Venus Concept Stock

Venus Concept Inc. (Venus Concept) operates as a global medical technology company.

The company develops, commercializes and delivers minimally invasive and non-invasive medical aesthetic and hair restoration technologies and related services. The company’s systems have been designed on proprietary and flexible platforms that enable the company to expand beyond the aesthetic industry’s traditional markets of dermatology and plastic surgery, and into non-traditional markets, including family and general practitioners and aesthetic medical spas. In the year ended December 31, 2022, a substantial majority of the company’s systems delivered in North America were in non-traditional markets.

Venus Viva, Venus Viva MD, Venus Legacy, Venus Concept, Venus Versa, Venus Fiore, Venus Freedom, Venus Bliss, Venus Bliss Max, NeoGraft, Venus Glow, ARTAS, ARTAS iX, and AI.ME, are trademarks of the company and its subsidiaries.

Products and Services

The company derives revenue from the sale of products and services. Product revenue includes revenue from the following: the sale, including traditional sales and subscription-based sales, of systems, inclusive of the main console and applicators/handpieces (referred to as system revenue); marketing supplies and kits; service revenue; and replacement applicators/handpieces.

Service revenue includes revenue derived from the company’s extended warranty service contracts provided to the company’s existing customers.

Systems are sold through traditional sales contracts, the company’s subscription model, and through distributors. In the third quarter of 2022 the company commenced an initiative to reduce the company’s reliance on system sales sold under subscription agreements in the United States.

The company generates revenue under its subscription-based business model and from traditional system sales. Venus Concept Ltd., a wholly owned subsidiary of the company (‘Venus Ltd.’) commenced a subscription-based model in North America in 2011. The company’s subscription model is also available in targeted international markets in which the company operates directly.

The company works with its customers to provide business recommendations that improve the quality of service outcomes, build patient traffic and improve financial returns for the customer’s business.

The company has developed and received regulatory clearance for twelve novel aesthetic technology platforms, including the company’s ARTAS and NeoGraft systems. The company’s ARTAS and NeoGraft systems are complementary and give the company a hair restoration product offering that can serve a broad segment of the market. The company’s medical aesthetic technology platforms have received regulatory clearance for a variety of indications, including the treatment of facial wrinkles in certain skin types, temporary reduction of appearance of cellulite, non-invasive fat reduction (lipolysis) in the abdomen and flanks for certain body types and relief of minor muscle aches and pains in jurisdictions around the world.

In the United States, the company has obtained 510(k) clearance from the United States Food and Drug Administration (‘FDA’) for the company’s Venus Viva, Venus Viva MD, Venus Legacy, Venus Versa, Venus Velocity, Venus Bliss, Venus Bliss Max, Venus Epileve, Venus Fiore, AI.ME, ARTAS and ARTAS iX systems. Outside the United States, the company markets its technologies in over 60 countries across Europe, the Middle East, Africa, the Asia-Pacific and Latin America.

As of December 31, 2022, the company operated directly in 15 international markets through its direct offices in the United States, Canada, the United Kingdom, Japan, South Korea, Mexico, Spain, Germany, Australia, China, Hong Kong, and Israel.

Aesthetic Technology Solutions

The company has designed a suite of medical aesthetic systems that use the company’s proprietary multipolar pulsed technology (‘(MP)2’) technology to address the limitations of existing medical aesthetic technologies and procedures.

Hair Loss Treatment Solutions

The ARTAS Solution

The ARTAS System addresses many of the shortcomings of other hair restoration procedures. The ARTAS System is capable of robotically assisting a physician through many of the most challenging steps of the hair restoration process, including the dissection of hair follicles, site planning and recipient site making. With this assistance, the ARTAS System can help shorten the often-long learning curve for both physicians and technicians to become proficient in performing hair restoration procedures. In addition, by assisting the physician and technicians with many of the repetitive tasks associated with the hair restoration procedures, the ARTAS System can make hair restoration procedures less labor intensive and can reduce operator fatigue, thereby reducing inconsistent results. Further, the ARTAS System’s site making functionality, which includes an enhanced imaging system and sophisticated algorithms, helps physicians avoid damaging existing follicles and enables them to create a more natural, aesthetically pleasing outcome for the patient. In March 2018, the company received 510(k) clearance from the FDA to expand the ARTAS technology to include implantation of harvested hair follicles into the company’s ARTAS iX System for sale in the United States. As of December 1, 2022, the ARTAS iX conforms to the European Union’s (‘EU’) ‘Low Voltage Directive’, which allows the company to affix the CE Mark and market the ARTAS iX system in the EU.

The company strategically markets the ARTAS System to hair restoration surgeons, dermatologists, plastic surgeons and aesthetic physicians. The company can reach its target physician customers effectively through focused marketing efforts. These efforts include participation in trade shows, scientific meetings, educational symposiums, webinars, online advertising and other activities. For physicians who purchase the ARTAS System, the company provides comprehensive clinical training and practice-based marketing support. For example, the company helps its physician customers increase the number of procedures performed by assigning a business development manager (‘BDM’) to aid in building the physician-customer’s hair restoration practice. Support from a BDM includes assistance with recruitment, consultation, and conversion of patients. Additionally, BDMs deploy patient marketing materials, assist with social media and digital marketing strategies, and provide other marketing and sales support.

