Laser Company Powers Up For Wall Street Debut
investors.com
INVESTOR'S BUSINESS DAILY
Posted 11/28/2005
Cynosure
Westford, Mass.
978-256-4200
cynosurelaser.com
Lead underwriters:
Citigroup and UBS Investment Bank
Offering price: $12-$14
Expected date: week of Dec. 5
Ticker: CYNO
THE BUZZ
Those lasers that zap wrinkles, hair and skin lesions are doing more than just make you look good. They're also beautifying a lot of investors' bank accounts.
Cutera, (CUTR) which went public at 14 a year ago March, now trades near 40. Syneron Medical (ELOS) hit the market five months later at 12 and now hovers at the same level.
The older Palomar Medical Technologies (PMTI) trades near 34 after selling for pocket change just three years ago.
Now comes Cynosure.
"It's in a very interesting peer group," said Renaissance Capital analyst Melanie Hase.
The bad news about all these peers is that, well, there are so many of them. Cynosure is nursing its growth in a market that includes some bigger, older players. And the company itself is coming off a difficult restructuring and changes in management.
Still, Cynosure did ding a rival in one way: It lured Cutera co-founder Michael Davin to be its chief executive. Both Cynosure and its potential investors probably hope he's brought some of the hoodoo that made Cutera a top medical stock.
So far, so good. Last year, Cynosure posted its first profit.
THE COMPANY
Cynosure was founded in 1991. Its flagship brand names include Apogee, Cynergy, PhotoSilk and TriActive Laser Dermology.
The company says it's one of the few laser makers using Alexandrite and pulse-dye technology, which is especially suited to some procedures and skin types.
In 2002, as Cynosure floundered, Italian firm El.En. bought a majority of the stock. The next year came a full-scale reorganization that included recruiting a new management team. After the offering, El.En. will still own 38% of shares.
Cynosure has sold about 4,700 of its systems. It has direct sales forces in North America, Japan, China and four European countries, and distributors in 31 other nations.
RISKS/CHALLENGES
Cynosure turned a profit last year, but the previous three years it lost money. The reorganized structure and the management are still relatively new.
The company is operating in a growing but crowded market. In addition to the firms mentioned above, Cynosure also competes against Laserscope, (LSCP) Lumenis, and various privately held players.
On top of that, it must compete with other forms of skin beautification such as Botox, collagen injections and plastic surgery.
In May, Cynosure was sued under the Telephone Consumer Protection Act after being accused of sending unsolicited faxes for marketing purposes.
The lawsuit is still in the courts. Meanwhile, Cynosure has stopped advertising by fax.
THE RESULTS
The company's growth has really taken off in the last two years. Revenue for the first nine months of this year came in at $40 million, equalling the total for all of 2004. In 2003, sales totaled just $25 million.
The bottom line has improved even more dramatically.
Last year the firm went from red ink to black. This year, operating income has more than doubled from 2004 to $2.9 million.
USE OF PROCEEDS
Cynosure expects to see $46 million in net proceeds from the offering, or $55 million if underwriters choose to exercise all their options.
The company plans to use $17 million to expand its sales, marketing and distribution capabilities.
An additional $5 million will go toward research and development. The rest is set aside for general corporate purposes.
THE MANAGEMENT
Michael Davin
Chairman, president and CEO
Joined Cynosure in September 2003. Co-founded Cutera in 1998 and worked as vice president of worldwide sales and strategic development. Before that worked at Coherent Medical.
Timothy Baker
Chief financial officer and treasurer
Joined in March 2004. Spent a year before that as vice president of finance at the biotech unit of Stryker. Also served as chief financial officer at Photoelectron and Radionics.
Douglas Delaney
Executive vice president, sales
Joined in 2003 and attained current position in February. Previously served as national sales manager at Cutera. |
