Tattoo Removal Market for Multi-wavelength Lasers Like the AlexTriVantage® Drivers, Barriers, and Demographics A 2009 Study Commissioned by Candela® Corporation

Introduction While Laser Tattoo Removal (LTR) is the most effective method of tattoo removal currently available, many dermatologists, plastic surgeons, and aesthetic laser providers do not perform the procedure. This omission is largely due to the misperceptions that exist about the procedure, consumer decision-making for seeking out the procedure, and the overall profitability of performing the procedure. In order to identify the drivers and barriers for both consumers and providers, as well as gain an in-depth understanding of the market including consumer demographics, Candela commissioned a national study. Data were collected through web-based surveys and detailed qualitative interviews with both consumers and providers. This white paper discusses the findings and describes the needs of both consumers considering laser tattoo removal and the providers who are performing the procedure.

Tattoo Population Demographics Many providers report that the tattoo population is not one that they want to attract to their practice. Many feel that people with tattoos are from poorer socioeconomic groups, and are unable to pay out of pocket for tattoo removal

procedures. Others feel that the number of tattoo removal patients they would see would not generate a significant enough procedural volume to cover the cost of offering the service. Based on secondary literature and our survey, the number of tattooed individuals who would seriously consider tattoo removal is larger than expected, and many of these consumers are from socioeconomic groups with increased income levels. Data collected in a national study by Laumann, et. al. (2006), indicated that of the approximately 73.5 million people in the US with at least one tattoo, 17% will regret their tattoo and consider having it removed. Our study indicates that for the majority of people, when regret occurs, it occurs within five years of getting the tattoo. Of those with regret, 83% reported that they would consider moving forward with tattoo removal in the future, 51% of those in a few months or less, indicating a potential market size of five million consumers considering moving forward with tattoo removal within a few months (Figure 1 next page). Our survey found that a large portion of the population with tattoo regret are highly educated women. Of the consumers who reported that they were likely to move forward with

Future Tattoo Removal Population US Tattoo Population 73.5MM

An estimated 24% of the US population has a tattoo.

US Tattoo Population Experiencing Regret 12.5MM

According to national data sets, 17% of the US tattooed population has experienced regret an considered removing their tattoo.

Potential Removal Consumers 10.5MM Potential Near-Term Removal Consumers 5.0MM

Of the regret consumers surveyed by Health Advances, 83% felt they would consider moving forward with tattoo removal in the future. Of the potential removal consumers, 50% felt they would consider moving forward with tattoo removal within a few months.

Figure 1.

tattoo removal within the next three years, over 75% were women and over 90% had completed at least some college. Of the consumers who indicated that they were likely to move forward with tattoo removal in the next three years, 52% have a yearly income of over $50,000. These demographics

Variable

are very much in line with what providers report as the demographics in their current practices for non-tattoo removal procedures. The demographics are also consistent with practice profiles of plastic surgeons and dermatologists surveyed who do not currently perform LTR (Figure 2).

Regret Consumers

Removal Consumers

(N=100)

(N=50)

74 (74%) 26 (26%)

36 (72%) 14 (28%)

1 (1%) 39 (39%) 43 (43%) 16 (16%) 1 (1%)

0 (0%) 17 (34%) 23 (46%) 7 (14%) 3 (6%)

3(3%) 15 (15%) 37 (37%) 13 (13%) 22 (22%) 10 (10%)

0 (0%) 4 (8%) 13 (26%) 8 (16%) 23 (46%) 2 (4%)

15 (15%) 37 (37%) 34 (34%) 7 (7%) 7 (7%)

3 (6%) 316 (32%) 21 (42%) 3 (6%) 7 (14%)

Gender Females Males

Age $200 per treatment, representing more than $3,500 in revenue per week (not including additional services these consumers may wish to pursue). Plastic surgeon and dermatologist offices both average eight tattoo removal patients per week, at $330 per treatment, or $2,600 of revenue per week. These average practice characteristics suggest that the average tattoo removal practice in a Medi-Spa generates $100,000 in revenue every 27 weeks or nearly $200,000 annually. A plastic surgeon or dermatologist office generates $100,000 every 38 weeks.