The NeoGraft Solution

NeoGraft offers a technology solution that complements the company’s robotic hair restoration system and provides an alternative to FUT Strip Surgery and Manual FUE procedures for the company’s customers and their patients.

Patient Value

Unlike traditional FUT Strip Surgery procedures, the NeoGraft system is minimally invasive. In a FUE procedure using NeoGraft, rather than surgically removing a portion of the patient’s scalp, each hair graft is individually dissected from the scalp for transplantation. Because a strip of the patient’s scalp is not removed, a FUE procedure avoids a long linear scar and reduces the post-operative pain and healing process, reducing the risk of potential infection and pain.

In addition to treating male pattern hair loss for patients with black and brown straight hair, the NeoGraft may also be used for women and people with curly or light-colored hair.

NeoGraft can be used for fine tuning of small, specific areas of the scalp, temples and temporal peaks.

Physician Value

The highly ergonomic mechanical NeoGraft system works as a natural extension of the surgeon's hand, allowing for faster and more accurate harvesting of hair follicles. NeoGraft patients may reach their goal with less time in the procedure room or fewer FUE procedures.

The company’s NeoGraft system is a lower priced option to the company’s ARTAS System making it a feasible alternative for physicians who do not perform a large volume of hair restoration surgeries.

Strategy

The company’s strategies are to broaden its portfolio of product offering; apply robotic technologies to new applications; focus on providing a complete set of products and services to the hair restoration market; expand FDA (and other regulatory agencies) cleared indications for the company’s products; expand into non-traditional markets; and enhance the company’s international operations.

Products

The company’s product portfolio includes nine energy-based systems that provide solutions for various non-invasive aesthetic applications using Venus Concept’s (MP)² technology, as well as the VariPulse, and/or fractional ablative RF, IPL, or laser technologies. The company offers two hair restoration solutions, NeoGraft and ARTAS, as well as the newest addition to the company’s portfolio, the company’s AI.ME next generation robotic platform for fractional skin resurfacing.

Products in Development

The company’s ongoing research and development activities are primarily focused on improving and enhancing the company’s technologies, products, and services, as well as expanding the company’s product offering with the introduction of new products for different aesthetic, medical and hair restoration applications. The company is developing the following products and technologies:

Skin Resurfacing on the AI.ME Platform

The skin resurfacing technology contained in the company’s AI.ME platform is intended to provide a non-surgical alternative to lift and tighten skin for procedures typically requiring surgical intervention. It uses mechanical vision, artificial intelligence and robotics to achieve the intended outcomes. The punches utilized for coring are designed not to leave scars on tissue. The skin will be contracted and smoothed after coring by applying a flexible patch to the area which will allow healing of the skin with predefined directional effect.

Venus Astera

The company is working on the next generation of the well-established Venus Legacy product line. This device is intended to extend the capabilities of the original Venus Legacy system product line by combining (MP)² and VariPulse technologies with real-time thermal feedback and ATC to provide homogeneous heating to multiple tissue depths while allowing for adjustable pulsed suction to further support deep energy penetration. This will result in enhanced lymphatic drainage and improved circulation stimulation. The device will come with both hand-held and hands-free applicators which will include (MP)² and EMS technologies.

Other Developments

The company’s research and development efforts also include research to expand indications, broaden the company’s offering of system applicators, advance the company’s proprietary (MP)2 technology, add new technologies and indications, develop design improvements and new products, as well as continue to support the company’s harvesting, site making and implantation functions for the ARTAS iX System, including the enhancements released this year which help promote faster procedures, achieve more acute angles for a more natural looking hairline, and includes a new training and demo mode for a more expedited training process and more life-like consultations.

Clinical Developments

The company continues to invest in research and development to support the company’s technology, marketing and post-marketing surveillance. The company also has a portfolio of 34 peer-reviewed publications and more than 20 white papers, many of which pertain to indications cleared outside of the United States to educate users in other countries and to study expanded indications in the United States. Authors for several of these publications hold stock options in Venus Concept or were paid consultants for the company.

Research has shown that (MP)2 technology improves aspects of textural lesions and body contouring. The fractional RF has been shown to improve skin structure, including wrinkles and scars through ablation and resurfacing. IPL technology used in the Venus Versa has shown to be versatile and effective for treating vascular and pigmented lesions, acne and rosacea. The company’s diode laser technology has been shown to be effective for lipolysis and reduction of fat layer thickness, as well as efficiently effecting hair reduction/removal. Additionally, the Venus Fiore device has demonstrated ability to improve symptoms related to vaginal atrophy.

The company has a number of ongoing clinical trials covering both new technologies and the development of expanded indications for existing technology. Clinical trials are conducted frequently to develop new technologies and support existing technologies and their respective enhancements and upgrades.

