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Cynosure Targets Raised At Northland Capital On Potential Vaginal Atrophy Treatment

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June 25, 2015 3:21 pm
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In a report issued Thursday, Northland Capital Markets analyst Suraj Kalia reiterated an Outperform rating on Cynosure, Inc. (NASDAQ: CYNO), while raising his price target from $42 to $46.

The surge in the price target was driven by the firm’s sum of the parts analysis on the MonaLisa Touch product, licensed for distribution in the U.S., for the treatment of vaginal atrophy. Northland’s due diligence indicates that this product “could present an effective alternative to both premenopausal and postmenopausal women at risk from estrogen therapy for treating vaginal atrophy.”

Understanding The Value Of The MonaLisa

Vaginal atrophy (VA) is a common condition associated with reduced estrogenization of the vaginal tissue. Usually, the condition is treated via estrogen therapy, which is not tolerated well by up to 1 in 5 women.

This is where the MonaLisa Touch comes in, with its ability to achieve similar or better results than estrogen therapy “with no systemic side effects, and a longer-duration of hydration with just 3x treatments.”

But, how does it work?

The MonaLisa Touch is “a fractional CO2 laser device specifically tailored for the vaginal mucosa,” the analysts explained. “By creating a sub-dermal injury in the vaginal mucosa, the CO2 laser is thought to initiate a wound-healing cascade starting from collagen remodeling, proteoglycan synthesis and ultimately yielding a hydrated vagina.”

Conservative assumptions of treatments/machine/year and penetration rates in the U.S., Northland estimates this opportunity could represent $4 to $10 per share on an NPV basis.

While execution risk lingers, randomized trials are yet to be conducted, and “competitors are eventually going to get into the space,” the analysts feel incrementally bullish about Cynosure's “ability to cross-sell and create a totally new market in women's health,” especially given the company’s track record.

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