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PhotoMedex Inc. Reports Operating Results (10-Q)

August 14, 2009 | About:
Todd Sullivan

PhotoMedex Inc. (PHMD) filed Quarterly Report for the period ended 2009-06-30.

Photomedex Inc. develops manufactures and markets therapeutic excimer laser-based instrumentation designed to treat psoriasis and vitiligo. They are also developing their technology for the treatment of other skin disorders. They\'ve received the first Food and Drug Administration or FDA approval to market an excimer laser system XTRAC system for the treatment of psoriasis. They have commercially launched the XTRAC system in the United States. PhotoMedex Inc. has a market cap of $8 million; its shares were traded at around $0.89 with and P/S ratio of 0.2.

Highlight of Business Operations:

Revenues from our Surgical Services segment, in the amount of $1,762,010 and $3,661,749 for the three and six months ended June 30, 2008, respectively, have been accounted for in 2008 as a discontinued operation.

Recognized treatment revenue for the three months ended June 30, 2009 and 2008 for domestic XTRAC procedures was $2,635,623 and $2,337,148, respectively, reflecting billed procedures of 35,602 and 33,476, respectively. In addition, 1,221 and 1,130 procedures were performed in the three months ended June 30, 2009 and 2008, respectively, without billing from us, in connection with clinical research and customer evaluations of the XTRAC laser. Recognized treatment revenue for the six months ended June 30, 2009 and 2008 for domestic XTRAC procedures was $4,672,627 and $3,903,055, respectively, reflecting billed procedures of 71,346 and 62,295, respectively. In addition, 3,026 and 2,649 procedures were performed in the six months ended June 30, 2009 and 2008, respectively, without billing from us, in connection with clinical research and customer evaluations of the XTRAC laser. The increase in procedures in the periods ended June 30, 2009 compared to the comparable periods in 2008 was largely due to the increased number of laser systems placed with our customers under our consignment program and to our increased marketing programs. Increases in procedures are dependent upon building market acceptance through marketing programs with our physician partners and their patients that the XTRAC procedures will be of clinical benefit and generally reimbursed.

We have a program to support certain physicians who may be denied reimbursement by private insurance carriers for XTRAC treatments. In accordance with the requirements of Staff Accounting Bulletin No. 104, we recognize service revenue under this program from the sale of XTRAC procedures or equivalent treatments to physicians participating in this program only to the extent the physicians have been reimbursed for the treatments. For the three months ended June 30, 2009, we deferred net revenues of $30,285 (461 procedures) under this program compared to deferred net revenues of $58,120 (891 procedures) for the three months ended June 30, 2008. For the six months ended June 30, 2009, we deferred net revenues of $3,901 (59 procedures) under this program

We defer substantially all sales of treatment codes ordered by and delivered to the customer within the last two weeks of the period in determining the amount of procedures performed by its physician-customers. Management believes this approach closely approximates the actual amount of unused treatments that existed at the end of a period. For the three months ended June 30, 2009 and 2008, we recognized net revenues of $329,166 (5,015 procedures) and $212,519 (3,259 procedures), respectively, under this approach. For the six months ended June 30, 2009 and 2008, we deferred net revenues of $18,251 (277 procedures) and $107,678 (1,648 procedures), respectively, under this approach.

For the three and six months ended June 30, 2009, domestic XTRAC laser sales were $523,680 and $1,161,985, respectively. There were 11 and 25 lasers sold, respectively. For the three and six months ended June 30, 2008, domestic XTRAC laser sales were $1,096,850 and $1,641,650, respectively. There were 21 and 31 lasers sold, respectively. We sell the laser directly to the customer for certain reasons, including the costs of logistical support and customer preference as well as a means of addressing under-performing accounts while preserving the vendor-customer relationship. We believe that we are able to reach a sector of the laser market that is better suited to a sale model than a per-procedure, or consignment, model at reasonable margins.

International sales of our XTRAC and VTRAC laser systems and related parts were $1,060,607 for the three months ended June 30, 2009 compared to $697,973 for the three months ended June 30, 2008. We sold 25 and 14 systems in the three-month periods ended June 30, 2009 and 2008, respectively. International sales of our XTRAC and VTRAC laser systems and related parts were $2,059,691 for the six months ended June 30, 2009 compared to $1,866,178 for the six months ended June 30, 2008. We sold 40 and 38 systems in the six-month periods ended June 30, 2009 and 2008, respectively. The average price of dermatology equipment sold internationally varies due to the quantities of refurbished domestic XTRAC systems and VTRACs sold. Both of these products have lower average selling prices than new XTRAC laser systems. However, by adding these to our product offerings along with expanding into new geographic territories where the products are sold, we have been able to increase overall international dermatology equipment revenues.

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