On May 28, Soliton Inc (NASDAQ:SOLY) surged 81% while the volume traded was up 16x. In particular, the rally came on the back of the announcement that the company had acquired the 510(k) clearance from the US FDA for a tattoo removing device. We examine if this surge can be sustained.
Soliton Share Price Analysis
On May 16, 2019, White Diamond Research published a bearish article about Soliton on Seeking Alpha which sent the stock into a tailspin. Notably, the share price dropped 52% after the article claimed being a Regulation A+ IPO, Soliton does not have the backing of institutional investors. The article further threw the status of the development of tattoo removal device and another one for removal of cellulite in doubt.
Nonetheless, the most recent price action shows that Soliton might have weathered the storm. Apart from revealing the advanced progress of the tattoo removal device, whose marketing the FDA has authorized, the company is in the process of initiating a pivotal trial for the cellulite removal device. This is after results from the proof-of-concept trial came out positive.
With the FDA approval, SOLY can now commercialize the tattoo removal device after spending so much during the R&D phase. The device utilizes acoustic pulse to facilitate an expedited tattoo removal process. Specifically, the device ensures that the process is painless and efficient. Also, the device dubbed Rapid Acoustic Pulse (RAP), reduces the amount of time it takes to completely remove tattoos.
The new device should help SOLY to make a significant dent in the growing tattoo removal market. As at 2016, the market was valued at close to $11.6 billion and it is projected to clock $27.3 billion come 2023. Essentially, the estimated CAGR between 2017 and 2023 is approximately 12.7%. Also, considering that majority of tattoo removal work is done using lasers, this RAP device should be an instant hit because it complements the laser-job.
Investors were quick to respond to the good news as the stock soared 81%. On a year-to-date basis, the stock’s momentum is much more impressive. The stock opened the year at $4.87 and it has so far rallied 316% to $20.28 at the time of writing.
Background to Soliton
Founded in 2012, Soliton is a medical device company which uses a proprietary rapid acoustic pulse technology platform to develop and commercialize products. The company is currently pursuing two lead products focused on the tattoo and cellulite removal markets. Soliton is headquartered in Houston, Texas.
Lead products progress
Soliton is staring at great things in future based on the progress of the development of its lead products. To be sure, the tattoo removal device already has official nod to advance past the R&D stage. Majorly, the potential of the device lies in its novelty and the ability to circumnavigate problems which the current tattoo removal devices face, which is the formation of vacuoles thus slowing down the process.
The company management believes that the clearance by the FDA to advance to the next stage is gratifying. Further, it validates the robustness of the RAP technology which is the foundation on which commercialization of the device is built. Also, the company is better placed to expand product development and commercialization within the segment of tattoo removal.
On the other hand, the development of the cellulite removal device is well underway since the data from the proof-of-concept came in positive. This device is based on the same concept as the one for tattoo removing. However, the cellulite version is higher powered. During the PoC trial, 100% of the patients reported zero pain. Also, there was neither discomfort nor downtime which makes the process much more effective compared to Cellfina, a popular method for removing cellulite.
“The very encouraging results of the POC Trial are driving our decision to launch the pivotal trial as quickly as possible and suggest we may be able to significantly improve the appearance of cellulite with a single completely non-invasive procedure. The procedure requires no recovery time and avoids the risks that go with even minimally invasive surgery,” Soliton Executive Chairman and Co-founder said.
Both of the Soliton products are novel in terms of how they accomplish the task. In particular, the RAP Technology platform is groundbreaking and should continue facilitating the development of novel products in the long term.
Also, the markets which the company has its sights on are potentially lucrative. As earlier mentioned, the tattoo removal market is set to grow at 12.7% CAGR between 2017 and 2023 and by 2023, the market will be worth $27.3 billion.
Essentially, the outlook for Soliton revenue growth prospects is quite favorable. As such, the company is likely to see its share price continue to grow both in the short term and in the long term.
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Disclosure: We have no position in SOLY and have not been compensated for this article.