There hasn't been much good news lately to relieve the pain of shareholders in aesthetic laser maker Candela (Nasdaq: CLZR ) . We're constantly treated to assurances of "wait till next quarter." Like the bars that post signs promising "free beer tomorrow," Candela's tomorrow never seems to come.
So the news that it has received FDA approval for pain reducing technology it acquired earlier this year when it bought the small Israeli company Inolase is actually something of a welcome relief, even if it's only temporary.
Inolase manufactures a device that reduces pain signals sent to the brain when a laser is applied to skin. The pneumatic skin flattening (PSF) technology sucks air from a chamber, causing the skin to flatten out. It's based on the so-called "gate control theory" of pain, which says nerves can feel either pressure or pain, but not both at the same time. The signals for each are sent through a single "gate" to the brain. Just like when you whack your funny bone and rub your elbow to lessen the pain.
The benefit, other than the obvious, is that it makes a patient more willing to continue treatment.
According to Millennium Research, there are more than 70,000 lasers and intense pulse light (IPL) devices installed worldwide. PSF technology can be used during all of the procedures -- from hair removal to varicose vein reduction. More importantly for Candela, it can now use the technology to market its lasers as a better alternative than the competition.
It needs something. Sales have been giving off a pretty weak signal lately, and management admits it has been losing market share. In the most recent quarter, it recorded a $0.03-per-share loss instead of the $0.06-per-share profit analysts were expecting.
The PSF technology may give Candela a chance to do more. The device is being retrofitted to all of Candela's existing laser and intense pulse light (IPL) devices, and with a disposable facepiece, it offers Candela the potential for a steady stream of revenue from consumables. It's also possible that Candela could sell the technology to other laser makers, though that's a dual-edged laser beam. With rivals like Palomar Medical Technologies (Nasdaq: PMTI ) , Cynosure (Nasdaq: CYNO ) , and Cutera (Nasdaq: CUTR ) already taking Candela's business these days, does it really want to give them another club with which to beat them?
The FDA approval gives Candela a chance to differentiate itself from the competition, giving its products a value-added benefit. Undoubtedly it will use that to try to shore up the erosion in its market share. While we'll probably see the skin flattening technology appearing this fall, it's not expected to help Candela become profitable anytime soon. For that we'll need to rely upon management's ability to sell systems that practitioners want, a procedure it so far hasn't been able to light upon.
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Fool contributor Rich Duprey owns shares of Candela, but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
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