July 6, 2006 11:27 AM PDT
Military know-how combats cellulite, body hair
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In the past few years, Syneron Medical, a company here that makes machines for aesthetic medical procedures like vein removal, has emerged as one of Israel's more noteworthy tech exporters. In its last quarter, ended in May, the company reported revenue of $23.7 million, up 28.3 percent from the year before, and net income of $8.8 million. Gross margins hover around 85 percent, the sort of levels usually associated only with software companies.
Back in May, daytime TV show "The View" showed off how Syneron's VelaSmooth system can sculpt out cellulite patches. Since its initial public offering on the Nasdaq in August 2004, the company's stock has climbed from $12 to above $20. For a while, it sold for $46.91 a share and surpassed Google in stock price gains following an IPO.
It's also a company that owes a heavy debt to the military, acknowledged chairman and co-founder Shimon Eckhouse. The company's eLight and eMax systems use an energy source--intense pulsed light (IPL)--that he helped create in the 1990s to remove paint from jet aircrafts.
Developing medical equipment is similar to creating weapons systems, said Eckhouse, who spent 17 years as a scientist at Israel's Armament Development Authority.
"When you are a weapons system designer...you are involved with electronics and optics and mechanics and software and explosives and that sort of thing. It is very multidisciplined," he said. "It is very hard in medicine...to do something in medicine without being multidisciplined. It involves imaging, high-energy sources, signal processing."
Although Israel is mostly known for security software and semiconductors, a growing number of companies are trying to capitalize on the demand for health care technology. Because of regulatory processes and other issues, medical devices are considered as among the riskier investments, but interest in the field is climbing.
The evolution of the industry can partly be traced, like a lot of sectors here, to the military. One of the other big Israeli success stories in recent years is Given Imaging, which created a pill-size video camera that can provide doctors with a fairly comprehensive view of the human digestive system. The "pillcam" was invented by Gadi Iddan, a missile scientist at the Arms Development Authority.
The multidisciplinary approach is further reflected in the educational system. The Technion, the country's premier engineering and technical school, has its own medical school, a rarity for tech colleges. Spinouts from the university include Regentis, which has developed a human-synthetic protein that will enable people to regrow cartilage.
Then there is the contradictory status of doctors in Israel. On one hand, the profession remains revered.
"Every Jewish mother wants her boy to be a doctor," said Zeev Holtzman, chairman of Giza Venture Capital.
The country, though, is awash in M.D.s. Some are homegrown, while others have emigrated from the former Soviet Union. As a result, salaries are relatively low. A new doctor fresh out of training might start at $60,000 to $70,000 a year, less than his or her U.S. counterparts.
"It is not a good life being a doctor, unless you are a specialist or at a private clinic," said Chen Porat, CEO of UC-Care Medical Systems, which has devised a catheter for male patients. To escape, many try to form medical device companies.
Syneron's technology essentially cuts down the health risks associated with traditional systems for hair and blemish removal. Today, most of these systems use lasers or IPL to roast a follicle.
Light, though, gets absorbed by pigments in the skin and results in burning. To get around that, Syneron's systems beam down light, either laser or IPL, as well as conductive Radio Frequency (RF) energy. By using both, doctors don't need to derive as much energy from light and therefore reduce the risk of burning.
"To put it roughly, light initially heats up an object (to be removed) and the RF concentrates on the preheated areas," Eckhouse said.
The tasks of Syneron's machines, which range in price from $50,000 to $150,000, vary depending on the configuration. To expand its market, the company is marketing not just to dermatologists, but to general practitioners as well. Outside of the U.S., the systems can be operated in some places by nonphysicians.
"There has been an acceptance of aesthetic procedures in the last 10 years," Eckhouse said.
The VelaSmooth system for cellulite and wrinkles differs slightly from the units made for hair and skin. The basic technology is the same, but it also comes with a module to move internal tissue around.
Unlike liposuction, the system does not eliminate fat, Eckhouse clarified. Instead, it sort of melts it and shifts it around so that it won't be as noticeable.
Redistribution of the fat can reduce the diameter of thighs and other body parts, the company said. The procedure, which takes multiple doctor visits, is also far less invasive than liposuction and can iron out some wrinkles.
"With liposuction, you end up with very loose skin," Eckhouse said. "Yes, I got rid of five pounds of fat, but now my skin looks horrible. Vela is actually effective in post-liposuction treatment. Doctors are buying it to tighten the thighs."
Nonetheless, Syneron and others are looking at ways to eliminate fat noninvasively, possibly with ultrasound waves.
"The challenge is, OK, you dissolved a large amount of fat. How do you get rid of it?" Eckhouse said. "The fat will go into the bloodstream, which is not the dream of anybody. It's a very delicate issue. We are right now in the R&D stage."
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