Deep Sail Capital Partners LP on Sanuwave Health, Inc.
Thesis
Deep Sail's Sanuwave holding sold off after the U.S. Centers for Medicare and Medicaid Services proposed reducing reimbursement for UltraMist, its main product. The manager believes the share price already discounts the proposed rate reduction taking effect without changes. The fund expects Sanuwave to argue successfully that the reduction is too severe, potentially producing a less punitive final reimbursement decision. A better-than-feared CMS ruling in November could therefore prompt a reassessment of the shares.
“I believe the current stock price assumes the proposed cuts are finalized without adjustment”
Key risks
- The proposed CMS reimbursement cut for UltraMist could be finalized without moderation.
- Sanuwave has already suffered from earlier reductions in reimbursement for skin substitutes.
- Dependence on regulatory reimbursement creates uncertainty around the economics of its core product.