Hotly contested market for wrinkle removers
Allergan's new dermal filler to face off with Medicis's Restylane. Plus, more competition is circling.
NEW YORK (CNNMoney.com) -- The market for injectable wrinkle removers is about to get bigger, but it's also about to get crowded.
Medicis (up $0.77 to $33.50, Charts) currently dominates the U.S. market, estimated at $200 million to $300 million, with Restylane, a "dermal filler" that's injected into the face to smooth wrinkles.
But Restylane could soon be competing with Juvederm, a dermal filler from Allergan (up $1.88 to $113.74, Charts), the company best known for its wrinkle remover Botox. Allergan started offering Juvederm to small numbers of patients in September and plans a nationwide launch for January 2007.
"Medicis certainly isn't going to lie down and let Allergan walk all over them," said Gary Nachman, analyst for Leerink Swann. "Over time, I forecast the Restylane franchise will grow from its current levels, but it's going to be challenging. It's going to be a more competitive marketplace a few years down the road."
The dermal fillers are substances that bind with water molecules. Some of the dermal fillers, like Restylane and Juvederm, are based on the active ingredient hyaluronic acid, a lubricating and cushioning substance that occurs naturally in the human body. When injected into the face, they add moisture to the skin, smoothing out wrinkles. The dermal fillers work differently from Botox, an injectable toxin that removes wrinkles by temporarily paralyzing facial muscles.
Though Medicis is the market leader, Allergan is a formidable adversary that is well entrenched with Botox. Allergan's sheer size advantage and potent sales force could propel it into the market with a Juvederm-Botox combo package.
This package presents a unique appeal to patients: Botox and dermal fillers treat different parts of the face, but when combined they could smooth wrinkles over the entire face.
"I expect most of the growth over the next few years to come from Juvederm, primarily because they'll be able to leverage the Botox-Juvederm combination," said Jose Haresco, analyst for Merriman Curhan Ford & Co. "It's the one-stop shopping experience. That trend of treating the whole face, and eventually treating the whole body of a person, is what's going to drive the market."
Competition gathers on the horizon
More dermal fillers are on the way.
Isolagen Inc. (up $0.10 to $3.50, Charts), a biotech, is to begin late-stage testing this year on a dermal filler that uses the patient's own skin cells. Assuming the tests are successful, it could take a couple years before the product makes its market debut. Based in Exton, Pa., Isolagen is headed by Nicholas Teti, a veteran in the industry. Teti is the former chief executive officer of Inamed, a maker of breast implants that was absorbed by Allergan in March. (In the breast implant industry, Allergan competes with Mentor Corp.) (up $0.58 to $50.98, Charts)
Artes Medical, a privately held San Diego company, is awaiting a decision from the Food and Drug Administration for ArteFill.
Privately held BioForm Medical, based in San Mateo, Calif., is awaiting an FDA decision for its dermal filler Radiesse, which is already on the market for use in reconstructive surgery and other applications.
With all these new players poised to enter the market, what will the U.S. industry for dermal fillers look like in the next few years? Analysts believe that Allergan's Juvederm will be a worthy adversary to Medicis's Restylane, eventually splitting market share with the older, more established product and dominating all newcomers.
"Allergan is going to steal market share from Medicis, but I think the market is going to grow," said Angela Maria Larson, analyst for Susquehanna Financial Group.
The longer-lasting face filler
BioForm and Artes Medical hope to gain a competitive edge with their longer-lasting products - Restylane and Juvederm last several months before the gel-based collagen dissolves, requiring fresh injections.
"The market is still under-served with products that only last six months," said BioForm CEO Steve Basta. "Our competitors' products are gel-based materials where the gel will deteriorate in a few months."
Basta said the gel in his dermal filler, Radiesse, also dissolves within six months, but 30 percent of the filler is made up of particles that allow the filler to maintain its structural integrity for twice as long, requiring fresh injections only once a year.
Artes Medical also plans to market a longer-lasting dermal filler. While Artes Medical describes (on its Web site) its product ArteFill as "permanent," Haresco of Merriman Curhan Ford said the company is seeking FDA approval for ArteFill as a one-year product. A company spokeswoman declined to elaborate.
Isolagen says on its Web site that its experimental product "may theoretically last indefinitely since one's own cells are unlikely to be degraded by the body's defenses."
Even if patients prefer the longer-lasting products, it's unclear whether they have a strong market advantage. Analysts said that physicians may prefer the products that require more frequent injections because it could translate into more money.
"You don't want something that cures the problem; you want something that physicians have to use every three to four months," said Larson, the analyst for Susquehanna Financial Group.
The companies offering longer-lasting dermal fillers are likely to charge more for their products, but they could get undermined by a cost-cutting war.
"If Allergan starts competing aggressively on price, then I think that Restylane is going to lose market share pretty quickly," said Haresco.
The analysts interviewed for this story do not own shares of stock in the companies mentioned here.