5 min reading time

On February 13th Allergan announced it will acquire ZELTIQ Aesthetics for $2.47B (14% premium). The next day Hologic announced it will acquire Cynosure Inc for $1.65B (28% premium).

Both ZELTIQ and Cynosure are medical device companies focused entirely on aesthetics including ‘body contouring’ (non-invasive fat reduction).

While Allergan has had significant presence in aesthetics (Botox accounts for around 20% of total sales), Hologic has not. Their focus is largely related to women’s health: diagnosis, imaging and treatment.

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Aesthetics consists of surgical procedures, such as breast augmentation and face lifts, as well as non-surgical procedures such as Botox injections and non-invasive fat reduction. Surgical procedures account for approximately 44% of total aesthetic procedural volume while non-surgical accounts for the other ~56%.

According to MarketsandMarkets, the global aesthetics market is expected to grow at a CAGR of almost 11% through 2020, more than double the estimated ~5% annual growth of the overall global medical device market.

The U.S., Brazil, Mexico, and India lead the world in non-surgical aesthetic procedures (such as body contouring), accounting for approximately 40% of the worldwide procedural volume, according to the International Society of Aesthetic Plastic Surgery.

Some of the recent and expected continued growth of the segment may be attributable to an increase in the number of men who are getting cosmetic/aesthetic treatment. Plastic surgeons are also adopting non-invasive devices as a way to offer additional procedures and another revenue source.

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Group member and Zacks analyst Brian Marckx helped write today’s announcement and asks, “The aesthetics market is largely not reimbursed by insurers, which is generally considered a significant drawback.

Yet clearly the aesthetic segment is now being viewed as an attractive growth segment. Why do you think that is?”

Share your comment publicly and, if you want to reach Brian directly, https://www.linkedin.com/in/brian-marckx-cfa-75441a5/ is his LinkedIn URL.

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Medical Devices Group Advisory Board member, Intellectual Property Lawyer Doug Limbach will give you free counsel how to protect your patents from competitors.

Specifically, you will learn:
• The “patent profanity” in your patent specifications or file histories – words like “necessary”
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• Whether your claims are overly detailed or focused on the wrong device features
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So I invite you to take this free content and protect your work!

Join us at http://medgroup.biz/check-patent on February 28. It’s free for all group members.

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FOR MEDTECH ENTREPRENEURS

My buddy Allan Daisley runs the ZeroTo510 Medical Device Accelerator out of Memphis, Tennessee.

They are taking applications at http://medgroup.biz/zeroto510 now for their sixth year. If selected, you’ll take advantage of a proven methodology, experienced mentors, and a seed investment.

60% of the graduates received follow-on funding (averaging about $700,000 per company to date).

If you apply at http://medgroup.biz/zeroto510 and get in, let me know! I like a good success story!

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Make it a great week.

Joe Hage
Medical Devices Group Leader

P.S. The 10x Medical Device Conference is ten weeks away. I’d love to meet you if you can make it out to San Diego. http://medgroup.biz/10x

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Joe Hage
🔥 Find me at MedicalDevicesGroup.net 🔥
Drats. The headline should have read, “Aesthetic Medical Devices.”

Joe Hage
🔥 Find me at MedicalDevicesGroup.net 🔥
I agree, Brian. Sometimes we just need to ask the wisdom of the crowd. It wouldn’t have occurred to me the way you summed it up.

Julie Omohundro
Principal Consultant at Class Three, LLC
“The aesthetics market is largely not reimbursed by insurers, which is generally considered a significant drawback.

Yet clearly the aesthetic segment is now being viewed as an attractive growth segment. Why do you think that is?”

It’s not a drawback. People want these procedures and are happy to pay top dollar for them, which means they can be very, very profitable.

In contrast, insurers don’t want the procedures they are paying for. What insurers want are premiums. Whatever an insurer pays for the procedures they cover offers no value to the insurer; it just reduces their profit margin. So insurers want to pay bottom dollar.

Paul Maguire
Executive Director Global VSL Med Devices
Coolsculpt is a terrific product Joe, and I can understand why Allergan stepped in. As you know I am now part of the ZELTIQ business and having spent many years in the med device space I must say the aesthetics is a groth sector. Wishing you well for the next 10 x event

Modesto (Mo) Casas
Increasing Worldwide revenues
Thanks for the quick analysis to add your “color” to the significance of the recent acquisitions.

Larry Brewton
AXON-II HELPS DOCTORS SOLVE CHRONIC PAIN PROBLEMS
Peter, how much clinical data do they have ?

Brian Marckx, CFA
Director of Research. Senior Equity Research Analyst – Medical Devices/MedTech/Diagnostics.
Great comments. I appreciate the feedback. It does seem like the lack of reimbursement really is a benefit in this space, perhaps a way to diversify revenue sources as well and reduce risk of not being paid.

Efrem Cray
Manager, R&D Process and Training at Confidential
Hello Joe, I appreciate discussing Allegan’s business model and focus on non-invasive aesthetics treatments. I worked a 6-month stint for Allergan while transferring purchased technology from a small Bay Area company. At that time Allergan was actively marketing the lap band as a minimally-invasive weight reduction therapy. In spite of Allergan’s best efforts, the GET-THIN clinics in Los Angeles used some dubious at best marketing techniques and in my opinion besmirched Allergan’s reputation and caused a tremendous financial burden on Allergan who tried to do everything right. This should serve as a cautionary tale for all companies with aesthetics products in the pipeline in that the doctors and clinics, as the interface between patient and manufacturer, must be held accountable in how they market the products to consumers. Too often the glitz and high dollar amounts of advertising end up skewing the claims or treatment protocols of the manufacturers to squeeze out some extra bucks.

Mick Hannan
Managing Partner, Cliste Life Sciences Group
There are several reasons this is an attractive market 1) Patients – people will always pay cash on two things: their pets and their looks 2) Providers – not dealing with reimbursement policy reduces medical practice complexity, significantly 3) Companies and Providers – because there is no reimbursement there is no way to fall afoul of the anti-kickback laws in the US, so products can be sold directly to MDs or groups who mark it up and sell to patients giving MDs a financial incentive to use the product, otherwise known as marketing the spread. 4) Companies – once patients have success with a product they often become brand loyal which since they are self paying can mitigate any future patent loss thus extending the productive life of the product. 5) Patients – any seemingly effective device that is less invasive and less expensive than surgery will likely be tried first.

John W.
CEO | Thought Leader | International Keynote Speaker | Author of the Culture-Driven Series of Books.
The medical device space is going to keep consolidating, innovating and changing. This is a great article and points to lots of growth and innovation in the future. Nice job Joe Hage!

RAKESH SRIVASTAVA
Clinical Researcher | Clinical Trials Manager | Apheresis | Immunology
Competition

Peter Meyer
Director of Business Development & Strategy
It doesn’t hurt that Zeltiq is rather unique in the Aesthetics space- they have strong clinical data to back up their device.