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Mar 13, 2015

The Business of Dermatology: An Exciting Future

By: Advancing Innovation in Dermatology

By WILLIAM JU, MD, FAAD

Featured on Practical Dermatology

Dermatology is recognized as a burgeoning area with exciting innovation for patients, doctors, and investors. This high growth industry is the result of a variety of macro factors that have generated the interest of many.

Macro factors

Aging. As we age, we pay more attention to a dermatologic health. Perhaps we, like one in five Americans, will develop skin cancer in the course of a life time.1 It may be that we just want to keep up our appearance, and we are at a point in life where that requires more effort. Either way, patients 60 years and older consume 42 percent of dermatology services in the United States,2 and that population is only growing larger.

Economic Growth. Worldwide, rapid economic growth in emerging markets is creating a larger middle class. In addition to powerhouses like China and India, smaller countries like Brazil and Mexico are also seeing significant growth in the number of households with disposable income.3 A rise in disposable income correlates with increased spending on cosmetic procedures.

Cost-Efficient Product Development. Compared to other areas of medicine, it can be relatively fast and inexpensive to enter the dermatology market. For example, dermatology drugs can often get through proof of concept and Phase II trials within two years with substantially less spending than in many other therapeutic areas.

Advanced Science. Combined with the other significant financial factors are the advances in scientific understanding. The dermatology and scientific communities are really starting to understand the underlying mechanisms of many conditions, creating new targets to go after and spurring innovation.
Where is the Growth?

Dermatology covers both medical procedures that are most commonly covered by insurance as well as elective procedures that are private cash pay, and growth is being seen across the board.

Drugs. Allergan acquired Vicept in 2011 following promising Phase II studies for a topical cream that treats the erythema of rosacea. In 2013, Actelion bought Ceptaris for its Valchlor gel for treating mycosis fungoides. Alexar Therapeutics was formed just over a year ago with $21.5 million in Series A funding for their lead agent, a topical Liver X receptor (LXR) agonist for the treatment of cutaneous inflammatory disorders. Aclaris Therapeutics secured $21 million in a Series B financing last fall, and recently announced positive results for the most recent trial of their topical treatment being developed for seborrheic keratosis and warts. Topokine Therapeutics is developing topical treatments meant to act on adipocytes to contour the face and body. Their lead program in Phase II clinical testing aims to create a non-invasive means to reduce excessive fat pouches around the eyelid. Topokine secured another round of funding less than a year ago to move forward with their novel approach to facial aesthetics.

Devices. Cytrellis Biosystems, which is based on technology developed at Harvard, focuses on cosmetic skin tightening. The principle of the Cytrellis device is to remove miniscule columns of skin, allowing the targeted areas to heal very quickly and without scarring, creating an alternative to a more invasive facelift.

Over-the-counter. In the cosmetic area, bright minds are elaborating new ways to do things. Colorescience is fusing suncare, makeup, and skincare in a premium, high quality, all-in-one makeup that protects skin from the damaging effects of the sun and environment. In the fall of last year, the company raised $15 million from investors in a Series B round.

Business Models. Development does not focus just on new therapies, but on better ways to get them to the end consumer. Proactiv is a pioneer for their marketing strategy of reaching out via celebrities and direct marketing, and they created a business model that is very successful in financial terms as well as at delivering effective acne therapy for millions of people. Bosley developed a very successful business model for hair restoration services. Positioning their company as the experts in the field and defining their brand with the artistry of a very natural-looking result, they now have more than 70 locations nationwide. More recently Schweiger Dermatology is providing branded, multi-site, comprehensive and concierge-like cosmetic dermatology services.
Who’s Behind It?

Perhaps the most encouraging aspect of growth in the dermatology field is that it is coming from a variety of sources. Innovation is coming from universities and research laboratories, such as in the case of Cytrellis Biosystems, all the way to astute clinicians who are noticing minute details on their patients and proposing and developing new ideas. Topokine’s therapy originated with two ophthalmologists noticing some side-effects on reducing peri-orbital fat when treating patients for their eye conditions. Similarly, Vicept’s therapy topical therapy for the erythema of rosacea was co-invented by a dermatologist while still in clinical practice. These sources can importantly augment the pipelines from the R&D departments of the larger, established dermatology companies.

Funding is also coming from a variety of sources. Large corporations are willing to invest substantially in dermatology, as was seen with the very biggest merger and acquisition in 2014 when Actavis acquired Allergan, creating a company that is a top global 10 pharmaceutical by revenues. Many notable examples of venture capital funding can also be found. Dermira had a successful initial public offering to bring in $125 million that will allow it to push forward its line of skin drugs. In fact, venture capitalists invested more money in dermatology in the first nine months of 2014 than in the full calendar years for the previous five years.

At Advancing Innovation in in Dermatology, we see the potential and host two very exciting conferences for those that want to participate in product and service innovation. The Dermatology Summit includes major pharmaceutical and consumer companies in the dermatology space, top-tier investors, and other stakeholders, including emerging players in pharmaceuticals and devices, service providers, and universities. This unique forum brings together and fosters an ecosystem to exchange ideas and provide unparalleled networking opportunities for business development.

We are also hosting the inaugural Dermatology Entrepreneurship Conference this month (March 2015). The focus here will be on fostering the early development of innovative products and services by physicians and entrepreneurs for dermatologic health. Inspiring case studies will be accompanied by salient educational panels and invaluable networking opportunities. Entrepreneurs will also have the opportunity to present their inventions and business plans in a “Dermatology Shark Tank” and in poster sessions.


1. http://www.skincancer.org/skin-cancer-information/skin-cancer-facts
2. IBIS World, Consumers of Dermatology Services for year ended December 31, 2011.
3. http://www.ey.com/GL/en/Issues/Driving-growth/Middle-class-growth-in-emerging-markets—China-and-India-tomorrow-s-middle-classes
4. http://www.nytimes.com/2011/04/24/world/asia/24beijing.html?_r=0