NEWS RELEASE for July 26, 2007 at 8:00AM Eastern Time

Kayla Castle

Investor Relations Manager

Palomar Medical Technologies, Inc.

781-993-2411

ir@palomarmedical.com

PALOMAR MEDICAL REPORTS SECOND QUARTER 2007 FINANCIAL RESULTS
Product Revenues Increase 31 Percent

        BURLINGTON, MA (July 26, 2007) … Palomar Medical Technologies, Inc. (NASDAQ: PMTI), a leading researcher and developer of light-based systems for cosmetic treatments, today announced financial results for the second quarter ended June 30, 2007. Revenues for the quarter ended June 30, 2007 were $32.8 million as compared to $36.7 million in the second quarter of 2006. Excluding back-owed royalties received from Cutera of $13.6 million in the second quarter of 2006 through a patent license agreement, revenues for the second quarter of 2006 were $23.0 million, resulting in a 42 percent increase in revenues for the second quarter of 2007. Product revenues increased to $28.3 million, a 31 percent increase over the $21.6 million in the second quarter of 2006. Gross margin from product revenues was 64 percent for the second quarter of 2007 as compared to 71 percent for the second quarter of 2006. Gross margin this quarter was affected by several factors. As a percentage of worldwide product revenues, expansion efforts outside North America resulted in product revenues at distributor transfer prices increasing over the same quarter last year. Gross margin was also affected by a decrease in average selling prices, an increase in trade-ups of StarLux 300s to StarLux 500s, and the sale of StarLux 300 demonstration units due to our recent introduction of the StarLux 500. Income before taxes for the second quarter of this year was $9.4 million as compared to the $18.1 million reported in the second quarter of last year. Excluding other income in the second quarter of 2007 and back-owed royalties and reimbursement of legal fees received from Cutera in the second quarter of 2006, income before taxes for the second quarter of 2007 was $8.9 million as compared to $5.8 million for the same quarter last year, resulting in a 54 percent increase. The Company also strengthened its balance sheet since the second quarter of last year, including increasing its cash and investments from $74 million to $121 million.

        The Company had a cash tax rate of 6 percent and an effective book tax rate of 38 percent for financial statement purposes for the second quarter of 2007 versus a cash tax rate of 3 percent and an effective book tax rate of 4 percent for the prior year’s second quarter. The Company reported net income of $5.8 million, or $0.30 per diluted share for the second quarter of this year, versus net income of $17.4 million, or $0.86 per diluted share for the second quarter of 2006. Non-GAAP net income for the second quarter of 2007, which excludes other income and non-cash taxes, resulted in $8.4 million, or $0.43 per diluted share. Non-GAAP net income for the second quarter of 2006, which includes adjustments to royalty revenue, cost of royalty revenue, general and administrative and interest income and excludes non-cash taxes, resulted in $5.6 million, or $0.28 per diluted share. Please refer to the financial statements included in this news release for a reconciliation of GAAP results to non-GAAP results for the three and six months ended June 30, 2007 and 2006.

        Chief Executive Officer Joseph P. Caruso commented, “We are again pleased with our financial performance and revenue growth this quarter. Awareness and acceptance of light-based cosmetic treatments are becoming a standard for consumers worldwide. Our plans for expansion in markets outside North America are moving along well. This expansion strategy is increasingly important as the market develops. Our recent introduction of our newest technology, the StarLux 500, continues to gain acceptance and a reputation as the technology of choice. ”

— more —

Palomar — Page 2

Use of Non-GAAP Financial Measures

        To supplement Palomar’s consolidated financial statements presented in accordance with GAAP, this news release uses the following measures defined as non-GAAP financial measures by the SEC: non-GAAP revenue, non-GAAP income before taxes, non-GAAP net income and non-GAAP diluted earnings per share. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. In addition, the non-GAAP financial measures included in this news release may be different from, and therefore not comparable to, similar measures used by other companies. For more information on these non-GAAP financial measures, please see the non-GAAP data included below. This data has more details of the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures. Palomar’s management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our core business operating results. Palomar believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Palomar’s performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to Palomar’s historical performance and our competitors’ operating results. Palomar believes that these non-GAAP measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making.

