Q4 aside, Candela pleased with performance

WAYLAND, MA-It has been an interesting-and profitable-12 months for Candela. The medical-laser company has watched its revenues grow 21% and its profits grow 104% in the latest fiscal year (ended July 1, 2006), despite a “disastrous” 4th quarter.

WAYLAND, MA-It has been an interesting-and profitable-12 months for Candela. The medical-laser company has watched its revenues grow 21% and its profits grow 104% in the latest fiscal year (ended July 1, 2006), despite a “disastrous” 4th quarter. Its stock price more than doubled in the first five months of 2006, reaching nearly $25/share in May, only to fall back to $9/share in September-about where it was in September ’05. And fellow competitor Palomar Medical Technologies (Burlington, MA) is aggressively pursuing Candela via patent-infringement litigation. Through it all, president and CEO Jerry Puorro remains bullish on the company and its position in the aesthetic-laser market.

“We are a $150 million company with somewhere between 25% and 27% market share in the aesthetic market, and we are still seeing growth this year,” Puorro said. “We gave targets for the new year that are very similar-that is, we expect to grow with or faster than the market, which we believe will grow 15%-18% in the new year.”

This despite the fact that Candela reported net income of $2.4 million on revenues of $41.3 million for the fourth quarter-compared to net income of $3.2 million on revenues of $39 million for the same quarter a year ago. Still, Puorro likes to point out that year-end net income was $14.9 million on revenues of $149.5 million, compared to net income of $7.3 million on revenues of $124 million for the previous fiscal year.

“While we are pleased with the full year results of 21% revenue growth and 104% profit growth, we are not satisfied with our fourth quarter finish,” Puorro said. “(But) we are optimistic we will grow with or above the market in the coming year.”

In the meantime, Candela must contend with Palomar, which filed a patent-infringement lawsuit against the company in early August, accusing Candela’s light-based hair removal systems of infringing U.S. Patent #5,735,844. Palomar says that it has been sending Candela letters for more than seven years to notify Candela that its products need a license to the ‘844 patent and offering to grant such a license. If Palomar prevails at trial, Candela may be ordered to pay tens of millions of dollars in damages for past sales and ordered to stop selling infringing products.

Candela immediately filed a countersuit against Palomar, asserting that Palomar infringes Candela’s U.S. patents #6,659,999 and #6,743,222. The complaint also asserts that Palomar, through its Q-YAG 5 Q-Switched laser system, willfully infringes upon U.S. patent #5,312,395. Puorro declined to comment on the pending litigation.

-Kathy Kincade

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