ADVANCE for Healthy Aging
January 19, 2010
Adapt or perish. That recessionary mantra has been drilled into your heads for the past two years. You stood up to the challenge by offering discounts, developing innovative marketing campaigns and trimming the fat on practice overhead. Will your tough decisions pay off in 2010?
The vital signs point to a piecemeal recovery for medical aesthetics, meaning your resourcefulness has made the industry poised for growth this year. But the usual suspects-joblessness, overindebted consumers and a weak banking system-will continue to confront the aesthetics industry.
Healthy Aging asked Wall Street analysts, physicians and industry insiders for tips on bracing for a turbulent recovery. Here's what they had to say.
Light and Laser
Diagnosis. Physicians offering light and laser procedures for facial rejuvenation felt the smack of a one-two punch: Consumers had less discretionary income at the same time banks tightened capital lending. Less revenue plus physicians' inability to make practice-expanding laser purchases meant double-digit declines last year for light and laser manufacturers.
Robert Ruck, Sciton's vice president of worldwide marketing, estimates the entire aesthetic light and laser industry is down 40 percent from before the recession. Not surprisingly, this market contraction paved the way for the first waves of consolidation. Solta acquired Reliant in October 2008. More recently, Syneron finalized its merger with Candela in January.
Prognosis. Generally capital equipment markets are hit first by recessionary pressures and come out last. The credit crunch will continue its grip on the light and laser industry, and analysts agree this market will remain slow throughout 2010.
"We saw a thawing in the third quarter of 2009," says Ruck. But he estimates light and laser purchases won't return to prerecession levels in 2010. "Those predictions are wildly optimistic."
Sciton is grappling with the credit crunch by focusing marketing efforts on prequalified physicians and urging banks to accept loans for physicians with lower credit scores. Other companies responded with lower cost laser systems. Lutronic, for instance, introduced the Mosaic fractional CO2 laser for under $50,000.
Jobless rates will likely rise before they go down as people who stopped hunting for employment re-enter the job market. A protracted trend of double-digit unemployment figures is likely to shake consumer confidence, making them reluctant to seek big-ticket laser procedures this year.
As aesthetic light and laser manufacturers regain their foothold, expect more mergers and acquisitions, says analyst Lisa Shantz, of the Toronto-based Millennium Research Group. Although consolidation makes it difficult for smaller companies to compete, the trend ultimately is expected to spur the industry.
"The combined companies are better poised for growth as the economy recovers because of their expanded product portfolios," says Shantz. Consolidation also may bring prices down, enabling physicians to expand their practice offerings, she adds.
Rx. Emphasize how small, nonsurgical touch-ups can go a long way in energizing patients' appearance, advises Bruce Katz, MD, director of Juva Skin & Laser Center, New York, N.Y. He markets laser eyelifts as a cheaper, equally effective alternative to blepharoplasty.
"People concerned about their jobs want to look young and vital," Dr. Katz says. "People may not be willing to spend $15,000, but they'll spend a few thousand."
Fractional resurfacing is another essential component of a post-recession life raft.
"What has saved my laser business is ablative fractionated resurfacing," says Mitchel Goldman, MD, medical director of Goldman, Butterwick, Keel Cosmetic Laser Dermatology in San Diego. Ablative fractional resurfacing tightens and rejuvenates skin at a lower cost than traditional facelifts. The technology also offers promising results for improving scars from acne, surgery and trauma, making it a versatile technology investment.
The demand for ablative fractional laser procedures is likely to be permanent as patients seek nonsurgical approaches to rejuvenation and physicians develop more laser capabilities.
Diagnosis. When consumers are worried about paying their mortgages, their love handles are a lot more tolerable. Thus, the factors cramping the laser industry also took a toll on the body contouring market.
Patients continue to gravitate to minimally invasive procedures for fat reduction. The laser-assisted liposuction market more than doubled in 2008, according to Millennium Research Group. Market declines in 2009, however, stifled new product development.
Despite this setback, media coverage of laser lipolysis and radiofrequency body contouring keeps consumer interest high even if they can't afford the procedures now.
Prognosis. Growth will remain slowest for traditional liposuction. Liposuction procedures were down 19 percent in 2008, according to the latest data from the American Society of Plastic Surgeons.
On the other hand, laser lipolysis is expected to make a healthy recovery over the next five years, becoming the most lucrative fat reduction capital equipment market in North America, according to Millennium Research Group analysts.
In 2010, Shantz predicts existing competitors in the laser lipolysis market will focus on product innovation to gain a competitive edge. New players may also elbow their way into the market this year by pursuing FDA approval for body contouring devices, further enhancing competitive pressure.
But cost remains a challenge. "A lot of new devices were approved in 2008, but physicians are having a difficult time affording them during the tough economic times," says Shantz.
More than a third of physicians surveyed by the equity research firm Leerink Swann reported having difficulty obtaining credit for capital purchases in 2009.
Noninvasive fat reduction technologies, such as radiofrequency and vacuum massage, hold promise as a profit center for aesthetic practices. Doctors can combine noninvasive procedures with liposuction, and nonphysicians can perform these procedures-opening the door for rapid growth in medispas.
