Irvine-based ZO Skin Health Inc. wants to redirect women from the cosmetic counter to their doctor’s office.
“The idea is to keep the patient in the practice with really good, healthy skin products,” said James Headley, the company’s chief executive.
Dr. Zein Obagi, ZO Skin Health’s founder and medical director, is considered a pioneer in the field of doctor-dispensed skincare products. The board-certified dermatologist created the original Obagi Nu-Derm and Obagi Blue Peel skincare lines as he continued to run his practice.
The lines encompass medical and “cosmeceutical” purposes and are sold exclusively through physicians. The products include cleansers, toners, polishes, creams, acne treatments, sunscreens and serums.
The company is growing. Headley estimates ZO Skin Health will have some $35 million in sales this year, up from $20 million last year and $8 million in 2012.
The overall cosmeceutical market in the U.S. is about $6.5 billion, according to Cleveland-based market tracker Freedonia Group, which estimates demand for such products will grow nearly 6% annually through 2015.
ZO Skin Health’s products are in “several hundred” doctors’ offices and are sold in some 50 countries outside the U.S.
International Markets
The U.K., Canada, and Vietnam are among the international markets for the line.
The company uses distributors rather than a direct sales force.
“International is growing quickly but not as fast as the U.S. because there are 23,000 dispensers, doctors [in the U.S.] who actually dispense skincare products out of their practices,” Headley said. “We’re opening about 40 to 50 new accounts a month.”
Nearly half of ZO Skin Health’s customer base is made up of plastic surgeons, Headley said.
Other doctors who carry the line include dermatologists and other specialists who have “bought into the aesthetic world” and are looking for fee-for-service offerings rather than insurance-covered services.
The company markets its products to doctors by advertising in trade publications such as the Dermatology Times, but it doesn’t do direct-to-consumer campaigns. ZO Skin Health also has a website that links patients with doctors who carry the products, a setup Headley described as a “mini-Amazon.”
The company takes an aggressive stance against what Headley calls “Internet pirates.” It’s filed several trademark infringement lawsuits in an attempt to stop unauthorized Internet sales of its products.
“We have what I call a ‘zero tolerance’ Internet policy, which means we don’t allow any doctors or anybody to sell our products. We control it ourselves,” he said.
Its competitors include SkinMedica, a unit of Irvine-based Allergan Inc., and Obagi Nu-Derm, which is now a part of Canada-based Valeant Pharmaceuticals International Inc., a drug maker with OC roots that bought a previous Obagi company, Obagi Medical Products Inc., last year.
ZO Skin Health emphasizes a continuum of care for its clients.
Headley gave an example of a hypothetical patient who uses the ZO Medical line to correct skin problems.
“Patients will go into the doctor’s office and buy the therapeutic line. Then they would go into Nordstrom or Sephora or Macy’s and buy Estee Lauder. … The products aren’t that effective,” said Headley, who previously worked for Estee Lauder Cos. and the Ralph Lauren division of L’Oreal.
“It’s also important to know that Dr. Obagi coined the term ‘skin health,’ ” Headley said, adding that the concept goes beyond the traditional role of dermatologists, which was to treat skin problems.
Instead, Obagi looked at the question of “why not keep skin healthy? If skin is healthy, then it’s more tolerant to sun, more tolerant to disease, more tolerant to UV light,” Headley said.
ZO Skin Health emphasizes its ties to founder Obagi, who has clinics in Beverly Hills, San Gabriel and a newly opened Obagi Skin Health Institute on Pacific Coast Highway in Laguna Beach.
“He is probably the most renowned dermatologist in the world,” Headley said. “We launched in Russia, in Moscow, in 2012. We had over 300 dermatologists attend his lecture.”
Obagi founded a company known as World Wide Medical Inc. in 1988. Obagi Medical Products bought World Wide in 1997, and the doctor stayed with the company until leaving to establish ZO Skin Health in 2007.
Differences
Obagi said he had philosophical differences with the new owners.
“It became clear that [Obagi Medical Products] and I had different visions for the future of skincare products and the direction in which they should evolve, so I decided to found a new company based on the newest skin health science. Today, I have absolutely no relationship with Obagi Medical Products,” Obagi said in a message posted on ZO Skin Health’s website.
ZO Skin Health has about 55 full-time employees and is planning to hire an additional 10 salespeople this year. It uses a Los Angeles-area contract manufacturer to make its products.
The company moved from Del Mar in San Diego County to Irvine in 2011 “because it’s a hub for medical products,” Headley said. “… There’s a great source of manpower and talent here.”
