Soliton (SOLY) is a pre-launch medical device company specializing in technology for tattoo removal and cellulite reduction. The company is working on extending its RAP (Rapid Acoustic Pulse) technology to other indications. Soliton is still pre-launch, so the company had little to report for its financials in its latest earnings report. Management spent most of the time discussing and reviewing known details about its RAP technology and trial results. However, the earnings conference call included a few nuggets of new news that caught my interest especially around the coming product launch:
- First orders underway (number and price not disclosed) – requires another 501(K) clearance on product enhancements before shipping.
- Additional R&D plans: expand aesthetic indications like skin laxity and scar reduction, unmet patient needs for therapeutic fibrotic conditions.
- New brand name: RESONIC.
- First sales will generate recognized revenue.
- Patient targets in place: “our goal is to have over 1000 patients treated and really understand the best patient experience and the best office experience before we go into a full national rollout.” (from Seeking Alpha transcript).
The scale and timing of the product launch plan remain the same as previously announced:
“Our plan is to launch the RAP device in both cellulite and tattoo removal indications and begin shipping initial devices during the second quarter of 2021. We intend to sell our RAP devices to approximately 25 dermatologists and plastic surgeons who are key opinion leaders in their field.”
On the financial side, costs increased year-over-year in the fourth quarter from $3.3M to $4.6M. Soliton spent the extra money on expanded general and administrative (G&A), sales, and marketing.
Given the company’s expanding product plans, I am wondering whether my target for a double by year-end could be conservative. Perhaps it makes more sense to envision a growth target for the end of 2022. The funding required for R&D could be a wildcard. While the company reiterated that its current balance sheet will support operations and initial commercialization going into Q3 2022, I have a small question whether Soliton covered the expanded R&D in that funding target. It is possible the company will need to do another secondary offering by year-end to get ahead of funding needs. Management did not disclose the possibility for any such plans and analysts did not think to ask.
SOLY survived the day after its earnings report with a 3.0% gain. However, at one point, the stock fell all the way to support at its uprtending 50-day moving average (DMA) (red line below).
I continue to hold with no plans to add to my position until SOLY manages a breakout above the highs from last June. Achieving such a milestone should solidify buying interest in this innovative medical device maker. In the short-term, SOLY could experience extra volatility as high-tech and speculative stocks get hit with interest rate and/or inflation fears.
Be careful out there!
Full disclosure: long SOLY