from regulatory approval in other countries, with Japan next year expected to approve Shockwave C2. This will help the company achieve expected revenue growth of 68% next year, with the company realizing profitability for the first time, earning at least $1.20 a share with a chance for significant upside.
Despite raising revenues guidance for the year, the shares have come under pressure since releasing third quarter earnings. The stock had gotten a little ahead of itself at $250, and the stock also weakened due to a general sell-off in small cap stocks since early November.
While there could be some further volatility to the shares, current levels represent a good entry price. The company has a proven and superior technology, with the potential to grow dramatically given extensive market share up for grabs. SWAV is a buy under $200. My target is $250.