        Conference Call: As previously announced, Palomar will conduct a conference call and webcast today at 11:30 AM Eastern Time. Management will discuss financial results and strategic matters. If you would like to participate, please call (800) 659-2032 or listen to the webcast in the Investor Relations section of the Company’s website at www.palomarmedical.com. The telephone replay will be available one hour after the call at (888) 286-8010 passcode 88967141 and will be available for fourteen days. A webcast replay will also be available.

        About Palomar Medical Technologies Inc: Palomar is a leading researcher and developer of light-based systems for cosmetic treatments. Palomar pioneered the optical hair removal field, when, in 1997, it introduced the first high-powered laser hair removal system. Since then, many of the major advances in light-based hair removal have been based on Palomar technology. In December 2006, Palomar became the first company to receive a 510(k) over-the-counter (OTC) clearance from the United States Food and Drug Administration (FDA) for a new, patented, home use, light-based hair removal device. OTC clearance allows the product to be marketed and sold directly to consumers without a prescription. There are now millions of light-based cosmetic procedures performed around the world every year in physician offices, clinics, spas and salons. Palomar is testing many new and exciting applications to further advance the hair removal market and other cosmetic applications. Palomar is focused on developing proprietary light-based technology for introduction to the mass markets. Palomar has an agreement with The Gillette Company to develop and potentially commercialize a patented home-use, light-based hair removal device for women. Palomar also has an agreement with Johnson & Johnson Consumer Companies to develop and potentially commercialize home-use, light-based devices for reducing or reshaping body fat including cellulite, reducing the appearance of skin aging, and reducing or preventing acne.

        For more information on Palomar and its products, visit Palomar’s website at www.palomarmedical.com. To continue receiving the most up-to-date information and latest news on Palomar as it happens, sign up to receive automatic e-mail alerts by going to the Investor Relations’ section of the website.

— more —

Palomar — Page 3

        With the exception of the historical information contained in this release, the matters described herein contain forward-looking statements, including but not limited to statements relating to new markets, future royalty amounts due from third parties, development and introduction of new products, and financial and operating projections (including future tax benefit from the Company’s NOLs and future effective tax rates). These forward-looking statements are neither promises nor guarantees, but involve risk and uncertainties that may individually or mutually impact the matters herein, and cause actual results, events and performance to differ materially from such forward-looking statements. These risk factors include, but are not limited to, results of future operations, technological difficulties in developing or introducing new products, the results of future research, lack of product demand and market acceptance for current and future products, the effect of economic conditions, challenges in managing joint ventures and research with third parties and government contracts, the impact of competitive products and pricing, governmental regulations with respect to medical devices, including whether FDA clearance will be obtained for future products and additional applications, the results of litigation, difficulties in collecting royalties, potential infringement of third-party intellectual property rights, factors affecting the Company’s future income and resulting ability to utilize its NOLs, and/or other factors, which are detailed from time to time in the Company’s SEC reports, including the report on Form 10-K for the year ended December 31, 2006 and the Company’s quarterly reports on Form 10-Q. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

— more —

Palomar — Page 4

Palomar Financial Summary:

