Incorporated: 2000
NAIC: 334510 Electromedical and Electrotherapeutic Apparatus Manufacturing
SIC: 3845 Electromedical Equipment
Syneron Medical Ltd. is a leading developer of noninvasive aesthetic enhancement devices and systems. The company produces a line of aesthetic medical systems based on its patented ELOS (electro-optical synergy) technology, itself based on technologies developed for the Israeli army. ELOS permits the use of multiple wavelengths by combining the energy from bi-polar electrical radio frequencies with an intense pulsed light (IPL) laser. This permits deeper skin penetration and more accurate and selective targeting, reducing the risks of scarring and skin pigmentation alteration, while enabling a broad range of applications. These applications include hair removal, wrinkle reduction, the temporary reduction of the appearance of cellulite, treatment of benign pigment-based lesions, such as age spots, and reduction of superficial vascular conditions, such as varicose veins. Syneron has rolled out a range of products and systems targeting each of these applications; the company's products include the VelaSmooth cellulite treatment, eLight, eLaser, Aurora, Pitanga, Polaris, Galaxy, and LiteTouch.
Founded in 2000, Syneron initially focused its product development and sales on the professional medical and aesthetic market. In 2007, the company signed a partnership agreement with Procter & Gamble (P&G) to develop a range of consumer-oriented devices and products to be sold under one of P&G's brands. Based in Yokneam Illit, Israel, Syneron is listed on the NASDAQ. The company carries out manufacturing in Israel, and operates sales and distribution subsidiaries in Canada, Germany, and Hong Kong. Syneron has sold more than 6,000 of its ELOS-based systems, which range in price from $50,000 to $150,000, throughout the world. In 2006, the company's sales reached $117 million, for a net profit of nearly $48 million. Cofounders Shimon Eckhouse and Michael Kreindel serve as chairman and chief technology officer, respectively, while Doron Gerstel is company CEO.
Serial Entrepreneur Strikes: 2000
Shimon Eckhouse had already gained a reputation as one of Israel's most active high-technology entrepreneurs when he cofounded Syneron in 2000. Eckhouse, who studied at Israel's prestigious Technion Institute of Technology, and completed a Ph.D. degree in physics at the University of California, started his career with Israel's Armament Development Authority, where he began working with laser technologies. Eckhouse later joined California-based Maxwell Technologies as head of development. Eckhouse continued to focus on laser technologies, seeking to overcome the limitations of conventional lasers. In 1991, while attempting to adapt laser systems for use in removing paint from jet airplanes, Eckhouse invented and patented a new generation of laser technology, called intense pulsed light (IPL).
Eckhouse quickly realized that the IPL technology represented an important advancement in the use of lasers for dermatological applications as well. Conventional lasers, which operated along a single wavelength, remained limited in their use in dermatology. This was due to factors such as low skin penetration, poor targeting and selectivity, and a high risk of scarring and pigmentation changes. The use of IPL technology promised to reduce the risk of scarring and pigmentation changes, while also broadening the range of possible uses. In order to develop IPL further, Eckhouse founded a new company, ESC Medical Systems, in 1991. By 1994, ESC had launched clinical trials of its first IPL-based device. By 1996, the company was valued at more than $1 billion.
Yet by the end of the decade, Eckhouse himself was ousted from ESC (which later became Lumenis) after a management shakeup in 1999. In the meantime, Eckhouse himself had grown into a major force behind Israel's emergence as one of the world's high-technology centers, and played a role in founding seven other technology-based start-ups. These included CardioDex, manufacturer of the Epiclose vascular closure device; Widemed, which developed bio-signal processing technologies; and Nanocyte, which worked on a transdermal drug delivery system. Other companies in Eckhouse's portfolio were OrSense, which focused on blood analysis and measuring technologies, and ColorChip Ltd.
In the meantime, other scientists had been working to evolve laser technology behind IPL, which remained burdened by the inherent limitations of the single range emitted by lasers, such as not being suitable for use on skin with darker pigmentation. Among them was Michael Kreindel, a Russian-born physicist who had earned a Ph.D. in pulsed power, gas discharge, and plasma physics at the Institute of Electrophysics in Russia. Kreindel immigrated to Israel in the early 1990s, joining ESC in 1994, where he remained through 2000. Kreindel achieved a breakthrough in 2000, when he successfully combined IPL's optical energy with the electrical energy generated through bi-polar radio frequencies.
Eckhouse and Kreindel immediately recognized the potential offered by the new technology, which they dubbed ELOS (for electro-optical synergy). The broader energy range provided for deeper skin penetration, while reducing exposure levels to the intense laser light. As a result, ELOS offered a wider range of dermatological applications, with highly improved safety levels for all skin types. Together that year they formed a new company, Syneron, in order to develop a range of devices based on the ELOS technology.
Product Rollouts
Over the next year, the company assembled a team to design its first product family, called Aurora. By the end of 2001, the company had completed that project, receiving approval to roll out the device in Europe. The Aurora system highlighted the benefits of ELOS, in particular through its wider range of applications. Initially approved as a hair removal system, including U.S. Food and Drug Administration (FDA) approval in July 2002, Aurora was later approved for use in treating acne, as well as a skin rejuvenation treatment, including treating such benign and superficial conditions as varicose veins, beauty marks, and age spots.
In 2003, Syneron rolled out its second ELOS-based product family, dubbed Polaris. This system was developed specifically to treat varicose veins in the leg and other vascular lesions. Initially approved for use in the European Union in December 2002, Polaris was rolled out for that market in May of the following year. By then, Polaris had also been approved for use in the United States. At the same time, Syneron launched another product family, Pitanga, a hair removal device also designed as a treatment for acne, developed for the Canadian and European markets.
