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I am new to writing about stocks that interest me but I make up for it by putting in hundreds of hours of hard research.
  • Solta Ready To Revolutionize $60 Billion Weight Loss Market 0 comments
    Aug 30, 2013 1:05 PM | about stocks: ARNA, LTM, VVUS, WTW, SLTM

    With over 200 million overweight or obese Americans, the $60 billion weight loss market is an attractive space for investors to look for a company that can stand out in the crowded field of players with the better mousetrap. Losing weight has been one of the most difficult challenges ever faced but now with the Solta Medical, Inc. (NASDAQ:SLTM), breakthrough losing weight is easier and light years faster than ever before. Solta makes it instantaneous and pain free with no dieting, no exercise, no blood, no needles, and no knives. Solta is now offering proprietary equipment for procedures by physicians and technicians using patented high-energy ultrasound to eliminate fat cells on contact.

    Last year investors cashed in on Arena Pharmaceuticals (NASDAQ:ARNA) when their obesity drug, Belviq, was approved sending their shares flying from under $2.00 to almost $12.00 per share. In 2012, Vivus, Inc. (NASDAQ:VVUS) rocketed from $9.00 to almost $30.00 when their obesity drug, Qsymia, was approved by the FDA. Sales have not yet lived up to expectations to warrant those lofty prices causing shares to give up about half their gain. Arena has fallen from $12 back to $6.35 and Vivus has dropped from $30.00 back to $12.60. Belviq and Qsymia are both expensive prescription drugs with potential adverse side effects and are reported to produce only about a 5% weight loss in one year that hardly seems worthwhile. Arena and Vivus both appear to be marking time just waiting for sales to improve. Investors will just have to wait and see.

    Then there are the old favorite diet food companies that have fallen out of favor with consumers and investors due to lackluster and even falling sales. Nutrisystems, Inc. soared from $7.18 to over $13.00 per share this year just on the hopes of turning the company around from declining sales of its diet foods. Sales have been falling for the past few years and continue to fall but the company is hopeful the new Walmart program will reverse its dim future prospects. Shares appear to be on the high side of valuations based on the fact that Nutrisystem sales have not yet proven themselves. Weight Watchers International, Inc. (NYSE:WTW) imploded from $60.30 this last year to under $36.00. The reason again is that sales are declining with no hope for a turnaround yet. Clearly, consumers are gradually losing their interest in diet foods and investors are losing weight in their wallets.

    On the exercise front, few health clubs are publicly traded, but Life Time Fitness, Inc. (NYSE:LTM) is indicative of the group of several privately held companies such as Gold's Gyms, 24 Hour Fitness, Equinox, and Bally's Fitness Centers. Health clubs or gyms are not setting any records with investors and are working hard just to keep their heads above water. In the past three years, shares of Life Time Fitness traded from a low in the mid $30's to a high in the mid $50's and are underwhelming in performance. Exercise and diet are clearly the best way to lose weight and keep it off, but it is the most difficult path because is takes such strong willpower that seems to be a very rare commodity these days when instant gratification seems to be the popular and only way to go. Investors are not inspired by health clubs. People just don't want to work that hard. They want fast and they want easy.

    Then we have Solta Medical, Inc. that is a world leader in the fast growing area of aesthetics. Solta appears to fit the kind of weight loss opportunity investors and consumers are looking for because they own the most exciting weight loss breakthrough in history. Imagine, just lying comfortably on a table for one hour. Relaxing while a technician gently massages your body with a soothing transducer that feels like you are enjoying a hot rock massage in a luxury spa. And in only one hour, your waistline is one inch smaller. This revolutionary procedure is just beginning to grow as the word slowly gets out. When diet, exercise and pills won't work, Solta's Liposonix® or VASER Shape are the perfect solution.

    VASER Shape is so effective that the popular television personality, Dr. Oz, demonstrated and endorsed it on his television show. Dr. Oz also demonstrated Liposonix with similar results. After a painless, non-invasive one-hour treatment, patients are shocked to see inches of fat disappear right in front of their eyes.

    When the miraculous results of VASER Shape and Liposonix are actually witnessed, the investment opportunity in Solta Medical becomes apparent because it is a breakthrough technology that clearly stands out from the competition. Solta has a strong position in the industry and is just wrestling with normal growing pains after acquiring Sound surgical and the VASER product line. There are always issues with sales and marketing for new products that have not been worked out effectively yet, but it is only a matter of a short amount of time before sales start going through the roof.

    In addition to VASER Shape and Liposonix the company offers aesthetic energy devices for skin resurfacing and rejuvenation, acne reduction, body contouring and skin tightening, as well as tools and accessories to optimize the latest liposuction techniques. The Solta Medical portfolio includes the well-known brands Thermage, Fraxel, Clear + Brilliant, Liposonix, Isolaz, CLARO, VASERlipo, VASERshape, VASERsmooth, VentX, PowerX, TouchView, and Origins.

    Solta Medical is already flowing substantial revenues with sales increasing by 25% from 2011 to over $144 million reported for the year ending December 31, 2012. Solta Medical has seen more than two and a half million procedures performed with their portfolio of products in over 80 countries around the world.

    On December 31, 2012, Solta reported a healthy position of almost $40 million in cash and over $80 million in current assets with less than $60 million in current liabilities. Solta is trading at $2.16 per share, down from $3.50 in the past year and down from it's all time high over $10.00 per share. Cantor has a $4.00 per share price target, but if the VASER line takes off as expected, this price is too low and Solta could see much higher prices in 2013.

    VOCE Capital Management has a position in Solta and they have voiced their displeasure with management's performance resulting in ouster of Stephen Fanning, the previous CEO. VOCE has a vision that Solta will be bought out at higher prices very soon but given their breakthrough products in weight loss and the size of the weight loss market, it is possible Solta may see record highs over $10.00 sooner than later.

    The risk to Solta shareholders is that they may be unsuccessful at marketing their new products and they may not be able to raise adequate capital to remain a viable company. There is also the risk of bigger market events influencing share prices in general that can spill over to Solta. And there is always the risk of the unforeseen.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Themes: long-ideas Stocks: ARNA, LTM, VVUS, WTW, SLTM
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