STRATA Skin Sciences, New Distribution Deal, and Debt Restructuring, Analysts View

STRATA Skin Sciences, Inc. (NASDAQ: SSKN) is a medical technology company in Dermatology and Plastic Surgery dedicated to developing, commercializing, and marketing innovative products for the treatment of dermatologic conditions.

Recent Events

October 5, 2017. The company announced signing an Agreement with MedResults Network (MRN). MRN is a Group Purchasing Organization that has more than 3,000 members including Dermatology Offices, Plastic Surgery Practices, Facial Plastic Practices, MediSpas and other providers. MRN researches product categories and selects advantaged products and then negotiates pricing for its membership. MRN focuses on the aesthetic market and has agreements with more than 50 vendors with only one vendor per product category.

The management believes the products that STRATA introduced earlier this year in the Aesthetic space are outstanding, technology-advantaged products but lacked broad awareness. They believe that the reach and credibility of MRN will greatly benefit sales efforts. MedResults Network is a free membership service that offers instant discounts and quarterly rebates at no risk or obligation. They have partnered with over 50 leading national vendors to negotiate cost savings for its members in product categories including dermal fillers, lasers, skin care, and more.

Sept. 25, 2017. The company announced the closing of a transaction in which holders of its 2.25% Senior Series A Secured Convertible Debentures and 4% Senior Secured Convertible Debentures, both due July 30, 2021, have agreed to exchange all of such debentures, with an aggregate principal amount of approximately $40.7 million, into 40,617 shares of newly created Series C Convertible Preferred Stock, convertible into 15.1 million shares of common stock.  In addition to eliminating the senior secured debt, the exchange has also eliminated the Company’s obligation to pay approximately $4.0 million of interest payments over the next four years.

Management believes the reduction in debt will result in a simplified balance sheet, and will improve access to the capital markets and increase financial flexibility.

September 5, 2017. SSKN received a response letter from the U.S. Food and Drug Administration concerning possible paths for 510k clearance of their new Optimal Dosing Technology (OTD) proposed to be used for the treatment of psoriasis, vitiligo, and other skin conditions.


The FDA response letter proposes two alternative paths for seeking regulatory clearance. The first path requires a clinical trial to substantiate potential claims for the OTD, and the second path is to seek regulatory clearance with no new claims regarding treatment or efficacy. Should the Company take the second path, they will likely consider initiatives to develop potential proprietary features for the OTD technology.



The XTRAC excimer laser uses a highly targeted beam of therapeutic UVB light to treat affected skin areas without damaging surrounding healthy skin.1-3 Improvement is possible without the troublesome side effects of biologics or drug therapies, the messy application of topical treatments multiple times a day or the worry of exposing healthy skin to UV light.

Nordlys® Laser

The Nordlys Hybrid System incorporates a multitude of light-based technologies in an all-in-one compact platform – SWT (Selective Waveband Technology: the latest evolution and most efficacious utilization of Intense Pulsed Light), Nd:YAG and the FRAX 1550 non-ablative fractionated technology. The Nordlys laser uses Ellipse’s patented Dual Wave Filtration, a technology that has made the Nordlys the device of choice to over 6,000 cosmetic and dermatologic physician offices worldwide.  The Nordlys system has 16 indications cleared to date by the U.S. Food and Drug Administration (FDA).


STRATAPEN MicroSystems is a micropigmentation device that provides advanced technology offering exceptional results. The STRATAPEN features both a patent-pending Biolock cartridge, which incorporates a seven-step safety system to prevent fluids from entering the motor, as well as a patent-pending removable nose cone.



According to Future Market Insights analysis, the global dermatology devices market is expected to reach US$ 2,708.4M in terms of revenue for 2016, witnessing a year-over-year growth of 6.2%.

Factors such as rising prevalence of skin problems including acne leading to scars, increasing obesity, and growing aesthetic awareness among people are likely to contribute to the revenue growth of the global dermatology devices market over the forecast period. Economic factors such as growing healthcare expenditure, increasing disposable income per capita, and rising government support in developed economies are expected to boost the growth of the global dermatology devices market over the forecast period.


Financial Results

Revenues for the second quarter of 2017 were $8.7 million compared with revenues for the second quarter of 2016 of $7.7 million.

Net loss for the second quarter of 2017 was $1.2 million or ($0.52) per diluted share, which included other income of $0.1 million for the change in fair value of warrant liability, $1.6 million in interest expense, $1.7 million in depreciation and amortization expenses and $0.1 million for income tax expense. This compares with net income for the second quarter of 2016 of $0.5 million or ($1.17) per diluted share, which included other income of $3.2 million for the change in fair value of warrant liability, $1.2 million in interest expense and $1.6 million in depreciation and amortization expenses and $0.1 million for income tax expense.

Revenues for the six months of 2017 were $16.0 million compared with revenues for the six months of 2016 of $15.4 million.

Net loss for the six months of 2017 was $3.4 million or ($1.53) per diluted share, which included $2.9 million in interest expense, $3.2 million in depreciation and amortization expenses and $0.1 million for income tax expense. This compares with net loss for the six months of 2016 of $0.9 million or ($2.76) per diluted share, which included other income of $5.2 million for the change in fair value of warrant liability, $2.4 million in interest expense and $3.3 million in depreciation and amortization expenses and $0.1 million for income tax expense.

SSKN is scheduled to release Q3 earnings on or about November 9, 2017.


Analysts Opinion

May-16-17          Reiterated          Rodman & Renshaw       Buy        $1.50 → $12

Feb-21-17            Resumed             Rodman & Renshaw       Buy        $1.50


Stock Influences and Risk Factors

The new MRN deal could generate significant revenue;

Any positive results from the FDA could be an immediate catalyst;

Laser treatments of psoriasis, vitiligo, atopic dermatitis, and leukoderma and any of our future products or services may fail to gain market acceptance;

The success of their products depends on third-party reimbursement of patients’ costs;

Rapid changes in technology in the medical devices industry or the development of a cure for skin conditions treated by their products could make their treatment system obsolete.


Stock Chart

On Wednesday, October 25, 2017, in intra-day trading, SSKN shares were at $1.42 (-4.05%) on traded volume of 340K shares. The current RSI (14) is 37.49

SSKN shares are trading below their 50-day moving average of $1.72 and below their 200-day moving average of $2.42.


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