STRATA Skin Sciences(SSKN) - 2023 Q4 - Annual Report

Technology and Product Efficacy - The XTRAC excimer laser technology is FDA-cleared and has been shown to have an 89% efficacy rate in treating psoriasis, with significant improvement in plaques and severity scores in as few as six to ten treatments [28]. - The XTRAC system has been cited in over 45 clinical studies, demonstrating its effectiveness and safety in treating various skin conditions [28]. - The TheraClear Acne Therapy System, acquired in January 2022, combines vacuum and broadband light for effective treatment of inflammatory acne, with treatments taking only 10 minutes [37]. - The XTRAC product line competes with pharmaceutical compounds and methodologies for treating skin conditions, with a focus on its clinical effect, minimal side effects, and cost-effectiveness [38]. - The XTRAC Momentum® 1.0, launched in February 2022, features higher power and a faster repetition rate compared to previous models, enhancing treatment efficiency [25]. Market Presence and Distribution - As of December 31, 2023, there are over 1,000 XTRAC lasers in use in the U.S., with 923 systems included in the dermatology recurring procedures revenue model [26]. - The company estimates that the target U.S. audience for XTRAC lasers comprises approximately 3,500 dermatologists who perform disease management [26]. - The company has transitioned its international sales to a direct distribution model, signing distributor contracts in multiple countries including Mexico and India in 2023 [27]. - The company has 923 partner clinics in the United States as of December 31, 2023, primarily in the dermatology procedures recurring revenue model [79]. Regulatory Compliance and Legal Matters - The XTRAC and TheraClear devices are classified as Class II medical devices, requiring FDA 510(k) clearance for marketing, which has been obtained for various skin conditions [48][51]. - The company has received FDA 510(k) clearance for the XTRAC Momentum Excimer Laser platform, enhancing its product offerings in dermatological treatments [49]. - The company is approved by the European Union to affix the CE mark to its XTRAC laser and VTRAC lamp systems, allowing marketing in the European Economic Area [54]. - The company is subject to various federal and state laws aimed at preventing fraud and abuse in healthcare programs, impacting its operational compliance [56]. - The False Claims Act imposes liability for knowingly presenting false claims, which could significantly affect the company's financial performance if violated [63]. - The company is subject to the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws, impacting its international customer relationships [65]. - Compliance with HIPAA regulations entails significant costs for the company, despite not being classified as a covered entity [67]. - The Health Information Technology for Economic and Clinical Health (HITECH) Act has increased civil penalty amounts for HIPAA violations up to an annual maximum of $1.5 million for uncorrected violations [68]. - The California Consumer Privacy Act (CCPA) provides specific privacy protections for California residents, impacting how the company handles personal data [66]. Operational Challenges - The impact of the COVID-19 pandemic has led to significant disruptions in business operations, affecting financial performance and customer behavior [21]. - The ongoing Russia-Ukraine conflict has affected the supply and pricing of noble gases essential for the operation of the company's lasers [22]. - Third-party reimbursement for the company's products is challenged by payers who may deny reimbursement based on cost-effectiveness or alternative treatments [73]. - The company maintains third-party relationships for the manufacture and maintenance of its systems, ensuring sufficient capacity to meet demand [40]. Financial and Employment Overview - The company had 99 full-time employees as of December 31, 2023, including 2 executive officers and 35 sales and marketing staff [78]. - As of December 31, 2023, the national payment rates assigned by CMS for phototherapy treatments are $153 for areas less than 250 square centimeters, $168 for areas between 250 to 500 square centimeters, and $228 for areas over 500 square centimeters [77].