Cynosure wins patent case, posts wider Q4 sales decline and net losses

February 9, 2010 by MassDevice staff

Cynosure Inc. (NSDQ:CYNO) announced mixed news today, saying it won a patent infringement lawsuit against a competitor but posting a 25 percent fourth-quarter sales slide and soaring net losses.

The Westford, Mass.-based cosmetic device maker reported fourth-quarter sales of $19 million for the three months ended Dec. 31, 2009, down 24 percent percent compared to $25 million during the same period in 2008. Fourth-quarter net losses widened 481.5 percent to $14.5 million, or $1.14 per diluted share, compared with $2.5 million, or 20 cents per diluted share, during Q4 2008.

For the full year, Cynosure posted sales of $72.8 million, down 47.9 percent compared with $139.7 million during the prior year. The company swung from net income of $10.2 million, or 80 cents per diluted share, during 2008 to net losses of $22.8 million, or $1.79 per diluted share, last year.

President and CEO Michael Davin chalked the declines up to the global economic downturn and its effect on the credit market, saying lack of credit made it difficult for practitioners to buy Cynosure's equipment. The company is working with lenders to develop financing programs, Davin said. One bright spot was international laser product sales, which grew 7.4 percent during the quarter to $8.7 million, or nearly 60 percent of total laser product sales, he added.

That reflects the success of its efforts in South Korea and China, Davin said, which gave regulatory clearance to Cynosure devices last September.

The company also said it agreed to settle a lawsuit against CoolTouch accusing that company of infringing one of its patents covering subcutaneous fat removal technology.

The lawsuit accused Roseville, Calif.-based CoolTouch of violating the Cynosure patent with its 1320 nm CoolLipo laser system. The terms of the settlement will see CoolTouch pay a 9 percent royalty on prior sales of the device, 10 percent of future sales for any product sold strictly for lipolysis (the melting of fat) and 7.5 percent of future sales of devices for lipolysis and at least one other procedure. CoolTouch also agreed to issue royalty-free licenses to Cynosure for any patents or applications for fat and cellulite treatments it owns.

Once it's recouped its legal expenses with the CoolTouch royalties, Cynosure will split the payments with its largest shareholder, El.En. S.p.A, with Cynosure keeping 60 percent of the money. Davin said the company plans to pursue licensing deals with other firms it believes are also infringing the patent.

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