This report originally appeared in the February 2010 issue of DOTmed Business News

Economic stress may be creating deep furrows on the brows of Americans, but more seem to be focusing on cash flow, rather than wrinkles when it comes to setting priorities and are opting out of cosmetic procedures that used to have them beating down the doors of the nation's medi-spas. While many industries have recently fallen on hard times, the cosmetic laser industry in particular has not been able to outshine consumer hesitancy, equipment financing woes and medi-spa budget cuts. Family practices are also taking a good look at their patient population to determine what procedures would best improve their bottom-line, and technology like intense pulsed light (IPL) systems are moving in on laser territory. Still, some are managing well and taking advantage of the potential upside of a down economy, like rock-bottom prices and opportunities for manufacturers to merge and consolidate.

Zapped by the economy

Fabian Tenenbaum, CFO of major laser manufacturer Syneron, estimates that there has been a 20 to 30 percent drop in new laser sales from the peak of 2007 to the third quarter of 2009.

"It was a challenging time in this space, with sales mostly declining year over year," says Tenenbaum. "We've seen some of the strongholds of the cosmetic market hold up pretty well, especially what we call the core markets - the dermatology and plastic surgery markets. Some markets were hit harder, mainly new entrants into the aesthetic provider market. This is especially true for the more developed markets like the U.S. that have been experiencing macroeconomic challenges that have affected consumer confidence and spending."

From the physician's perspective

Jeff Russell, executive director of the International Association for Physicians in Aesthetic Medicine (IAPAM), just published a paper on the latest trends in the industry.

"Right now there is a consolidation in the laser industry," says Russell. "There is a lot of merging of the larger laser companies and shutting down of smaller ones. It will be interesting to see what happens in the future. Whenever we are looking at laser manufacturers now, we are looking at their financial statements to make sure they are still going to be in business in a year or two. That's an important thing we never used to do, but now we give our members a financial snapshot of those companies."

For new purchases, the IAPAM now generally only recommends buying from the top five manufacturers, and even some of those have weak balance sheets.

"They don't have a lot of money in the bank right now and we are exercising a lot more caution."

Mergers galore

Some of the biggest names in aesthetic lasers include Palomar, Syneron, Cutera, Lutronic, Sciton and Cynosure. Israeli-based manufacturer Syneron completed a merger with Maryland-based laser company Candela in early January.

"The idea is really to put together the leading companies," says Tenenbaum. "We are going to be far and away the leader in this space. Syneron, founded in 2001, is a young company. We've grown rapidly. Candela is a very established company with almost 40 years in the business and considered best of breed."




A lot of the consolidation taking place is being done not only to form stronger companies, but also to take advantage of some of the research and development out there as the technology continues to evolve.

For example, Syneron recently announced that it has signed an agreement to acquire Primaeva Medical, Inc., a Calif.-based aesthetic technology company and maker of an RF device for the minimally invasive treatment of skin laxity and wrinkles. Syneron is expected to release the technology in 2010.

"It's been shown that it's not that people are losing interest," says Tenenbaum. "What bothers them will continue to bother them. The overall macromarket environment should quickly swing back to normal."

Manufacturers like Syneron are also taking every opportunity to expand their international investments.

"We do continue to see healthy growth in many international markets - especially in the Asian markets - China, for example, is a very healthy growth opportunity for us," says Tenenbaum.

Fierce financing

One of the major challenges on the end user side of the industry is getting financing for cosmetic lasers. New lasers can run about $80,000 and some even more than $100,000. In this economy, prices are dropping and there appears to be greater creativity in the way manufacturers are securing revenue.

"I've recently seen some of the best pricing I've ever encountered," says Russell. "All the laser companies are extremely competitive right now."

With equipment financing so hard to come by, medi-spas and practicing physicians are being required to have stellar credit ratings before even being considered for financing. For those looking to invest but having a hard time coming up with the dough, profit-sharing and pay-as-you-go programs are being offered. With this kind of deal, a practitioner can pay $25,000 down and $5,000 for a certain number of procedures.

Another thing that is keeping manufacturers afloat is the consumable element of every purchase. The system was once all about the capital purchase, but now the system carries both a capital and consumable component, meaning the laser is associated with a specific price, and certain components of the laser, such as disposable tips or fibers, need to be replaced on an ongoing basis.