Most Frequent Second Procedures by TR Patients

Percent of TR Patients Receiving Second Procedure 100%

Frequency of Procedures

100%

% of Patients

75%

50%

25%

0%

75%

50%

25%

0% Plastic Surgeon Office

Dermatologist Office

Medi-Spa

Botox

Hair Reduction

Dermal Sun Damage/ Filler Age Spots

Location

Facial Peels

Spider/ Skin Varicose Resurfacing Vein Treatment

Figure 3.

Tattoo Removal Market for Multi-wavelength Lasers Like the AlexTrivantage — Drivers, Barriers, and Demographics

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Finally, tattoo removal has become increasingly profitable as physicians are able to allow other clinicians to perform the procedure. Regulations vary by state, but the majority of states allow non-MD providers such as laser technicians, LPNAs, RNs, NPs and PAs to perform the tattoo removal laser procedure. Of the surveyed respondents, Medi-Spas had the lowest percentage of physicians performing tattoo removal procedures (less than 5%). Dermatologists and Plastic Surgeons tended to perform more of tattoo removal themselves at 71%and 84% respectively. The opportunity for lower cost labor, as well as the high revenue potential, is a large driver of the increase in tattoo removal inclusion in physician and Medi-Spa practices.

the Q-switched ND:YAG are effective on black, red, and orange inks, they are not as effective to resistant colors targeted by Q-switched Alexandrite lasers, such as blues and greens. In addition to residual ink, scarring from the laser tattoo removal process was the top concern of consumers after cost. While scarring is a potential side effect of LTR, the incidence is quite low. The providers we surveyed reported only 3% of their patients experienced severe scarring and 4% experienced keloids. Providers who owned the AlexTriVantage (ATV) laser reported significantly less scarring and keloiding than providers owning other lasers, as well as lower rates of residual color. Additionally, users of the ATV reported lower levels of strong remnants of color after the completion of the tattoo removal process (Figure 4).

The Benefits of the AlexTrivantage While laser tattoo removal is the most effective form of tattoo removal, it is still not a perfect process. Some inks and colors are more resistant to removal, making it necessary for providers to purchase more than one laser of different wavelengths to be able to remove multiple colors of ink. Even with multiple lasers, tattoo removal providers report that over 45% of their patients have slight remnants of ink remaining after completion of the removal process.

The ATV laser combines the three most effective tattoo removal wavelengths in the same laser; the fastest and most powerful Q-Switched Alexandrite laser output at 755 nm also pumps a set of Q-switched Nd:YAG 1064 nm and KTP frequency doubled 532 nm laser hand pieces. This Laser-Pumped Laser approach provides owners of the ATV with the most versatile tattoo removal product currently on the market, with wavelengths optimized for blues, greens, blacks, and reds. The unique combination of wavelengths and design also

In our sample, providers used an average of 1.7 tattoo removal lasers in their practice. The most popular (82% of providers surveyed) type of laser used is the Q-switched ND:YAG, but while the 1064 nm and 532 nm wavelengths of

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provides a tattoo removal option that is gentle to the skin and may demonstrate a lower risk of post inflammatory hypopigmentation (PIH). The technical specifications are shown in Figure 5.

Technical Specifications

Wavelengths

532nm, 755nm, 1064nm

Max Fluence

755nm laser: 18 J/cm2 755nm long–pulse laser: 70 J/cm2 532nm laser: 5 J/cm2 1064nm long–pulse laser: 10 J/cm2

Spot Sizes

755nm laser: 2, 3, and 4mm 532 and 1064 lasers: 2, 3, and 5mm

Pulse Duration

Short: 50ns Long: 120µs

Figure 4.

Results of Tattoo Removal Process 100%

TR Providers: AlexTrivantage® Users TR Providers: Other Laser Users

% of Patients

75%

50%

25%

0% Strong remnants of color

Mild

Severe

Mild

Severe

{ {

Slight remnants of color

HYPOpigmentation

Keloids present

Severe scarring

HYPERpigmentation

Figure 5.

Tattoo Removal Market for Multi-wavelength Lasers Like the AlexTrivantage — Drivers, Barriers, and Demographics

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In addition to the versatility of wavelengths available with the ATV, it also has a separate pulse mode for the Alexandrite 755 nm wavelength, designed to treat a wide variety of pigmented lesions (birthmarks, freckles, melasma, nevus, sun/age spots) increasing the number of procedures that can be performed with the laser.

