Kythera Biopharmaceuticals (KYTH): If You Missed the Double Chin Rally, Try Small Caps ZLTQ, SLTM & CYNO

On Tuesday, small cap biotech stock Kythera Biopharmaceuticals Inc (NASDAQ: KYTH) surged around 25% after announcing that its ATX-101 REFINE-1 and REFINE-2 Phase III trials met all primary and secondary endpoints for the reduction of so-called double chins; but if investors missed out on that rally, small caps Zeltiq Aesthetics Inc (NASDAQ: ZLTQ), Solta Medical Inc (NASDAQ: SLTM) and Cynosure, Inc (NASDAQ: CYNO) each have a piece of the aesthetic market as well. In the case of Kythera Biopharmaceuticals, its ATX-101 can be injected to deal with double chins – meaning its less invasive than liposuction as the drug dissolves fat cells but leaves other tissue alone. JP Morgan has noted:

With positive data now in-hand,we see a very high probability of a 2015 approval for ATX101 in the US and Europe in what we see as a $500+ million annual sales opportunity to Kythera.We reiterate our Overweight rating and our raising our price target to $45 from $34.

However, Kythera Biopharmaceuticals is not the only small cap targeting the aesthetic treatment market as investors might want to consider the following stocks: 

Zeltiq Aesthetics Inc. Focused on the design, development and commercialization of non-invasive procedures for the reduction of unwanted fat tissue, small cap Zeltiq Aesthetics' first commercial product, the CoolSculpting System, is designed to selectively reduce stubborn fat that may not respond to diet or exercise. On Tuesday morning, Zeltiq Aesthetics held an investor day and afterwards the stock jumped from the $8.30 level to the $9.30 level as investors must have liked what they heard (you can listen and view the presentation by clicking here). The PowerPoint presentation noted that treating existing aesthetic patients is a $11 billion market in the US (14.6 million procedures with 40 - 54 year olds making up 48% of the procedures) and that there are 30,000 aesthetic practices globally with the company initially targeting 5,000 of these accounts and currently having about 1,500 accounts – meaning there is still a large untapped market. Otherwise, investors should note that the last time Zeltiq Aesthetics reported earnings, it reported an 18% year-over-year increase and a 32% sequential increase to $26.3 million along with a net loss of $3.6 million verses $8.1 million. On Wednesday, Zeltiq Aesthetics fell 0.64% to $9.25 (ZLTQ has a 52 week trading range of $3.20 to $9.69 a share) for a market cap of $334.46 million plus the stock is up 106.5% since the start of the year, up 53.4% over the past year and down 40.8% since October 2011. 

Solta Medical Inc. Focused on the medical aesthetics market, small cap Solta Medical 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. At the beginning of September, Solta Medical announced the appointment of an executive search firm to find a permanent President and Chief Executive Officer after the resignation of Stephen J. Fanning on August 6, 2013. He resigned after Solta Medical reported "dismal" earnings or rather a dismal guidance. Specifically, Solta Medical reported a 16% revenue increase to $43.2 million along with GAAP net income of $3.8 million verses a GAAP net loss of $26.3 million. However, Solta Medical gave a full year revenue guidance of approximately $165 million verses $180 million while Non-GAAP operating income guidance was lowered from $13 million to $16 million to approximately $10 million. Roth Capital Partners analyst Chris Lewis issued a research note which said the company will continue to face challenges from pricing pressure, management uncertainties and sales force turnover. On Wednesday, Solta Medical rose 1.41% to $2.16 (SLTM has a 52 week trading range of $1.44 to $3.21 a share) for a market cap of $172.33 million plus the stock is down 16.9% since the start of the year, down 34.5% over the past year and down 41.6% over the past five years.

Cynosure, Inc. A developer and manufacturer of a broad array of light-based aesthetic and medical treatment systems, small cap Cynosure currently holds 37 US patents and markets over 14 different light based systems, representing advanced levels of solid-state, liquid and semiconductor laser technologies. At the end of July, Cynosure reported a 27% revenue increase to a record $50.1 million thanks to higher laser product sales across distribution channels plus $5.1 million in revenue from five days of sales attributable to the Palomar acquisition. Adjusted net income came in at $5.0 million with the company having $106 million in cash or cash equivalents and no debt at the end of the quarter. It should be noted that the Palomar Medical Technologies acquisition )for $294 million in cash and shares) means that Cynosure now has 20,000 laser hair removal machines in more than 100 countries plus the CEO was quoted as saying:

"Combining with Palomar complements our product portfolio and customer base, adding new product and service revenues, strengthening our global distribution network, creating new cross-selling opportunities and enhancing our intellectual property position."

Otherwise and back in May, Cynosure was added to the S&P SmallCap 600® Index. On Wednesday, Cynosure rose 0.39% to $23.08 (CYNO has a 52 week trading range of $21.14 to $30.20 a share) for a market cap of $514.80 million plus the stock is down 1.75% since the start of the year, down 12.7% over the past year and up 5.5% over the past five years.

Finally, here is a look at the share performance of Kythera Biopharmaceuticals verses the other small cap aesthetic treatment stocks:

As you can see from the above performance, its been a rather mixed performance for investors with Kythera Biopharmaceuticals and Cynosure being winners while Zeltiq Aesthetics and Solta Medical have been losers.