Don't let the past get under your skin

There are a variety of lasers on the market for surgical and cosmetic purposes. Some of these include the carbon dioxide laser, the neodymium and erbium YAG lasers, and a range of lasers using holmium, argon, alexandrite, diode and pulsed dye technology. Surgical and cosmetic lasers such as the C02 and erbium YAG lasers can be aggressively ablative or non-ablative. An ablative laser utilizes a brief burst of energy at the skin. The energy heats water within the skin's cells, vaporizing the tissue and water contained within it. Some popular uses for this technology help people to erase past mistakes - literally.

In the cosmetic industry, removing the lapse in judgment tattooed on that left buttock or zapping the fuzzy to outright hirsute, are two of the great procedural mainstays. Tattoo removal requires an ablative laser. In medi-spas, aggressively ablative lasers are employed in acne treatments and the removal of everything from relatively innocuous warts to precancerous lesions. In recent years, fractional laser treatments have become a popular choice because while they involve ablative technology, the tissue damage is limited to a finely focused area. These lasers are often used to treat vascular lesions like spider veins and birthmarks.

Almost everyone surveyed in the industry remarked that a lot of what was previously conducted with a laser is now being done with intense pulsed light (IPL) systems, which are minimally invasive and offer a far more comfortable experience.

The way of the minimally invasive

Russell says that one of the main reasons, if not the main reason, why patients don't return for more treatment is due to the pain associated with cosmetic procedures. That is the primary reason why technology is moving toward the more subtle and less painful.

"We're seeing an overall trend toward minimally invasive procedures," says Russell. "A lot of these are almost giving invasive-type results. Those $2,000 to $3,000 fractional procedures are now gone. It was the hottest thing a year ago, but people are not spending that kind of money anymore."

Instead, people are now more apt to buy $1,000 to $2,000 multi-procedure packages designed for people wanting to look 10 years younger for the job hunt.

Tenenbaum says a lot of new technology is focusing on integrated systems. Every medi-spa is going to have a laser on hand, but the technology really moving in is IPL, as well as radio frequency and ultrasound systems for "sublative rejuvenation" and "circumferential reduction."

Syneron's eMatrix is a good example of the turn toward the minimally invasive. According to Tenenbaum, the system uses bi-polar RF radiation that helps to spare the epidermis and instead heats up and breaks down deeper tissues, which activates the production of more collagen.




"It relatively saves the epidermal layers of the skin," he says. "Older fractional technology would use different kinds of lasers, but it can be at a very high cost to the epidermis with significant downtimes and probably a longer period of significant redness. It's best to offer multiple types of treatment using many energy forms in the same product. It allows you greater flexibility for the specific patient and skin type, which is harder to do when you use only one modality."

Russell says these minimally invasive technologies are showing impressive results, but more long-range studies need to be conducted to determine the long-term effectiveness of these treatments.

Weighty possibilities

Cosmetic laser procedures are increasingly advancing from medi-spas into family OB/GYN medical practices, because they offer an ideal and ready-made patient population. Russell says about three-quarters of the clinics' patient population is considered overweight or obese.

"For the last three years we've seen a huge increase in medical weight management," says Russell. "The most profitable procedures are weight-loss related. I think one of the trends we'll see for lasers is weight-loss clinics, and medically supervised weight loss clinics will also be adding minimally invasive laser technology to their centers."

The plentiful secondary market

Many of those surveyed described a shrinking number of laser-treatment providers and a greater number of used lasers on the market.

"Pre-owned is the way to go in today's market," says Edward Kirk, president of Spectrum Laser Services, which sells and services cosmetic, surgical and ophthalmic laser systems, as well as IPLs, diode lasers and microdermabrasion systems. "You can get a laser system for 40 percent of its original [suggested retail price.] As a consumer you are no longer at the mercy of the manufacturer."

Some say that facility closures have flooded the market with used systems, which has had a dramatic impact on prices.

"The market for used cosmetic lasers was pretty anemic for most of 2008 and nearly all of 2009," commented John Bailey, owner of Minn.-based equipment supplier BMX Medical, Inc. "This is due to the staggering number of cosmetic lasers available in the marketplace caused by an unprecedented number of medi-spas and related businesses forced to close [due to the recession] in 2008-2009."

Others agree that the market is flush and prices are low, but they argue that many businesses are still faring well and growing in the current economic climate.

"There is a healthy number of equipment in the market which tends to bring down the prices when the supply is ample," says Alison Fortin, director of purchasing for Global Inventory Management LLC, a supplier of both cosmetic and surgical lasers based in Dover, N.H.

On the provider side, Jim Mousseau, co-owner of The Laser Network, a Colorado-based seller of surgical, ophthalmic and cosmetic lasers, says physicians have an edge in the market over aestheticians. "Doctor-led medi-spas are holding steady while non-physician medi-spas are shrinking."

