Physicians have been involved in the beauty industry for decades. Clinique, launched in 1968, drew on
dermatologist Norman Orentreich’s work on skincare formulations and the three-step regimen he used with patients. My experience with physician-founded skincare brands dates to my time in venture capital at Easton Capital, where we invested in DDF (Doctor’s Dermatologic Formula), later acquired by P&G in 2007. Today, advising companies on acquisitions and sales at Pharus Advisors, I return to a question that matters on both sides of a transaction: what does physician involvement contribute, and how much of that contribution will continue under new ownership?
Physician backing can give a brand an aura of expertise that inspires consumer confidence. A founder who communicates effectively on social media may turn that confidence into substantial sales. These abilities have commercial value. A buyer should understand what the physician contributes and how much of that value will endure under new ownership.
The sums involved today can be substantial. Galderma’s recently announced agreement to acquire ZO Skin Health values the business at $1.5 billion, approximately 4.5 times its reported annual sales. Its stated rationale includes the brand’s clinical credentials and relationships with physicians, as well as its fit with Galderma’s existing business. That transaction does not tell us how much of the price reflects physician involvement. It does show why understanding that involvement matters. If you are paying, or expecting, a premium for physician backing, you should have a clear idea of what justifies it.
What does the physician actually contribute?
A physician’s involvement can cover several relationships, summarized in Table 1. Understanding which apply is a starting point. The more useful question is what the physician contributes and how that affects the business.
The contribution can begin with recognizing a problem. A physician who repeatedly sees patients abandon a regimen because it irritates their skin or takes too long may identify an opportunity that a market survey misses. Their experience can help a company decide what to develop and how people will actually use it. That is valuable even before anyone chooses an ingredient.
But relevant expertise needs examination. A podiatrist may bring considerable insight to nail and foot care. A physician from another specialty may have relevant research experience, while a dermatologist may have little training in formulation chemistry. Medical credentials alone do not establish expertise in every aspect of skin, hair or nail products. The question is whether the individual’s knowledge fits the work and whether the company has other specialists where needed.
Authority matters too. In some businesses, the founding physician calls the shots. In others, the physician offers input that management can accept or ignore. A knowledgeable founder can make development more effective. It is also worth understanding how they respond to other medical and scientific expertise, particularly when it challenges their own conclusions. An adviser can contribute substantially if the company seeks their input early enough and acts on it.
What does the evidence establish?
Physician involvement can improve the quality of a company’s research. It cannot substitute for the research itself. Nor does evidence about a desirable ingredient identified by a physician automatically support the same claims for a finished product containing it. Concentration and formulation can affect performance, and the conditions of use may differ from those in the ingredient study.
The studies themselves deserve scrutiny. Appropriate ethical oversight and informed consent matter, as do the quality principles reflected in Good Clinical Practice. Applicable requirements depend on the product and jurisdiction. A claim of GCP compliance does not, by itself, establish that a study answers the question being asked. Table 2 includes questions about study conduct and access to the underlying evidence.
There is another distinction worth making explicit. Improvement in an uncontrolled, open-label study does not establish that a product performs better than available alternatives. Without a suitable control, it can also be difficult to determine how much of the improvement comes from the product. Even a study showing a benefit over its vehicle may leave unanswered whether an existing product works just as well.
I would bring the same healthy skepticism to claims for an exosome or skin longevity product whether or not a physician backs it. Physician involvement does not lower the bar for evidence. If superior performance is part of the commercial proposition, the evidence should support it. A product may succeed for other reasons, including ease of use or access through a trusted professional. Those strengths should be assessed on their own merits.
What will the next owner see?
For an investor or acquirer, the questions in Table 2 help distinguish what is already established from what still needs work. The answers should inform the plans for the business after the transaction. A physician relationship that has mainly supported promotion might also contribute to better product development. A promising formulation may warrant a stronger study before the company commits to expanding its claims or entering a new market.
Brand owners should consider the same questions before a sale process begins. Growing sales and loyal customers may attract a buyer whose standards for product development, evidence and claims differ from the brand’s own. Understanding the expectations of likely acquirers gives management time to address gaps. Otherwise, the buyer may factor the cost and time required into its offer or reconsider its interest.
The beauty industry offers high-profile examples of difficult transitions following a founder’s departure. For a physician-backed brand, buyers should ask what could leave with the individual and what has become part of the company. Continued rights to the physician’s name will not preserve their expertise or professional relationships. Planning for a transition should begin before the sale, while the physician can help others assume those responsibilities. If the physician stays, someone accustomed to final authority may need to work within the buyer’s decision process and alongside its scientific team. That working relationship deserves attention before the deal closes.
This is also an oversight question between transactions. As the company introduces products, someone needs to ensure that the evidence and claims remain aligned. The physician may help with that work, but responsibility should be clear. A relationship established for the original product does not necessarily provide the expertise or time required for everything that follows.
The same is true of research. A company may have more supporting evidence than its marketing communicates, or less than its claims suggest. Understanding the difference helps management decide where further investment would be useful. Not every product needs a head-to-head trial. But if a company’s expected value rests partly on a performance advantage, demonstrating that advantage may deserve a place in the budget.
Physician backing can contribute meaningfully to a brand’s success. Assessing it requires understanding the work behind the association and what that work has produced. For brands seeking investment, making those contributions clear can help a prospective partner appreciate the business. For buyers, it provides a sounder basis for deciding what they are paying for and how they can help the company grow.
