The medical aesthetics leader you might have never heard of 💉💉💉

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Welcome to Alternate Universe!

In today’s edition:

• The industry leader in medical aesthetics you’ve probably never heard of 💉

• Job opportunities at recently funded European startups 👇

• BlackRock and Partners Group join forces 💪

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The Crux 🔴

Last month, the French beauty giant, L’Oreal announced it will buy a 10% stake worth 1.6 billion Swiss francs in Galderma, a Swiss dermatological company.

As someone who keeps up-to-date with major companies across the US and Europe, I was surprised to realize I hadn’t heard of Galderma before (a slight blow to my ego, I’ll admit).

It was time to learn more about Galderma and the world of injectable aesthetics.

Let’s jump in.

🐰🕳️⌚

Background

Galderma was initially founded as a joint venture between Nestlé and L’Oréal in 1981. However, in 2014, Nestlé bought out L’Oréal’s stake, only to sell the company five years later to a consortium of investors, including EQT Group and the Abu Dhabi Investment Authority, along with other institutional investors.

In March 2024, Galderma made its public debut on the Swiss stock exchange (SIX: GALD), marking one of the largest IPOs globally in the first quarter.

So, why did L’Oréal want back in?

According to CEO Nicolas Hieronimus, this strategic move gives L’Oréal access to the fast-growing medical aesthetics market, which complements its existing beauty portfolio.

L’Oréal’s portfolio is already quite extensive. The company offers everything from mass-market products, like L’Oréal Paris and Garnier, to luxury brands such as Lancôme and Yves Saint Laurent. It also dominates professional haircare with Kérastase and has a strong foothold in active cosmetics through brands like La Roche-Posay and Vichy.

Yet this move was L’Oreal’s way to narrow in on the growth of medical aesthetics.

What? 🧐

Medical aesthetics is a field that focuses on enhancing cosmetic appearance through non-surgical and minimally invasive procedures. These treatments address issues like wrinkles, scars, and other skin imperfections. Unlike cosmetic surgery, medical aesthetics procedures typically involve shorter recovery times and are often performed in outpatient settings by qualified healthcare professionals, such as dermatologists or specialized practitioners.

The range of available treatments is vast and continually expanding, but the two most popular options are dermal fillers and neuromodulators.

Dermal fillers are used to restore lost volume, smooth wrinkles, and enhance facial contours. Common substances used in fillers include hyaluronic acid, calcium hydroxylapatite, and poly-L-lactic acid.

Source

Neuromodulators work by reducing muscle contractions. They are derived from botulinum toxin type A, and include brand names like Botox, Dysport, and Xeomin. When injected into specific facial muscles, neuromodulators temporarily relax these muscles, smoothing out dynamic wrinkles caused by repetitive facial expressions, such as frown lines, crow's feet, and forehead lines.

Trends 📊

Google Trends data shows that search volumes for Botox and medical aesthetics have steadily increased over time. This growth has been driven by several factors.

One key driver is the changing perception of injectables, especially among Gen Z and millennials. Millennials, in particular, have become the dominant demographic seeking minimally invasive treatments. According to Allergan’s 360° Aesthetics Report, "82% of millennial consumers believe injectable treatments are socially acceptable." The report also revealed that 52% have considered dermal fillers, and 60% have contemplated using neuromodulators. Globally, millennials are more inclined to explore preventative treatments than any other age group.

At first, I was surprised by this trend.

Why would the youngest generations invest the most in anti-aging procedures?

There’s a term for this phenomenon—prejuvenation—which refers to the use of treatments before any visible signs of aging, in an effort to delay wrinkles for as long as possible. While this may sound like pseudo-science, studies on the long-term use of onabotulinumtoxin A have shown that it can indeed prevent the formation of static facial lines.

Market 💹

The medical aesthetics industry has demonstrated remarkable resilience over the past two decades. Its performance has tracked the S&P 500’s and even stayed steady relative to the rest of the market during the 2008 financial crisis. The only recent blip was in 2020, when patients had challenges accessing care during the pandemic lockdowns.

The market growth rate remains healthy.

