Dermatological Device Company to Acquire Laser System Firm

Source: Streetwise Reports   08/24/2021

An H.C. Wainwright report noted that “this deal is an opportunity for STRATA Skin Sciences to substantially increase its long-term, recurring revenue base.”

In an Aug. 23 research note, H.C. Wainwright & Co. analyst Joseph Pantginis reported STRATA Skin Sciences Inc.’s (SSKN:NASDAQ) recently announced acquisition and its Q2/21 financial results. STRATA is a dermatological device firm.

Regarding the acquisition, Pantginis relayed, STRATA entered an agreement to buy Ra Medical Systems for $3.7 million in cash up front. Ra Medical develops and produces excimer laser systems for the treatment of dermatological and vascular diseases.

Through the transaction, STRATA will gain a laser that complements its laser portfolio, specifically a 308 nanometer ultraviolet B excimer Pharos, used to treat chronic skin diseases, such as psoriasis, vitiligo, and atopic dermatitis. STRATA will also garner access to Ra Medical’s customer base of about 400 dermatology practices, to which it will be able to market its existing products and services.

“We and management believe this deal is an opportunity for STRATA to substantially increase its long-term recurring revenue base in a way that is synergistic with the company’s current clinical and commercial strategy, and positions the company as the leader in laser-based therapeutics for chronic skin conditions,” Pantginis wrote.

As for STRATA’s Q2/21 performance financially, Pantginis noted, the company generated $7.4 million ($7.4M) in revenue, up 83% year over year and up 28% quarter over quarter. Revenue exceeded H.C. Wainwright’s and consensus’ forecasts of $6.28M and $6.67M, respectively. Revenue encompasses monies collected on 889 installed XTRAC devices, which compares to 18 devices at the end of Q1/21.

STRATA’s earnings per share in Q2/21 were ($0.03), better than H.C. Wainwright’s estimate of ($0.07) and consensus’ projected ($0.04).

At the end of Q2/21, STRATA had $17M in cash.

The medical device company has been and continues working to increase its revenue to pre-COVID levels by year-end 2021. The strategy for doing so has five components. They are to maintain investment in overall direct-to-consumer advertising and resources, to refocus on high-volume customers and accounts, and to provide further support, if possible, to partners not generating revenue. The other methods are to better define the plan for marketing to dermatologists, emphasizing what differentiates XTRAC and how it benefits patients and clinics, and to relaunch efforts to treat vitiligo to boost XTRAC’s profile and patient population.

Already STRATA is seeing more treatments with XTRAC being performed in the clinic compared to those in 2019. This is attributed to the company’s social media presence, educating physicians via webinars, and other vehicles.

Pantginis noted good news for STRATA on the reimbursement front. Cigna expanded its coverage to include excimer laser treatment of vitiligo.

H.C. Wainwright has a Buy rating and a $3 per share target price on STRATA, the stock of which is currently trading at about $1.42 per share.

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