Noninvasive ultrasound body contouring, although not yet approved in the U.S., will generate consumer interest if approved over the next five years. Clinical trials indicate LipoSonix (Medicis) reduces waistlines by 2.8 cm. However, Leerink Swann's report indicates many physicians remain skeptical about whether ultrasound body contouring can deliver consistent results, which could make the popularity of this procedure short lived.
Rx. Patients want to feel like they're stretching their dollars, so emphasize more than just contoured curves. Laser lipolysis, for instance, offers the added benefit of skin tightening, while noninvasive cellulite reduction procedures combined with gold standard liposuction do wonders for cellulite.
"In my practice, all patients who have liposuction also have post-operative Velashape (Syneron) or SmoothShapes (Eleme Medical) treatments to enhance the results," Dr. Goldman says.
Diagnosis. The global facial injectables market declined 5 percent in 2009 to $1.2 billion as patients cut back on treatments during the recession, according to the Millennium Research Group. Before the recession bottomed out, the American Society of Plastic Surgeons reported that Botox use rose 8 percent in the United States in 2008, and hyaluronic acid injections increased 6 percent over 2007 levels.
New products entering the market continue to generate consumer interest in injectable procedures, which positions the market for a healthy rebound this year.
The April 2009 arrival of Dysport (Ipsen, Medicis) counteracted some of the negative impacts of the recession, although growth in 2009 remained negative in the botulinum toxin market, Shantz says. Allergan's Botox maintains 93 percent of the market share and appears to have greater perceived safety and efficacy. But Dysport is perceived as having a faster onset. By 2011, the newcomer is expected to have 25 percent of the market share, according to Leerink Swann.
Allergan also leads the $325 million filler market with Juvederm, expected to take 36 percent of the market share this year, according to Leerink Swann. The Restylane/Perlane franchise (Medicis) will take second place with 35 percent of the market share. These numbers could shift slightly with Evolence's (Johnson and Johnson) exit. Evolence held 3 percent of the market share before J&J dropped the product in November.
Prognosis. Injectables will recover faster in 2010 than the capital equipment market, thanks to the popularity of liquid facelifts. Patients are seeking more drastic rejuvenation results without having to undergo plastic surgery for a facelift or brow lift. Physicians are using multiple syringes for these procedures, which drives up unit volume, Shantz says.
Dysport will grow in popularity as more general practitioners, gynecologists and new physicians enter the market. New physicians may gravitate to Dysport because it typically has a lower per-procedure cost, says Shantz, adding that the newcomer will carry more weight in 2010.
Rx. The prices may fall as competition in the injectable markets heats up. "Physicians can respond by enjoying higher profit margins or passing on the cost savings to patients by lowering procedure prices," says Shantz.
Diagnosis. The lipstick theory is clearly not a force to reckon with. Leonard Lauder, chairman of Estee Lauder Companies, first proposed the theory after noticing lipstick sales increased after the September 11 attacks. He hypothesized women boost their moods during hard times with inexpensive cosmetic splurges. Cosmeceutical sales, particularly anti-aging products, remained strong as consumers traded big-ticket procedures for small indulgences.
Among the biggest cosmeceutical players, Obagi Medical Systems shares rose 56 percent from January 2009 to January 2010. Allergan shares rose about 53 percent over the year. L'Oreal, the parent company of La-Roche Posay and Biotherm, saw a 25 percent growth in share prices.
"In my practice, I have not seen a decrease in cosmeceutical sales," says Goldman. "I'm selling more of my Obagi systems than ever before-2009 was better than 2008. Yet my liposuction is down. Breast augmentation and facelifts are way down. Even laser resurfacing's down."
Prognosis. Fueled by consumers' desire for a facelift in a bottle, cosmeceuticals are the fastest growing segment of the personal care market.
The mass appeal of anti-aging products is driving down costs, making cosmeceuticals more affordable to younger consumers. To capture consumers' attention, skin care companies are pressured to develop exotic ingredients or reformulate improved versions of existing products, according to Harry Glorikian, managing partner, Scientia Advisors, Cambridge, Mass.
The latest marketing trend? Skin care companies are emphasizing high-tech delivery modes that drive active ingredients into the skin, Glorikian says. Borrowed from the pharmaceutical industry, these novel carrier systems include nanoemulsions, iontophoresis, microencapsulation and patch technology.
Rx. As consumers become more skeptical of beauty product claims, they are seeking advice from physicians. Products sold in medical spas and physicians' offices make up 17 percent of the U.S. cosmeceutical market share, according to Scientia.
"If consumers spend $80 at Nordstrom, they might as well go to a doctor and get a product they know will give them results," Dr. Goldman says. "That's why I think my cosmeceutical business is going up."
One way to capitalize on this, Dr. Goldman advises, is combining rejuvenating serums with laser procedures. Cosmeceuticals can decrease the patient's cost by resulting in fewer procedures, he says. You may have the added benefit of boosting your laser business.
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ADVANCE for Healthy Aging