The L’Oreal investment comes in line with the investment activity in the space. Galderma acquired Alastin in 2022, while Revance formed an exclusive distribution agreement for TEOXANE dermal fillers in 2020.

Yet the market still poses some key risks.

Price sensitivity is one of them. In the December 2022 McKinsey Aesthetics Consumer Survey, around 60% of respondents said they would spend at least 10% less on medical aesthetics during a recession, driven by price sensitivity. Nearly half (46%) of US consumers were open to switching to lower-cost brands, while only 7% expected to stop treatments entirely.

The counterargument to the price sensitivity bucks slightly within the millennial category. Despite notably being one of the least economically favoured generations, millennials outspend other generations regarding self-care and cosmetics. This trend is primarily due to millennials delaying several other large financial decisions such as marriage and house hunting, to pursue more individualistic endeavors like career and travel.

Guilty as charged.

Regulatory approvals are the other barrier to market expansion. Injectables require tight scrutiny and rightly so. Disproportionate approval among different territories as well as multiple regulatory body requests can delay product launches and revenues.

Investment Implications 🤑

Galderma is focused on the research & development of skin care products. Its portfolio spans 3 broad segments:

1.  Injectable aesthetics – which includes both neuromodulators and dermal fillers.

2. Dermatological skincare – including the flagship range Cetaphil, offering moisturizers and cleansers.

3. Therapeutic dermatology – which includes treatments for atopic dermatitis, skin cancer, and psoriasis.

Are Galderma’s products any better than competitors though?

The Restylane family of hyaluronic acid fillers has the strongest supporting evidence, largely because it became the gold standard for comparison after bovine collagens in the US. A key study compared Restylane with Zyplast in 137 patients, finding that after 6 months, 56.9% of patients showed better results with Restylane, while only 9.5% favored Zyplast. The study confirmed Restylane's superiority based on the Winkle Severity Rating Scale.

In its H1 2024 presentation, the company posted 10.8% net sales growth, driven primarily by its injectable aesthetics and skincare segments. The company continues to reduce leverage and improve profitability.

Both the neuromodulation and filler segments include other market players. Allergan, the maker of Botox, is now a subsidiary of AbbVie. This makes it less of a pure-play medical aesthetics trade given AbbVie’s huge portfolio.

Another interesting player is Revance Therapeutics.

Their flagship product, Daxxify, is a neuromodulator that lasts an average of 6 months and up to 9 months, while other neuromodulators tend to last for around 3 months. This is the result of Revance’s technology, called Peptide Exchange Technology (PXT). Since it lasts an average of six months (up to nine in some cases) and requires only two treatments a year instead of four, each treatment may cost more, but the annual cost will likely be the same or even lower than what patients typically spend.

Despite the interesting tech, Revance’s stock price has tumbled by over 35% YTD due to ongoing litigation with AbbVie. Revance faces a lawsuit from AbbVie over alleged trade secret misappropriation.

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Headhunted 🦅

Recently funded private companies need talent! Scout jobs at recently funded European startups, ahead of your competition. 💪

1. Starhive 🇸🇪 - The no-code app has raised $3m in a seed round. Hiring a Head of Sales and a Business Development rep (link)

2. Beebop.ai 🇧🇪 - The power grid flexibility software company has announced a €4.9m seed round. Multiple roles across Europe (link)

3. Formo 🇩🇪 - Alternative cheese startup has closed a $61m Series B. Multiple roles in Germany available (link)

4. Abolis Biotechnologies 🇫🇷 - The biomanufacturing startup has raised €35m in funding. Now hiring a full stack developer (link)

5. Cerrion 🇨🇭 - Swiss video AI startup has closed a $5m round. Hiring a customer success manager and a senior computer vision engineer in Zurich (link)

Interestingness📔 

• UBS Global Wealth Report

• McDonald’s meal deals are here to stay for a little longer

• The Less-Efficient Market Hypothesis

• BlackRock and Partners Group join forces 💪

📚 New to investing? Grab a PDF copy of my ebook here.

As always, the financial disclaimer!

This is not investment advice. I am not a financial advisor. Make sure to conduct your thorough research before purchasing or selling financial products.