Sales and Marketing

The company markets and sells its products and services to the traditional medical aesthetic market, including plastic surgeons and dermatologists, as well as to a broad base of non-traditional physician markets, including general and family practitioners and aesthetic medical spas.

Direct Sales

The company provides its subscription model and traditional sales model, as well as the associated marketing support programs through the company’s wholly owned subsidiaries in the United States, Canada, the United Kingdom, Japan, South Korea, Mexico, Spain, Germany, Israel, Australia, and China, as well as through Venus Concept’s majority-owned subsidiary in Hong Kong.

Direct Sales Force

In the United States and select international markets, the company uses its direct sales force to sell its systems and other products and services. The company plans to continue to focus its direct sales efforts in the North America market and continue to evaluate and optimize the company’s use of direct and distributor resources in the company’s international markets.

Distributors

In countries where the company does not operate directly, the company sells its products through distributors. As of December 31, 2022, the company had distribution agreements in over 40 countries. The company enters into both exclusive and non-exclusive distribution agreements, which generally provide the distributor with a right to distribute certain of the company’s products within a designated territory.

Marketing and Branding Programs

The company is focused on, and invests heavily in, direct-to-consumer marketing initiatives to increase awareness of the company’s products and services. The company’s marketing activities are critical in supporting the continued growth and development of the company’s business. The company has an internal team of digital marketing, brand, marketing operations and events specialists that support North America and the company’s regional markets.

The company implemented business to business and business to customer public relations outreach strategies that incorporates both digital media and top national media channels in the fashion and beauty industries and have a presence on the most popular social media channels, such as Facebook, Twitter, YouTube, Pinterest, LinkedIn and Instagram. The company also attends major medical and scientific meetings, as well as trade shows. Since some countries require customized marketing programs, the company has hired country-specific marketing managers to ensure that marketing programs are executed successfully in those jurisdictions.

Customer Support

The company provides its customers and authorized distributors with customer support through the company’s fully integrated marketing program and strong clinical and technical support teams.

Intellectual Property

Portfolio

As of December 31, 2022, the company’s patent portfolio included:

14 issued U.S. patents which cover the company’s (MP)2, fractional RF and Directional Skin Tightening technology (including cellulite treatments) that are associated with six different patent families (the earliest of which will expire in 2028), 9 pending U.S. patent applications, 27 issued foreign counterpart patents, and 7 pending foreign counterpart patent applications;

5 issued foreign patents covering the NeoGraft system and its methods of use (the earliest of which expired in 2022); and

90 issued U.S. patents primarily covering the ARTAS System and methods of use (the earliest of which expire in 2025, 1 pending U.S. patent applications, 152 issued foreign counterpart patents, and 8 pending foreign counterpart patent applications.

As of December 31, 2022, the company’s trademark portfolio included the following trademark registrations, pending trademark applications or common law trademark rights, among others: Venus Viva,Venus Viva MD, Venus Legacy, Venus Concept, Venus Versa, Venus Fiore, Venus Freedom, Venus Bliss, Venus Bliss Max, NeoGraft, Venus Glow, ARTAS, ARTAS iX, and AI.ME. The company continues to file new trademark applications in many countries to protect the company’s products and related slogans.

License Agreement with HSC Development LLC and James A. Harris, MD

In July 2006, the company entered into a license agreement (the ‘HSC License Agreement’) with HSC Development LLC, or HSC, and James A. Harris, M.D., as amended, pursuant to which the company received an exclusive, worldwide license to develop, manufacture and commercialize products covered by any of the licensed patent rights or that incorporate the licensed technology in the field of performance of hair removal and implantation, including transplantation, procedures using a computer controlled system in which a needle or other device carried on a mechanized arm is oriented to a follicular unit for extraction of same, or to an implant site for implantation of a follicular unit, or some combination thereof. Under the HSC License Agreement, the company developed the ARTAS System to be utilized as a robotic system to assist a physician in performing hair restoration procedures. The licensed patents will expire from 2025 through 2030.

Government Regulation

The design, development, manufacture, testing and sale of the company’s products are subject to regulation by numerous governmental authorities, including the FDA, and corresponding state and foreign regulatory agencies.

The company has made modifications to its products in the past and has determined based on the company’s review of the applicable FDA regulations and guidance that in certain instances new 510(k) clearances or premarket approval approvals were not required.

The company’s manufacturing processes are required to comply with the applicable portions of the Quality System Regulations, which cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation and servicing of finished devices intended for human use. As a manufacturer, the company is subject to periodic scheduled or unscheduled inspections by the FDA.

In the European Economic Area (‘EEA’), the company’s devices are required to comply with the Essential Requirements set forth in Annex I to the Council Directive 93/42/EEC concerning medical devices, commonly referred to as the Medical Devices Directive. Compliance with the Medical Devices Directive entitles a manufacturer to affix the CE mark to its medical devices, without which they cannot be commercialized in the EEA.

To the extent that the company’s products have already been certified under the existing regulatory framework, the MDR (Regulation 2017/745) allows the company to market them provided that the requirements of the transitional provisions are fulfilled.