Over the last two weeks, a lot has been written—and not all of it complimentary—about the Pfizer and Allergan merger that will create on completion the world’s largest pharmaceutical company valued at $160 billion. Industry analysts and financial, legal, and political heavyweights are unanimous in their criticism of the ethics of the merger, announced on November 23, 2015, noting it for being a blatant tax inversion tactic. Merging with the Dublin, Ireland-based Allergan significantly reduces the U.S.-based Pfizer’s tax liability as corporate tax rates are lower in Ireland than in the United States.
Interest in the merger also stems from the curiosity about the fate of the individual portfolios of the two companies. It is the general consensus that Pfizer’s blockbuster product Viagra and Allergan’s equally successful injectable Botox will remain immune to any adverse impact of the deal and transition, fiercely protected and supported by their respective parent companies. Less clear is what happens to other brands and products, such as in the case of Allergan, with its professional skin care brand SkinMedica.
In the U.S. professional skin care market, Allergan has been a prominent player since the mid-2000s with its then brands M.D. Forté and Prevage MD, which were replaced by the Vivite range by 2011. In 2013, Allergan acquired SkinMedica’s prescription and nonprescription skin care products generally sold by doctors for an upfront payment of $350 million and phased out the Vivite range, giving a boost to SkinMedica’s sales, which according to the 2014 edition of Professional Skin Care Global Series have increased at a CAGR of about 18% since 2010. The brand offers a wide range of high potency, specialized products, and ranks in the top three brands in the medical care providers channel. In 2014, even as Allergan spent most of the year resisting the hostile takeover bid by the Canadian company Valeant Pharmaceuticals, SkinMedica’s sales continued unabated.
However, SkinMedica is little more than a fledgling in the collective portfolio of the two combining companies. Usually, a small brand either benefits from being acquired by a large parent company that sees the growth potential in it and backs it with an increased budget for product innovation and marketing, or loses out as the parent company directs its energies on the larger and more successful businesses. In SkinMedica’s case, a unique third possibility gives hope to the professional skin care industry and loyal users of the brand. There has been little comment from either company about their plans for their various brands, and industry analysts have focused entirely on the tax aspect of the merger. It is therefore likely that the individual businesses of the two companies will continue to operate as they did, and SkinMedica will continue benefiting from Allergan’s attentiveness to the brand’s growth and innovation. In such a scenario, SkinMedica will continue to be one of the leading players in the category, vying for market share with its closest competitors of SkinCeuticals and Obagi.
To learn more about SkinMedica and other leading and up-and-coming players in the professional skin care market, please refer to the Professional Skin Care Global Series—a comprehensive series of reports focusing on the market’s size and growth, new product launches, and key changes in the competitive landscape for about 10 key countries. To request a sample, please contact our team.
Written by Renu Singh, Project Manager, Consumer Products Practice