The new skin trade
Preserving youth without plastic surgery will soon be a $20 billion business. And that's just scratching the surface.
SAN FRANCISCO (Business 2.0) - Last year, Cheri Isabell decided to do something about the years of sun worship and stress that were starting to show on her face.
But instead of going under the knife, she opted for a nonsurgical smorgasbord: Restylane shots to plump her lips, chemical peels to repair the sun damage, and Botox injections to freeze her wrinkles.
The total cost: a hefty $3,500, all out of pocket. For Isabell, a 40-year-old business owner and mom in St. Paul, Minn., it was worth it. "Nobody thinks I look my age, and I feel more confident," she says. "Plus, it's great that I can pretty much get off the table and go."
Faster, cheaper treatments
Vanity may be the driving force, but the booming business of nonsurgical cosmetic treatments is anything but frivolous. In 2005, Americans spent more than $12.5 billion on cosmetic procedures, the majority of which were noninvasive, meaning no knife required. Thanks partly to greater exposure in pop culture--through TV shows like Extreme Makeover--the number of nonsurgical treatments has skyrocketed more than 764 percent since 1997, far outpacing the growth of plastic surgery. With baby boomers and more men looking for creative ways to slow the aging process, the "medical-aesthetic" economy--including device sales and doctors' fees--could easily surpass $20 billion by the end of 2006. "There has been a dramatic move toward minimally invasive procedures," says Shiu-Yik Au, an analyst at Millennium Research Group. "No one wants to sit out three weeks recovering. They want things done as quickly as possible."
Many of the companies answering the demand are not pharmaceutical or medical-device powerhouses but plucky, fast-rising startups. They're flooding the market with dozens of new treatments--from liquid face-lifts to ultrasonic cellulite smoothers--making "lunchtime" procedures cheaper by the day and creating opportunities from drug labs to doctors' offices. "Despite the large number of companies, this is very much a demand-driven economy," says Jose Haresco, a Merriman Curhan Ford analyst who covers several medical-aesthetic firms. "It's still very underpenetrated."
In fact, the skin economy promises to be so lucrative that OB-GYNs, family practitioners--you name it--are abandoning their specialties for a piece of the multibillion-dollar action. Since anyone with a medical degree can buy the equipment, device makers are seeing their customer base expand beyond the roughly 50,000 plastic surgeons and dermatologists around the globe. Take internist Ken Oleszek, who, enticed by an end to insurance-related red tape, recently started an aesthetics-focused practice in Denver. "Over the next 10 years," he says, "there's going to be a blurring of the lines between traditional disease management and medical spas."
Medicine and spas collide
So-called medspas like Oleszek's, offering cosmetic treatments with physicians at the helm, are indeed becoming more popular: In 2004 there were 750 such businesses in the United States, but by the end of 2006 there could be as many as 2,500. At the same time, doctors and trade groups are charging as much as $10,000 for aesthetic training courses; Oleszek estimates that he has spent $70,000 on such workshops. And as traditional spas and salons start to sell medical treatments alongside facials and massages, device makers are rolling out less expensive equipment to serve them.
Until recently, nonsurgical cosmetic procedures were mostly limited to prescription drugs, collagen injections, and painful laser treatments. That all changed, says Vic Narurkar, founder of the Bay Area Laser Institute, thanks to the phenomenal success of Botox, which in 2002 won approval from the Food and Drug Administration to treat frown lines. Allergan, the Irvine, Calif., specialty pharmaceutical firm that makes Botox, has enjoyed double-digit growth every year since the drug was approved, and worldwide cosmetic Botox sales are expected to surpass $400 million in 2006.
Aside from giving new meaning to "expressionless," the wrinkle-removing injections demonstrated the huge moneymaking potential of aging skin. "Botox was the big bang," says Narurkar, who is also a dermatologist. "It changed people's perceptions about what could be done." For now, Allergan has the market to itself, but competitors are on the way. One, called Reloxin, could hit doctors' offices in 2007.
A plump new market
Gaining ground alongside Botox is another category of injections called dermal fillers, which fill in deep wrinkles and plump up sunken skin everywhere from cheeks to hands. Dominating this out-of-nowhere category is Arizona-based Medicis Pharmaceutical, which last year sold an estimated $107 million worth of its popular filler, Restylane. Increasingly, doctors are using Restylane in tandem with Botox for "mini" face-lifts. Looking to maintain its dominance, Allergan in November made a $3.2 billion bid to acquire Inamed, which makes a Restylane challenger called Juvederm. The deal is expected to go through by February, and if Juvederm wins FDA approval, Allergan could bundle it with Botox and get a leg up in the filler segment, which could hit $800 million worldwide by 2011.
Injections aren't the only new way to turn back the clock. Another is Contour Threads, developed by a North Carolina-based suture company called Quill Medical. Released last year, the FDA-approved barbed sutures, or "threads," are inserted under the skin and massaged to make the face taut; the one-hour face-lift heals in a week and can be done while the patient watches in a mirror. Doctors have performed nearly 10,000 lifts with Contour Threads, and Quill CEO Matthew Megaro expects that number to double by 2007.
Vying for another slice of the rejuvenation market are lasers and other energy-based devices. Triggering a process similar to wound healing, these technologies penetrate underlying tissue to activate skin growth, without harming the epidermis the way older lasers did. Already, there are 28 cosmetic laser companies in the United States, and annual growth is expected to hover around 20 percent for the next few years. Newer technologies--from infrared light to plasma energy--are smoothing deeper wrinkles with less pain, further fueling what could soon be a billion-dollar category. One buzz-worthy startup is Reliant Technologies, based in Mountain View, Calif., whose Fraxel laser speeds healing by selectively targeting microscopic portions of skin and leaving surrounding tissue intact. Other companies are exploring the use of light-emitting diodes to painlessly stimulate collagen growth. GentleWaves, a machine made by Virginia Beach, Va., startup Light BioScience, relies on LEDs and a proprietary pulsing sequence to reduce wrinkles.
It's only a matter of time, insiders say, before a major device maker merges with an aesthetic pharmaceutical company to create the cosmetic counterpart to Johnson & Johnson. One candidate for such a combination is Israeli-based startup Syneron, which has been coming at the medical-cosmetic market with machines that do everything from remove hair to tighten skin. Syneron has seen its revenues go from zero to $90 million in four years, and now it's after the holy grail of aesthetic medicine: an effective, noninvasive weapon against fat. In July the company introduced the VelaSmooth, which uses radio frequency and infrared light to smooth cellulite. It's Syneron's attempt to take the lead in the so-called body contouring market, which is expected to reach $400 million in five years. But Syneron could face tough competition from a company called UltraShape, also based in Israel, which is awaiting FDA approval for a device that promises to melt fat with ultrasound. Meanwhile, lipodissolve mesotherapy--a sort of mini-liposuction through soy-based injections--is already gaining fans, despite controversy over its unknown long-term effects. Cheri Isabell, for one, is paying $600 a month for it. "I don't think I'd ever do liposuction again," she says. "But I'd love a little Botox for Christmas."
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