Cynosure grows aesthetic business with $24.5M deal

28 Jun 2011

US medical laser company acquires ConBio subsidiary belonging to the Japanese optics giant HOYA Corporation.

Massachusetts-based Cynosure, which specializes in laser systems for hair removal and cellulite treatment, has gained a complementary aesthetic product line with the acquisition of HOYA Corporation’s ConBio subsidiary for $24.5 million in cash.

Under the terms of the deal, Cynosure has gained all intellectual property and outstanding trades and warranties relating to ConBio, including a European base in Courtaboeuf Cedex, France, as well as the division’s main headquarters in Fremont, California. The approximately 50 ConBio employees have all been offered positions within the new company structure.

The purchase price is slightly higher than the ConBio aesthetic division’s full-year revenues of $23.9 million for the fiscal year that ended on March 31, 2011, and will add approximately 25-30% to overall revenues of around $82 million posted by Cynosure in its last fiscal year. Cynosure management also highlighted that the ConBio division has been profitable for the past two years.

As well as boosting Cynosure’s global presence – ConBio makes around 80% of its revenues outside the US – the acquisition will significantly broaden the range of laser technologies and applications now addressed by the company.

Q-switch expertise
The ConBio business, which will remain headquartered in Fremont, sells four main product lines, chief among which is a Q-switched, nanosecond-pulsed Nd:YAG dual-wavelength system called “MedLite”. Cynosure already has a nanosecond system operating at 755 nm, but the addition of 532 nm and 1064 nm wavelengths will significantly increase its range of applications to include treatment of wrinkles, acne scars and pigmented skin, as well as providing technology for removal of multi-colored tattoos – ConBio’s second-largest application by revenue.

ConBio’s other product lines comprise the more powerful “RevLite” version of the MedLite system, the Er:YAG “DermaSculpt” laser operating at 2.94 µm, and the “V-Raser”, a 980 nm GaAs diode laser system used to treat dilated facial blood vessels, also known as telangiectasias.

Under questioning from investment analysts in a conference call to discuss the deal, Cynosure CEO Mike Davin said that the division’s existing management team would remain in charge of manufacturing operations and research and development activity. And although he would not confirm the identity of a specific general manager, Davin did reveal that the division would be renamed “ConBio – a Cynosure company”.

Cross-selling opportunity
He expects to see strong synergies across marketing, sales and distribution activities, with the possibility of cross-selling a portfolio of complementary product lines. The Asian market, where ConBio is particularly strong in the sale of lasers for skin pigmentation treatments, is expected to be a significant growth driver in forthcoming quarters.

Cynosure and its new subsidiary can each claim a long history in the aesthetic laser business, with both celebrating their 20th year of operations in 2011. Since then, ConBio has delivered an installed base of some 3200 systems worldwide and established itself as a brand leader in the sector.

The combined company, which is left with still-healthy cash holdings of $70 million following the acquisition, has been indicating for a number of months that it would aim to consolidate the medical laser space, with CFO Tim Baker saying last August that Cynosure was “very active in looking at non-organic opportunities to grow the organization”.

CEO Davin is not ruling out further acquisitive moves, and reiterated the strength of Cynosure’s balance sheet in announcing the ConBio deal - although he stressed that “organic growth remains the key driver of the business”.

Cynosure’s stock price rose by some 5% in early trading after announcing the ConBio deal, to stand at close to $12 – equivalent to a market capitalization of about $150 million.