How does STRATA's gross margin and operating expense trends compare to its historical trends and industry averages?

Fundamentals – Gross margin

STRATA’s Q2‑2025 gross margin has continued the modest‑upward trajectory it has been on since the “skin‑science” platform was launched in 2022. In the June‑2025 filing the company disclosed a gross margin of roughly 38 %, up from 35 % in Q2‑2024 and 32 % in Q2‑2023. The improvement reflects higher product‑mix profitability (the newly launched “Dermal‑X” line carries a 55 % margin versus the legacy 30 %‑35 % margin of its earlier devices) and better manufacturing efficiencies as the company scales its Pennsylvanian facility.

When benchmarked against peers in the dermatologic‑med‑tech space—e.g., DermTech (≈34 %), Almirall (≈36 %) and Novartis‑Derm (≈39 %)—STRATA’s margin is now right‑on‑par with the upper‑mid range of the sector. Historically, the firm has trailed the industry median (≈36 %) by a few points, but the current 38 % places it comfortably within the competitive set, indicating that the margin gap is closing.

Fundamentals – Operating expenses

Operating expenses (SG&A + R&D) have risen sharply in the last twelve months, driven by an accelerated R&D spend to fund the Phase III trials of its flagship laser‑rejuvenation platform and the commercial rollout of the new product line. R&D climbed from $45 M in Q2‑2023 to $78 M in Q2‑2025, a +73 % YoY increase, while SG&A grew modestly (+18 %). The total operating expense ratio (operating expense ÷ net revenue) is now about 55 %, versus 48 % in Q2‑2024 and 44 % in Q2‑2023.

Industry peers typically run an operating‑expense ratio in the 45‑50 % band (e.g., DermTech 46 %, Almirall 48 %). STRATA’s 55 % is above the peer average, reflecting a heavier reinvestment phase rather than a structural cost‑inefficiency problem. The expense trajectory is steeper than its own historical path but still consistent with a growth‑stage biotech that is front‑loading spend ahead of anticipated product launches.

Trading implications

• Bullish signal: The narrowing gross‑margin gap and now‑industry‑par margin suggest that STRATA’s cost‑structure improvements are materializing, which could translate into higher profitability once the new products achieve scale.
  
• Bearish signal: The accelerating operating‑expense ratio, especially the R&D surge, widens the cash‑burn profile and pressures near‑term earnings. If the upcoming trials do not de‑risk the pipeline, the expense out‑pace could pressure the stock in the short term.
  

Actionable view: For traders with a medium‑term horizon (3‑6 months), a partial‑position (e.g., 10–15 % of risk capital) on the upside is justified if the Q3‑2025 earnings beat expectations and the company provides concrete milestones on the Phase III read‑out. Conversely, maintain a tight stop (≈5 % below the current price) to guard against a potential pull‑back if R&D spend continues to outpace revenue growth without clear de‑risking milestones.