Trends and Opportunities in the Physician-Dispensed Aesthetic Skin Care Market 2020

The global medical aesthetics market, likely the fastest growing at 11.5% CAGR and most profitable segment in today's healthcare field, is expected to be a +$22B industry by 2025 according to Medical Insights and Market Research reports. Growth drivers for the market include an increasing adoption of minimally invasive and noninvasive aesthetic procedures, increasing public awareness about cosmetic procedures, and rising adoption of surgical and non-surgical cosmetic treatments for the targeted population demographic.

On the basis of product type, the facial aesthetics segment is expected to dominate the global medical aesthetics market in 2020. Based on end-user data, the hospitals, physician clinics, and medical spas segment is estimated to hold the largest share. Geographically, North America continues to command the lion's share of the market while Asia leads in growth rate (7.4%). The large share of this region is mainly attributed to factors such as the growing healthcare sector, increasing awareness and adoption of aesthetic procedures among the population, growing healthcare expenditure and discretionary income, rising incidences of skin disorders, technological advancements, and increase in the consciousness about physical appearances.

One of the non-surgical aesthetic applications that is experiencing strong growth is the professional skin care market and the use of physician-dispensed cosmeceuticals (Decision Resource Group, Kline Report, 2018). This entails the sale of skin care products through professional channels, such as spas and salons, and medical care providers. The medical care providers channel recorded its strongest growth of nearly 10% since 2012. The channel’s upward trajectory is driven by consumers increasingly migrating to physicians’ offices for skin care services and products that claim to deliver enhanced results. The channel benefits from a rising consumer interest in non-surgical procedures, heightened focus on pre- and post-procedure products, and doctors’ increased desire to boost their revenues by dispensing skin care products.

Source: Decision Resource Group

Physician Dispensed Skin Care Market: SENTé Labs

One of the companies that operates in the physician-dispensed market is SENTé' Labs, a US-based, privately-held, medical-grade, innovative skin care company focusing on the development of proprietary cosmeceutical actives with proven efficacy and safety targeting aging skin and pigmentation. Recently, I had the opportunity to interview SENTé's CEO, Laurent Combredet, to understand his thoughts on the aesthetic market and the company's growth opportunities in the sector.

Interview

Crean: Laurent, can you tell me how you got involved in the aesthetic market?

Combredet: I bring nearly 20 years of commercial, operations and management experience in the dermatology and consumer products industry. After spending over 10 years in various commercial leadership positions with J&J Consumer, I joined Allergan in 2014 to lead SkinMedica, a leading brand in the physician dispensed channel. Two years later I opted to become CEO of SENTé Labs, an early-stage technology driven medical grade skin care company.

Crean: Can you tell me more about the growth opportunities in the facial aesthetic market? 

Combredet: The facial aesthetic market is highly dynamic fueled by product innovation, increased access, and innovative marketing campaigns increasingly focused on social media. Exciting growth areas include new minimally invasive in-office treatments that pack in results and minimize downtime such as microneedling or recent laser introductions, body contouring treatments, and, of course integrated skin care solutions that pair well with office services and extend benefits at home.

Crean: How has the aesthetic market changed over the past 5-10 years? Where is the market headed?

Combredet: The market has changed significantly in the last 5-10 years with important trends shaping it such as the early adoption of certain procedures by younger consumers (millennials), greater access to products and providers via online channels, increased number of services for rejuvenation from head to toe fueled by product and service innovation, and convergence of retail trends in aesthetics practices and vice versa. Think of Sephora beauty bars influencing practices and med spa services finding their way inside Sephoras.

Crean: Can you tell me more about the background on SENTé, its products and the targeted aesthetic disorders you are trying to address?

Combredet: SENTé was founded 10 years ago by a group of biotechnology entrepreneurs aiming to disrupt the aesthetics market with a new skin care technology. SENTé products are formulated with a proprietary and patented heparan sulfate analog. Heparan Sulfate is in the same molecular family as Hyaluronic Acid, both are well known for attracting and retaining water. What makes Heparan Sulfate so unique is its critical role in helping cells receive and interpret messages critical to controlling inflammation and promoting skin repair. With age, we produce less heparan sulfate, contributing to the aging process. No company had been able to deliver Heparan Sulfate topically until SENTé. The company bioengineered a low molecular weight heparan sulfate analog with demonstrated clinical efficacy in both hydration and skin renewal. Our skin care products are not only effective at treating various aging signs such as fine lines and rough texture but also remarkably well tolerated making it ideal for sensitive skin patients. In addition, SENTé has the exclusive rights to Cyspera, a novel intensive pigment corrector formulated with cysteamine. This unique technology is clinically proven to help reduce the appearance of stubborn discoloration in darker skin types. It provides a unique solution for addressing skin discoloration that is effective and also very well tolerated.

