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Where some see a mark of regret, Soliton sees a market opportunity.
As more and more tattoo-bearing millennials age into their 30s, dermatologists are experiencing an uptick in tattoo regret syndrome. However, tattoo removal treatment has remained largely the same for decades, an expensive and painful procedure that can lead to varying degrees of success. Houston-based medical device company Soliton is betting its device will modernize the procedure and attract a whole new market of millennials.
Klemp says there are two distinct groups of tattoo owners his company targets: “regretters” and “considerrers.” By making the tattoo removal process cheaper, faster and more comfortable, Klemp says he can flip the category of “considerrers” into following through on altering or removing a tattoo.
“We identified that there’s a much bigger audience for tattoo removal procedures than what we call ‘regretters.’ This other group, this broader group is what we call ‘considerers,’ who are considering a tattoo removal,” he said. “If you ask them whether they regret their tattoo, they’re likely to say no, but they might say, ‘I don’t like this one anymore, or I’m not in love with this font anymore.’ It’s the people considering a change to one or more tattoos that turns out to be much bigger.”
Klemp co-founded Soliton with Christopher Capelli while the two were working at The University of Texas MD Anderson Cancer Center in 2012. With seed funding from the Hunt Petroleum family, the two invented their Rapid Acoustic Pulse, or RAP, Device in hopes that it will disrupt the industry that Klemp said has only seen incremental innovation over the past few decades.
Klemp estimates the tattoo removal industry to be worth billions, but of the more than 10,000 laser clinics that provide hair removal and skin treatments, fewer than 1,000 currently provide tattoo removal, according to laser product retailer Astanza laser. Meanwhile, the number of Americans with tattoos and those considering tattoo removal is on the rise, according to a 2015 Harris Poll survey. One in three Americans have a tattoo, the survey says, and half of all millennials have one. The survey adds that one in four tattoo owners experience tattoo regret.
One Houston-area dermatologist said about 30% of his business is tattoo removal and he’s watched that figure grow every year as tattooed millennials age into their 30s.
The space is intensely competitive. Players in the tattoo removal industry include general medical device manufacturers such as Hologic-owned Cynosure, Cutera, Lumenis, Candela and Laserscope as well as some highly-specialized companies like Merz. Soliton plans to compete by providing a superior product, but warned investors this year that “competitive pressures may result in price reductions, reduced margins and loss of market share.”
Soliton went public on the Nasdaq on February 19 this year, trading at $5.00 per share. It was last trading just under $11. A word of caution for investors, it’s still a very small stock and they can be risky. Soliton’s market value is just $182 million. Investors warmed on the stock following successful clinical trials and after their device received FDA approval for tattoo removal.
$22 price target
Executive managing director of Maxim Group Anthony Vendetti released a note earlier this month rating Soliton stock a buy and announcing a 12-month price target of $22 per share. He said Soliton is looking beyond tattoo removal at other applications like non-invasive cellulite treatment. Altogether, Soliton could be looking at a multi-billion dollar market, he said, but there’s a long road ahead.
“[Soliton] is in the process of trying to commercialize it, building more prototypes, building enough systems that they can get in the hands of the key opinion leaders for feedback,” Vendetti said in an interview. “It is a competitive industry, and also one that is very often disrupted by new technology and new strategies.”
Despite the challenges presented by the industry, Klemp said he’s betting that as Soliton’s RAP device makes it easier and cheaper to alter tattoos, the growing group of “considerrers” will be swayed to commit to the procedure.
“More than half of the tattoo owners in the United States, close to 60%, would say ‘I would consider changing one of my tattoos if I had the opportunity,'” Klemp said. “When we ask them why they’re not acting on that, they give a somewhat predictable response: the current method is just not acceptable. It takes too long. There’s too much pain involved. It’s expensive. It’s just something I don’t want to go through.”
The most popular tattoo removal procedure today is a laser treatment. A technician zaps the tattoo area to heat the ink particles in the skin and break them down into small enough sizes that the immune system can, over time, eliminate the tattoo naturally.
To remove a single tattoo, it can take up to 12 sessions spaced out over the course of two years for optimal results. Each treatment can cost between $100 and $400, depending on the size and location of the tattoo, and after each treatment, the tattoo area can be painful and needs to be regularly cleaned like an open wound.
Dr. Paul Friedman, director of the Dermatology and Laser Surgery Center in Houston, says some tattoo owners are put off by the procedure.
“All the time, people come in for consultations and we explain the procedure, then we never see those people again,” he said. “I’ve had also the reverse for people go to a non-clinic setting where there is not a physician performing the treatment, so they might end up with subpar results, they might end up with complications and there could be pain associated with the treatment.”
Friedman said he’s been seeing more and more millennials come in with tattoo regret. The reasons vary, he said, but often their tastes have simply changed and they’d like to update tattoos they got years ago. He hasn’t used Soliton’s RAP device, but often uses one of their primary competitors, Merz’s PFD Patch.
The PFD Patch helped grow the market when it rolled out in 2016, he said, but the industry is due for a makeover.
