July 14, 2011
San Jose Mercury News
Pleasanton-based Zeltiq files for $115 million IPO
Zeltiq Aesthetics filed for a $115 million initial public stock offering Wednesday, hoping its noninvasive process to reduce love handles and other unwanted fat will be embraced by Wall Street.
Pleasanton-based Zeltiq didn't disclose the terms of the offering, including the price per share or the number of shares that will comprise the IPO. The timing of the offering wasn't disclosed.
Founded in 2005, the company has devised a technique called CoolSculpting. This precise cooling technique removes fat and destroys fat cells without damaging the skin or other tissue.
"CoolSculpting is the first and only noninvasive, clinically proven procedure to selectively reduce fat layers in problem areas that include muffin top, love handles and back fat," the company says in background materials posted on its Internet site.
Still, plenty of risks abound, the filing shows.
"We are dependent on the success of CoolSculpting, which has a limited commercial history," Zeltiq stated.
"When you have a company that offers elective procedures, it is going to be a question that even if investors like the technology, will it be enough to motivate buyers to get the IPO," said David Menlow, head of research firm IPOfinancial.com.
Although Zeltiq has yet to turn a profit, the firm has managed to shrink its red ink and generate sharply rising revenue, its IPO filing shows.
In 2010, Zeltiq lost just under $19 million, less than the $21.9 million it lost in 2009. Revenue in 2010 totaled $25.5 million, about 16 times as much as the $1.6 million in revenue in 2009.
Similar financial progress materialized during the first three months of 2011. In the first quarter, Zeltiq lost $2.4 million, compared with the year-ago quarter. First-quarter revenue totaled $14.3 million, seven times as much as the $2 million in revenue in the prior-year quarter.
The company is looking to add employees. It has seven openings on its online site, all in Pleasanton.
Zeltiq has "just under 100 employees," said Shari Gold, a company spokeswoman.
The market that Zeltiq is playing is a multibillion-dollar sector, researchers say.
An estimated 9.3 million plastic surgery procedures were performed in the United States during 2010, according to statistics compiled by the American Society for Aesthetic Plastic Surgery. Americans spent almost $10.7 billion on cosmetic procedures last year.
Zeltiq generates its revenue from two primary sources: the sale of the CoolSculpting systems and from fees that physicians pay the company for each ï»¿CoolSculpting procedure they conduct.
"We selectively market CoolSculpting to those dermatologists, plastic surgeons, and aesthetic specialists who we identify as having significant experience in performing aesthetic procedures," the company stated in its regulatory filing.
The technique's public acceptance isn't assured.
"The degree of market acceptance of CoolSculpting by physicians and patients is unproven," according to Zeltiq's filing.
The company also noted that it could take up to two to four months, following treatment, for patients to notice the aesthetic results of a CoolSculpting procedure.
On the positive side, the co-managers of the IPO are Wall Street stalwarts: JPMorgan Chase and Goldman Sachs, analysts said.
Zeltiq also may be buoyed by a decent IPO backdrop.
"It's a good environment for IPOs if you have the goods to show investors," Menlow said. "If Zeltiq shows it can be profitable in the next few quarters, that could be compelling. For the right deal, the market will respond."