H.C. Wainwright analyst Swayampakula Ramakanth came out today with some commentary on MELA Sciences Inc (NASDAQ:MELA), after the company announced the purchase of XTRAC and VTRAC dermatology businesses from PhotoMedex Inc (NASDAQ:PHMD) for $42.5 million in cash. The analyst also reiterated a Buy rating on the stock with a $4.50 price target, which implies an upside of 238% from current levels.

Ramakanth noted, “PhotoMedex has pursued a direct-to-patient marketing strategy since 2012 that has led to strong growth in XTRAC revenues. Treatment revenues grew from $8.4M in 2012 to $15.5M in 2013 and $22.9M in 2014. In 1Q15, treatment revenues reached $5.4M compared to $4.4M in 1Q14, an increase of 22%. Furthermore, we believe there remains great market potential as there were XTRAC machines installed in 640 clinics in 2014 out of an estimated 2,500 to 3,500 practicing clinical dermatologists in the US. Management intends to maintain the current business model, and we expect the growth trajectory could continue with 15-18% increases in revenues year-over-year over the medium term.”

Bottom line: “We see this acquisition as a way to generate immediate revenues and provide additional cushion for the company while MelaFind advances through reimbursement processes toward becoming a successful commercial product.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Swayampakula Ramakanth has a total average return of 12.5% and a 41.0% success rate. Ramakanth has a -27.1% average return when recommending MELA, and is ranked #855 out of 3640 analysts.

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