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Galderma, the biggest pharmaceutical company of interest to rosacea sufferers has had a subtle, but potentially important change in ownership.
Galderma was created in 1981 as a joint venture between L’Oréal and Nestlé and is of course known for their prescription products like Metrogel, Oracea and Mirvaso as well as skincare products like Cetaphil.
So the news well covered in the media recently is that Nestle has spent $3.6 billion to now own the part of the joint venture previously owned by LOreal.
Nestle’s Galderma Skin-Care Purchase Highlights Health Challenge
By Matthew Boyle February 12, 2014
Nestle SA (NESN) paid $3.6 billion yesterday to take full control of Galderma, the dermatology business that revives skin. Nestle Chief Executive Officer Paul Bulcke will need to do the same at the unit to spur growth.
The maker of treatments for acne and psoriasis, Galderma will become part of a new division known as Nestle Skin Health SA, with a brand stable ranging from prescription drugs to over-the-counter soaps and sunscreens for skin, hair and nails. It’s the latest push by Nestle into health care, a sector that promises faster growth and wider profit margins than the Swiss company’s main food business.
“From Nestle’s point of view, there are benefits to diversifying and skin care has high margins and strong growth potential,” said Oru Mohiuddin, an analyst at Euromonitor International in London. “But 2013 was not an easy year for Galderma and they’re preparing for the challenges ahead.”
Nestle, which bought the half of the venture it didn’t own from partner L’Oreal SA, (OR) is banking on full control to help the unit revive its performance. Galderma sales growth slowed last year to 3.9 percent, trailing the pace of more than 10 percent in previous years, as increased competition from generic products in the U.S. squeezed margins. Galderma has hired new managers, reorganized its business units, and will now rely more on Nestle’s global research, distribution and marketing muscle.
Of more interest to rosacea sufferers are some comments about how Nestle might view the future of Galderma.
Clinical Trials
Galderma has sought to decrease its reliance on prescription drugs in the U.S., which must undergo rounds of clinical trials and regulatory approvals and are susceptible to competition from less-expensive generic copycats.
“Keeping ahead of generics is key,” said Andrew Wood, an analyst at Sanford C. Bernstein in New York. “They have a strong pipeline, and that should keep them ahead.”
Galderma had seven products in late-stage clinical trials last year, according to the annual report, and in 2013 debuted Mirvaso, a drug to treat rosacea, a facial condition that causes inflammation. A spokeswoman declined to comment on the company’s new products.
Nestle will likely accelerate Galderma’s shift away from prescription-based products toward medical skincare items that can be sold a few aisles down from its coffee and chocolate in retailers around the globe, according to Mohiuddin.
So this commentary is suggesting that Galderma might see a move away from expensive prescription products towards skincare products. The idea being that reliable profits are more easily found in the skincare aisle compared to the prescription counter.
This may well mean that Galderma sees products like Cetaphil and other skincare products as worth developing into new and more profitable ventures.
Despite the strong demand for rosacea prescriptions, and the seemingly high prices paid by insurance companies and rosacea sufferers, Galderma’s prescription products are not seen as providing reliable sales growth.
Keep an eye out in the future for new skincare products from Galderma, it may be part of the new direction for the company.
This sounds like bad news to me! Should we be worried about prescription products currently in the pipeline, like ivermectin/cd5024?
It is hard to say what, if anything will change. There in indication that only those products that are deemed to be likely to contribute to sales growth will be nutured. We will just have to wait and see what they release.
Thanks David.