Crean: What are the key success factors for professional skin care brands?

Combredet: key success factors include: (1) products backed by clinical evidence, (2) dedicated physician and staff education, (3) deep understanding of the needs of the practices and custom retail solutions to help drive success

Crean: How is SENTé addressing these key success factors in the market?

Combredet: SENTé has consistently provided robust clinical data and before and after photos on its products to substantiate safety and efficacy. We have dedicated online and live physician and staff training modules to help our customers learn about our products and how to integrate them with services.

Crean: What are the challenges the company faces in the market?

Combredet: The biggest challenge is the time and focus customers can dedicate to skincare. Practices are very busy with patients interested in a growing number of services. Integrating skin care requires team education, support and focus. It is often challenging for offices with hectic patient schedules to build a successful retail business. This is why SENTé focuses on supporting them from day 1.

Crean: What are the growth opportunities for the Company?

Combredet: SENTé has tremendous growth opportunities both in the US and abroad. We launched a new marketing campaign in the US last year featuring our technology that will be running this year in offices and online. This will help build awareness of the benefits of our products. We will be increasingly present where consumers are, on social media channels, to build awareness and drive them to our practices. We also plan on driving product innovation both in anti-aging and skin discoloration that practices can easily integrate with their in-office treatments.

Crean: How has e-commerce, (i.e. Amazon and online channels) affected the physician dispensing channel?

Combredet: E-commerce has had a significant impact on this market. Several sites, including Amazon, now offer nearly all of the medical grade skin care brands dispensed by physicians. This has helped build awareness of our market and increase purchases. While this is good news for consumers seeking convenience, many physicians worry about losing patients to these sites. SENTé has been working on delivering a turnkey e-commerce solution that helps physicians sell online to their patients. This helps practices deliver a convenient option to patients who prefer to buy online without losing them to these larger e-commerce sites. It also ensures that SENTé remains physician exclusive.

Crean: Where do you see the market 10 years from now given current trends, and how do you envision SENTé will be positioned?

Combredet: I see the market gaining in retail sophistication as practices grow and gain in retail expertise. I expect offices to enhance the overall retail experience in the practice and also digitally. I also expect continuous market consolidation leading to greater marketing coordination and practice image building.

 Crean: As an investor, I am always looking to allocate smart capital in companies that offer a compelling ROI to its shareholders. Why is this market and your Company an investment area for me to consider?

Combredet: Physician dispensed skin care market has a very favorable outlook with growing consumer adoption of aesthetics services and market access.

With a portfolio of proprietary and clinically proven technologies as well as a dedicated physician exclusive model, SENTé is very well positioned to capitalize on this opportunity.

Crean: In comparing SENTé and its peers in the Aesthetics Market, how are you differentiated? What is SENTé doing that is creating success? Are there peers or other Aesthetics companies that we should point to as being successful?

Combredet: SENTé offers physicians a very unique proposition with effective and remarkably safe technologies that are easy to integrate with their services and exclusive access ensuring patient loyalty to the practice. SENTé is focused on growing the retail practices of its physician partners by focusing on what they do best and ensuring that skin care is seamlessly integrated in their practices. Other early stage companies in our space are also focused on building unique propositions for practices, which is helping drive strong overall market growth for all to benefit from.

Final Thoughts

A rising demand for cosmeceuticals, increasing emphasis on beauty and appearance, and rising awareness about anti-aging are major drivers of the global physician dispensed market. Key players operating in the global physician dispensed cosmeceuticals market include Allergan's SkinMedica, L'Oreal, Alastin, ZO Skin Health Inc., and Obagi. These companies have diverse product offerings and extensive distribution systems across the world. Barriers to entry are low and there is an increasing entry of small players, especially in the emerging markets of Asia. Given the crowded space, it is critical that companies differentiate themselves and build scale to compete effectively in the market.

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David H. Crean, Ph.D., is a Managing Director for Objective Capital Partners, a leading investment banking advisory firm whose Principals have collectively engaged in more than 500 successful transactions serving the transaction needs of growth stage and mid-size companies. Services include M&A sale transactions, partnering/ licensing, equity and debt capital raises, valuation and comprehensive advisory services. Additional information on Objective Capital Partners is available at www.objectivecp.com.

This article is provided for informational purposes only and does not constitute an offer, invitation or recommendation to buy, sell, subscribe for or issue any securities. Securities and investment banking services are offered through BA Securities, LLC Member FINRA, SIPC. David H. Crean is a Registered Representative for BA Securities. Objective Capital Partners and BA Securities are separate and unaffiliated entities. While the information provided herein is believed to be accurate and reliable, Objective Capital Partners and BA Securities, LLC makes no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person.