Laser refurbishing and service

For laser refurbishers, hospitals are a big customer base, as are surgery centers, but John Minor, sales and operations manager for Laser Labs, Inc., in Tampa, Fla., says independent doctors make up the majority of his clientele.

"We have in-house, factory-trained technicians that perform the work, either onsite or at our facility," says Minor. "We provide everything from preventative maintenance on systems to complete refurbishment. We can change YAG heads, CO2 tubes, power supplies, articulated arms, etc. We carry a large inventory of parts and accessories to handle most any job. We even carry parts for systems that have been called 'obsolete.'"

Others say the hospitals are the ideal client, because of regulatory legislation that obligates them to seek service.

"Hospitals are the backbone for any service company since they are under federal mandates to have their laser systems inspected twice a year," says Kirk.

Another challenge for the buyer is the fact that some manufacturers do not provide service on pre-owned units.

"Some companies, such as Palomar, charge substantial amounts (up to $25,000) to 'inspect' pre-owned units just to be able to purchase their inflated contract pricing," notes Kirk. "In the end it's all about doing your homework before purchasing new or pre- owned."

A new cost-conscious era?

Whether the cosmetic laser industry will bounce back to its formerly robust sales remains to be seen. Some in the industry say the prices will probably not reach their former zenith any time soon.

Paul Edmondson, owner of Photonic Services, LLC, out of Laguna Beach, Calif., thinks that manufacturers may be in for a somewhat rude awakening, with the business of used systems taking over an increasing amount of market share.

"I believe it will continue to outpace new lasers," says Edmondson. "The era of the 130K new laser is over."

Still, with new technology on the horizon and analysts indicating some positive signs of economic stability, manufacturers will continue to bring new and enhanced systems to the market, which will no doubt sway buyers looking to provide innovative and cutting-edge cosmetic procedures to their patients.

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DOTmed Registered Surgical & Cosmetic Lasers Equipment Sales & Service Companies
Names in boldface are Premium Listings.

Domestic
Vin Wells, Rock Bottom Lasers, AZ
Chris Jones, Quanta Technologies, LLC, AZ
Paul Edmondson, Photonic Services, LLC, CA
DOTmed Certified
Jim Mousseau, The Laser Network, CO
Samuel Lehrer, TheLaserOutlet.com, FL
Cliff Peeke, Olympia US Funding Solutions, LLC, FL
Debbie Benghuzzi, Bay Medical Equipment, LLC, FL
DOTmed Certified
John Minor, Laser Labs, Inc., FL
Chris McDougall, Laser Locators, FL
Kirk Wilks, Escrow Medical, GA
DOTmed Certified
Dominic Fosco, Redfish Medical, Inc., IL
DOTmed 100
Richard Fosco, HealthWare, Inc., IL
DOTmed Certified
Tony Kokjohn, The Laser Agent, Inc., IN
Timothy Flynn, Derm Laser Repair, LLC, MA
Alison Bouck, Medical Laser Resources, LLC, MI
John Bailey, BMX Medical, Inc., MN
Justin Secrist, Alternative Worldwide Medical, MO
Alison Fortin, Global Inventory Management, LLC, NH
DOTmed Certified
Richard Gobeille, Aesthetic Plastic Surgery - Laser Division, NM
Richard Cook, Laser Solutions, Inc., NJ
Jeff Baker, Laser Service Co., NJ
Mike Moreno, MedPro, Inc., NJ
DOTmed Certified/100
Edward Kirk, Spectrum Laser Services, NJ
Dennis Ning, KDWLASER, NY
Yancey Ingram, Laser Partners of Oklahoma, Inc., OK
Gordon Learn, Progressive Medical Laser, PA
Lorenzo Flowers, JLJ United, Inc., TX
Dan Herbert, Laser Concepts-Cosmetic Laser World, TX
Chris Cleary, Maxim Laser.com, TX
Geoffrey Loveless, Aesthetic Head Pros, TX
John Crownover, Laser Scientific, TX
DOTmed Certified
Philip Mothena, Simple Solutions, Inc., VA

International
Oscar Villanueva, MDA - Medical Devices, Brazil
Fred Zakian, Kevork Instruments, Mexico
Hassan Feroze, FeroXtar, Pakistan
Hamdy Abdullah, Technology Conductors Trading Est., Saudi Arabia
Ed Kabelitz, Laserblitz, Slovakia
Rafael Carballido, Ecodiagnostic, Venezuela

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