By 2004, Syneron had added a new device family, called Comet, for hair removal applications. Syneron also combined the Aurora and Polaris systems into a single unit, dubbed Galaxy, offering practitioners a more extensive, and modular, range of treatment operations. In this way, the company responded to two increasing trends in the medical market. On the one hand, aesthetic surgery was enjoying a major growth spurt, gaining not only in popularity but increasingly in its social acceptance as well. This movement came in part as the first members of the huge postwar baby boomer generation sought to defy the aging process as they entered their 60s. On the other hand, an increasing number of physicians had begun to turn from high-risk medical procedures, and the burdensome malpractice insurance premiums that accompanied them, to lower risk, and highly lucrative aesthetic procedures. By March of that year, the company's installed base had grown to more than 1,400 devices.
A Cellulite Miracle for the New Century
Syneron went public in 2004, listing its shares on the NASDAQ in advance of its next product rollout. First approved in Europe and Canada, the new device, marketed as VelaSmooth, promised a revolution in the treatment of cellulite. According to the product's original user manual, released in July 2004, "the VelaSmooth system [was] indicated for the treatment and reduction of cellulite, and the improvement of adipose tissue metabolism." With an estimated 90 percent of all women affected to some degree by the development of cellulite, the market for the new system was potentially enormous.
In advance of the VelaSmooth rollout, Syneron expanded its international sales force, building a team of 50 to support the company's growth throughout North America and Europe, as well as in Asia and elsewhere. In the United States, the company also teamed up with an insurance company, offering an insurance premium reduction of 66 percent for doctors implementing medical procedures based on Syneron's devices.
Syneron was forced to scale back claims for the VelaSmooth system, however, after clinical testing failed to show any significant improvement in the presence of cellulite following the use of the device. Accordingly, starting in January 2005, the company changed the wording of its user manual to read: "The VelaSmooth Shaper system is indicated for the temporary reduction in the appearance of cellulite, to relieve minor muscle aches and pain and for temporary improvement in the local blood circulation." The revised statement enabled Syneron to achieve FDA approval for the device in July of that year.
The company continued to seek new applications for its laser technology. In July 2005, the company acquired a 25.5 percent stake in Light Instruments, which had been developing the LiteTouch dental laser system. By the end of that year, Syneron had doubled its investment in Light Instruments, for a total of $1.5 million, with an option to boost its control of that company to 67 percent. LiteTouch succeeded in gaining FDA approval by October 2006.
In the meantime, Syneron had begun to broaden the scope of its marketing effort. In April 2006, the company created a new division, Syneron Cosmetics, which focused on sales to the nonmedical field such as spas, aesthetic practitioners, and other cosmetics professionals. The company also launched its next generation of ELOS-based devices, including the eLight, adding broad spectrum laser technologies; eLaser, which featured diode-based laser technology; and eMax, which offered both new laser types. All three systems received FDA approval in October 2006. By the end of that year, the company's revenues had climbed to $117 million, with an installed base of more than 6,000 devices, and net profits topping 41 percent.
Syneron appeared set to enter an entirely new era in 2007, however. In March of that year, the company announced that it had reached an agreement to develop consumer-oriented, home use devices to be marketed by Procter & Gamble (P&G). The agreement, which also called for the two companies to develop devices to be used in conjunction with preparations developed by P&G, opened a new and potentially enormous market for Syneron. Following the agreement, Syneron stated that it would initially focus on the treatment of wrinkles, fine lines, sun spots, age spots and related blemishes, as well as cellulite. The company's efforts to develop treatments for the latter category received a leg up in August 2007 with FDA approval to market the VelaShape for use in the "circumferential reduction of thigh measurement." Syneron's leading edge technologies placed it at the forefront of the new generation of the market for aesthetic and dermatological devices.
Principal Subsidiaries
Syneron Inc. (Canada); Syneron GmbH (Germany); Syneron Latin America; Syneron Medical (HK) LTD. (Hong Kong).
Principal Competitors
Candela Corporation; Cutera, Inc.; Cynosure, Inc.; Lumenis Ltd.; Palomar Medical Technologies, Inc.; Thermage, Inc.
Further Reading
Benesh, Peter, "It Fleshes Out a New Game Plan," Investor's Business Daily, October 11, 2004, p. A13.
Bittar, Christine, "P&G in Deal to Market Items Like Anti-Cellulite Device," MediaPost's Marketing Daily, March 1, 2007.
Boles, Tracey, "Anti-Cellulite Device to Launch in the UK," Sunday Business, August 14, 2005.
Fischer, Jeff, "Syneron Medical's Value," Complete Growth Investor, March 5, 2007.
Fishman, Rae, "Eckhouse, Syneron Push Further into Green with Sale of Stock," Medical Device Week, March 9, 2005.
Kanellos, Michael, "Military Know-How Combats Cellulite, Body Hair," News.com, July 6, 2006.
"Market's Missing Syneron, but Wait on the Sidelines Anyway--Lehman," Ha'Aretz, March 1, 2007.
Saito-Chung, David, "Combining Light, Radio Waves, Syneron Growing with Skin Treatment Devices," Investor's Business Daily, August 1, 2005, p. B02.
Tsipor, Tali, "Syneron Gets FDA Approval for Dental Laser," Globes, October 10, 2006.
Wise, Christina, "Helping Doctors Boost Sales; Syneron's Lasers Enjoy Lower Insurance Premiums," Investor's Business Daily, May 23, 2005, p. B02.
Wollberg, Erez, "Syneron Beats Estimates, Raises Guidance," Globes, August 6, 2007.
— M. L. Cohen