Positive Consumer Reaction to the AlexTrivantage Consumers were presented with a blinded description of Candela’s ATV laser, which described the key characteristics of the laser without disclosing the brand or model. Before reading the product concept, regret consumers were asked how likely they were to move

forward with LTR. Forty-two percent indicated that they were considering moving forward with tattoo removal within the next year (Considering Moving Forward with tattoo removal in Near Future), and another 41% indicated that they were considering moving forward with laser tattoo removal in a few years (Fence Sitters). After reading the description of the ATV laser, these numbers shifted, with 60% of regret consumers likely to move forward with laser tattoo removal in the next three years, and only 26% neutral or on the fence (Figure 6). Extrapolating this data nationally indicates a market of approximately 3-4 million consumers that regret their tattoo and indicated that they are likely to move forward with tattoo removal in the next three years.

Effect of Product Concept on Consumer TR Plans

Regret Consumers — 12.5MM

Not Considering Moving Forward with TR in Future (17%)

Fence Sitters (41%)

Considering Moving Forward with TR in Near Future (42%)

Product Concept Unlikely to Move Forward with TR within 3 Years (14%)

Neutral (26%)

Likely to Move Forward with TR within 3 years (60%)

7.5MM removal consumers indicating that they likely move forward within next 3 years

Figure 6.

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3.7MM General rule of thumb cut consumer response by 50%

The reaction to the product was positive overall, especially from consumers who had previously under-gone laser tattoo removal and had a more accurate basis of comparison to other products. Almost 75% of consumers who had already had one or more tattoos removed indicated that not only would they have considered the ATV laser for removing their tattoo, but that they would have sought out this laser. Of the consumers who regret their tattoo, but have not moved forward with LTR, 62% would consider the ATV laser for removing their tattoo, and 28% would seek it out. In addition, consumers indicated that they were willing to pay more to undergo laser tattoo removal that would be less painful, and more

effective at removing all colors (Figure 7). We encourage tattoo removal providers to note that as expected all consumers desire increased efficacy, consumers also hold strong views of pain and the potential impact on willingness to pay for the procedure.

Conclusion With one in four Americans having a tattoo and nearly 20% of those with tattoos experiencing regret, the potential market for laser tattoo removal is sizeable. While providers have an overall skeptical view of this market, our research shows that this is an inaccurate misperception and that consumers most likely to move forward with laser tattoo removal

Consumer’s Consideration of the AlexTrivantage Laser for Removing Their Tattoo

100% Regret Consumers Removal Consumers

% of Respondents

75%

50%

25%

0% No

Not sure

Yes, but I would not seek it out

Yes, and I would seek out this laser

Figure 7.

Tattoo Removal Market for Multi-wavelength Lasers Like the AlexTrivantage — Drivers, Barriers, and Demographics

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fall into the demographic segments currently making up the bulk of aesthetic practices. In addition, once a relationship is established with a provider, laser tattoo removal consumers are likely to return for additional profitable procedures such as Botox. Consumers reacted positively to the description of the ATV laser, and would be more likely to move forward with a laser tattoo removal process that offered the benefits of the ATV. In addition, consumers would be willing to pay more for a less painful procedure or for a laser that would better remove all colors, two characteristics of the ATV. Providers had concerns about the profitability of performing LTR. Our findings show that practices in which laser technicians perform the tattoo removal procedures, such as MediSpas, are more likely to build a profitable tattoo removal practice because they can charge less per session and attract a higher volume of patients. Our research indicates that higher volume centers have in fact developed a profitable business around LTR. In addition, practices can further increase profitability by using the ATV to also remove pigmented lesions.

Candela Corporation 530 Boston Post Road Wayland, MA 01778, USA Phone: (508) 358-7637 Fax: (508) 358-5569 Toll-Free: (800) 821-2013 www.candelalaser.com AlexTrivantage is a registered trademark of Candela Corporation. Botox is a registered trademark of Allergan, Inc. To find out more about Candela and its products, contact your authorized Candela representative, or call toll-free worldwide (800) 821-2013. Dial USA country code if calling internationally. ©2009 Candela Corporation. All rights reserved. Printed in the USA. 010/09 0920-15-0044 Revision A