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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Disclosures from H. C. Wainwright, STRATA Skin Sciences, August 23, 2021
Investment Banking Services include, but are not limited to, acting as a manager/co-manager in the underwriting or placement of securities, acting as financial advisor, and/or providing corporate finance or capital markets-related services to a company or one of its affiliates or subsidiaries within the past 12 months.
I, Joseph Pantginis, Ph.D. and Emanuela Branchetti, Ph.D., certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.
None of the research analysts or the research analyst's household has a financial interest in the securities of STRATA Skin Sciences (including, without limitation, any option, right, warrant, future, long or short position).
As of July 31, 2021 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of STRATA Skin Sciences.
Neither the research analyst nor the Firm has any material conflict of interest in of which the research analyst knows or has reason to know at the time of publication of this research report.
The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.
The firm or its affiliates received compensation from STRATA Skin Sciences for non-investment banking services in the previous 12 months.
The Firm or its affiliates did not receive compensation from STRATA Skin Sciences for investment banking services within twelve months before, but will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
The Firm does not make a market in STRATA Skin Sciences as of the date of this research report.
H.C. Wainwright & Co., LLC and its affiliates, officers, directors, and employees, excluding its analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives (including options and warrants) thereof of covered companies referred to in this research report.
