Since there seems to be renewed interest here, regarding TLZ, I
offer this update to my previous reports and commentary.
Finacial Results
----------------
Despite more than two years of intensive promotion, and mostly
uncritical media coverage, Thermolase's estimated installed base of
300 lasers revenued a mere $4.8 million from SoftLight treatments
in its most recently reported fiscal quarter, ended 30 Sep 97. This
was a 19.3 percent decline from the previous quarter - the first
decline since SoftLight operations began, two years earlier.
Based on a six day work week, Thermolase revenued about $205 per
laser per day, which represents a very severe under-utilization. To
put this into perspective, the regular price of the new "SoftLight
Facial" is $255! Operating LOSSES have averaged about 80 percent of
revenue for the past few quarters.
As a result, Thermolase announced in July that it was freezing the
number of it Spa Thiras at 15, and was modifying its laser hair
removal process. The new process, called SoftLight 2.0, does away
with the pre-wax, but according to two consumers who have tried it,
little or no hair was removed! Perhaps, as some have suspected, it
was the waxing that used to temporarily remove the hair after all.
(For details, see the section below, on SoftLight 2.0)
One potential benefit of SoftLight 2.0 is that it may accelerate
revenue recognition, because treatments now appear to be spaced at
approximately monthly intervals. SoftLight 1.0 treatments appeared
to have been spaced at intervals of up to several months, depending
on the rate of hair regrowth. This change has the potential to
temporarily reverse the revenue decline that occured in Q4;
however, that would be a one-time event, and might not be
sustainable, given the apparently inferior treatment outcomes of
SoftLight 2.0 versus SoftLight 1.0.
Thermolase almost ran out of money sometime about July, but was
bailed out with an emergency loan by its wealthy parent company. In
early September, it negotiated a $115 million convertible
debenture, so it once again has plenty of borrowed money to burn.
However, the net worth of Thermolase crumbled to $333,000 by the
end of Q4, or less than one cent per share!
Miraculously, Thermolase's share price rebounded from its low of $9
this spring, reaching $18 in mid-October. Even more miraculously,
that was the price that was touted by certain stock brokers in the
spring, which also just happens to be slightly above the conversion
price of the debenture sold in September. Looks rather fishy to me!
In Nov'97, over 2 million shares were being held by short-sellers -
betting that the price eventually would fall, which it has. Since
the disastrous Q4 results were announced, the share price quickly
fell to about $9. Based on conventional stock valuation rules of
thumb, I believe that a realistic share price would be about 60
cents per share - assuming one believes that it will become
profitable any time soon, which I do not.
I offer the following discussion of the SoftLight technology,
beginning with a review of the original SoftLight 1.0.
SoftLight 1.0
-------------
Thermolase's SoftLight was the first FDA cleared device and method
of laser hair removal. This is a low-power ND:YAG laser, used in
combination with a black carbon activating lotion. The hair is
first removed by waxing, followed by application of the carbon
lotion, and then the skin is irradiated by the laser.
SoftLight was cleared to market by the FDA in Apr'95, but
Thermolase is not allowed to claim "painless" treatments nor
"permanent" or even "long term" results. The following article in
the Sep'96 FDA Consumer magazine clearly states that Softlight may
claim only a "hair reduction for up to three months after
treatment":
fda.gov
Even Thermolase's SoftLight brochure states that they do not intend
to kill hair follicles! Permanent hair removal can ONLY be achieved
through killing hair follicles.
SoftLight 2.0
-------------
In September 1997, Thermolase introduced a modified treatment,
called SoftLight 2.0. In this modification, waxing has been
abandoned. There is good reason to doubt that SoftLight 2.0 will be
a significant improvement. For one, Thermolase has not received
clearance from FDA to make claims of improved efficacy, and indeed
its consumer advertising appears to be unchanged. Also, a
favourable stock research report issued by Lehman Bros in May 1997,
states that Thermolase only hopes to reduce the re-treatment
frequency from 4 times per year, to 1 to 2 times per year. Lehman
actually extolled the benefits of a recurring revenue stream from
re-treatments.
Thus far, I have been contacted by only one consumer treated with
this method, and she expressed disappointment. She paid $2,500 CDN
for a series of up to four treatments to remove facial hair, and
has recently completed the first two. Despite three separate laser
irradiations in the first session, she reported, "absolutely no
hair loss whatsoever" at the end of the session. When she
questioned the technician, she was told subsequent treatments would
remove the hair. The consumer also reported that the 2nd
irradiation was very painful:
"At this point I did feel quite a bit of discomfort. When the laser
was on my cheeks, I could feel pain shooting up to my molars. The
nurse had to stop a few times. It felt like I was being pounded on
the side of my face."
After her second treatment session, she reported that all of her
hair STILL remained. Again, she confronted the technician, who
simply advised her to buy the "full treatment package"! This
outcome tends to support my belief that in SoftLight 1.0, the
waxing was primarily responsible for removing the hair, since now
that waxing has been dropped, the hair remains.
Here is a link to a 25 Nov 97 post to the Electrolysis Forum, by
another woman who experienced both the SoftLight 1.0 and 2.0
treatments.
bworks.com
[eventually, this post likely will be moved to the site's archives,
in which case the URL likely will change slightly to
bworks.com ]
She wrote:
"The end of July [1997] I signed up for softlight treatment. I took
advantage of the 90 [days] "hair free" guarantee. I went to a Spa
Thira. That first appointment in July I was waxed first (upper lip
and chin) and was treated with the laser. I left THAT appointment
with NO hair - as the waxing removed all the hair. I had a
thrilling 2 weeks, but noticed in the third week hair was regrowing
(ALL the hair was regrowing). I called for another appointment and
was told that they changed the process and they no longer wax
first. THIS I thought was a good thing since I feel the only
benefit I got from the original treatment was from the waxing. Went
for my next treatment (late August), they did their "thing" was
told that while I was leaving the appointment with hair that the
hairs should fall out on their own over a period of two weeks. (!!)
That this was the first of a two-part treatment and that after the
second appointment I would be hair-free for maybe 6-months or more
:) In the meantime I should shave and that this helps to exfoliate
and will facilitate the falling out of the hairs."
"Two weeks after that appointment I did notice some of the hairs
falling out - mostly on the chin area. Very exciting! But, only a
small percentage fell out - maybe 20%. The hair on my upper lip did
fall out at about 3 1/2 weeks - about 98% of that hair."
"I went one month later (late Sept.) for the second part of the
two-part treatment and this time it was sort of an abbreviated
version of the first-part treatment. Again I was told, the hairs
would fall out....6 months hair free. Again, to shave.... In about
10 days some hairs on the chin - maybe 10% started to fall out.
Maybe one or two on the upper lip. After that no results."
"To put this in a time-line perspective: my last laser treatment
was done the end of September. The hair on my upper lip is now
growing back. Just as a note, for the most part THAT hair is and
was fine hair - but just darker in color with just a few course
hairs. The hair on my chin is ALL there now. That hair is course
and dark. I have the same amount of hair on my chin as I had BEFORE
I started lasering. It is exactly the same. In fact it's the same
amount as I've had for about one year."
As I have warned for nearly one year, I see no future for laser
hair removal, given the present poor treatment cost:benefit ratio,
and the rampant false and misleading promotion to consumers that I
have seen.
Caveat Emptor!
Ted Molczan
molczan@fox.nstn.ca |