Consolidated Statements of Income (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
Revenues:
Product revenues	$	28,280,653		$	21,617,074		$	55,679,198		$	42,006,844
Royalty revenues		2,073,621			14,151,941			4,758,175			14,796,942
Funded product development revenues		2,414,218			887,583			3,849,298			2,307,357
Total revenues		32,768,492			36,656,598			64,286,671			59,111,143
Costs and expenses:
Cost of product revenues		10,308,578			6,337,968			18,926,966			11,653,451
Cost of royalty revenues		829,448			5,660,773			1,903,270			5,918,773
Research and development		3,752,093			3,620,741			8,055,435			7,165,947
Selling and marketing		6,358,629			5,642,755			12,634,617			11,080,390
General and administrative		4,150,911			(877,823	)		7,295,001			1,142,915
Total costs and expenses		25,399,659			20,384,414			48,815,289			36,961,476
Income from operations		7,368,833			16,272,184			15,471,382			22,149,667
Interest income		1,533,077			1,868,939			2,899,376			2,444,964
Other income		500,000			--			500,000			--
Income before income taxes		9,401,910			18,141,123			18,870,758			24,594,631
Provision for income taxes - cash		564,115			525,367			1,132,246			712,261
Provision for income taxes - non-cash		3,008,611			248,679			6,038,642			271,524
Net income	$	5,829,184		$	17,367,077		$	11,699,870		$	23,610,846
Net income per share:
Basic	$	0.32		$	1.00		$	0.64		$	1.36
Diluted	$	0.30		$	0.86		$	0.60		$	1.18
Weighted average number of shares outstanding:
Basic		18,333,091			17,397,750			18,306,598			17,334,577
Diluted		19,418,394			20,171,377			19,493,964			20,037,545
Non-GAAP data:
Income before income taxes	$	9,401,910		$	18,141,123		$	18,870,758		$	24,594,631
Royalty revenue: Back-owed royalty		--			(13,620,571	)		--			(13,620,571	)
Cost of product revenue: Royalty adjustment		--			--			--			(762,000	)
Cost of product revenue: Inventory write-down		--			--			--			145,000
Cost of royalty revenue: Back-owed royalty		--			5,448,228			--			5,448,228
Selling and marketing: Demo inventory write-off		--			--			--			230,000
General and administrative: Additional legal            expense related to trial preparation		--			750,000			--			750,000
General and administrative: Royalty settlement            legal expense reimbursement		--			(3,760,000	)		--			(3,760,000	)
Interest income: Interest on back-owed royalties		--			(1,164,212	)		--			(1,164,212	)
Other income: Expiration of standstill agreement		(500,000	)		--			(500,000	)		--
Non-GAAP Income before income taxes		8,901,910			5,794,568			18,370,758			11,861,076
Provision for income taxes		3,572,726			774,046			7,170,888			983,785
Provision for income taxes - non-cash		(3,008,611	)		(248,679	)		(6,038,642	)		(271,524	)
Tax effect related to one-time events		(30,000	)		(357,556	)		(30,000	)		(368,764	)
Non-GAAP Provision for income taxes		534,115			167,811			1,102,246			343,497
Non-GAAP Net income	$	8,367,795		$	5,626,757		$	17,268,512		$	11,517,579
Non-GAAP Diluted net income per share	$	0.43		$	0.28		$	0.89		$	0.57
Diluted weighted average number of shares outstanding		19,418,394			20,171,377			19,493,964			20,037,545

— more —

Palomar — Page 5

Consolidated Balance Sheets (Unaudited)

	June 30, 2007			December 31, 2006
Assets
Current assets:
Cash and cash equivalents	$	27,782,417		$	36,817,257
Available-for-sale investments, at market value		93,224,721			67,351,822
Accounts receivable, net		20,924,259			15,443,053
Inventories		13,929,752			11,011,710
Deferred tax asset		3,944,405			7,595,000
Other current assets		3,381,305			1,702,263
Total current assets		163,186,859			139,921,105
Property and equipment, net		1,362,126			1,129,985
Other assets		111,074			111,074
Total assets	$	164,660,059		$	141,162,164
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,959,579		$	2,263,029
Accrued liabilities		15,165,840			15,798,076
Deferred revenue		11,668,210			5,969,397
Total current liabilities		29,793,629			24,030,502
Stockholders' equity:
Preferred stock, $.01 par value-
Authorized - 1,500,000 shares
Issued - none		--			--
Common stock, $.01 par value-
Authorized - 45,000,000 shares
Issued - 18,380,156 and 18,063,103 shares, respectively		183,802			180,631
Additional paid-in capital		195,969,428			189,937,701
Accumulated deficit		(61,286,800	)		(72,986,670	)
Total stockholders' equity		134,866,430			117,131,662
Total liabilities and stockholders' equity	$	164,660,059		$	141,162,164

# # #