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Eyeing up the global aesthetics market

Here are some lessons we learned during a recent interview with CFO Alan Olby

Alan hasinclair.jpgs served as Sinclair’s Chief Financial Officer since 2009 and was previously Group Financial Controller of Xenova Group plc and KS Biomedix plc. Prior to his role at KS Biomedix plc, Alan was a Corporate Finance Manager at Deloitte having previously been an Audit Manager at Baker Tilly.


Sinclair takes a different approach to aesthetics

Being relative newcomers to the aesthetics market, Sinclair new that getting their foot in the door would be difficult. Major players Allergan, Galderma and Merz already controlled the market, and directly competing with them simply wasn’t an option.

“We first looked at moving into aesthetics about four years ago. Back then the market was dominated by three very big players: Allergan in the US, which is very well known; Galderma, which is part of Nestle; and Merz, a privately owned German company who have 70-80% market share in some key products. Coming into aesthetics as a new player, we knew we’d have to do something differently, rather trying to compete with them from scratch.”

Sinclair’s products, however, exploit a gap in the aesthetics market, focusing on different methods to the well-trodden path of wrinkle reduction. These treatments – which have the added benefit of being particularly long-lasting, so patients don’t need to return for more injections every six months – aim to avoid a ‘non-natural’ look, providing a healthy, age-appropriate look, as Alan explains:

“The big companies have typically focussed on toxins and fillers for filling wrinkles, trying to make patients look younger. You’re probably familiar with the ‘Botox look’ of a frozen forehead, or the ‘fixed’ look in the faces of people who have had multiple filler injections: these looks appear less than natural in some respects.

We aim for a more natural outcome, where people look healthier and more age appropriate. Our treatments reshape the face and achieve volumisation by lifting the fat under the skin, rather than filling in wrinkles to make people look younger. It’s not about looking younger, it’s about looking rejuvenated.”

Sinclair’s success rests with a few choice products

Silhouette, a key product in Sinclair’s portfolio, specialises in facial fat redistribution. A suture comprising of hollow cones and terminal needles, Silhouette combats the downward drift of fat which occurs with age by repositioning subdermal tissue further up the face, giving a look of revolumisation.

“The suture is injected in the fact under the skin, and the cones, which go in opposite directions, ratchet onto the skin to create a lifting effect. It gives an effect similar to a face lift, but is a non-invasive technique done under local anaesthetic in just forty five minutes.”

Sinclair’s second key product, Ellanse, works by stimulating collagen production in the skin. Ellanse is popular with patients as its effects are immediate, differentiating it from other treatments – including Radiesse, produced by competitor Merz; and Sculpture, one of Sinclair’s other collagen stimulator products – that can take six to eight weeks to show results.

“As you age your skin loses collagen and loses volume; this product helps the skin to reproduce collagen, allowing the skin to revolumise. One advantage of Ellanse is that it has a much more predictable life span. Depending on the polymer chain links in the product, its effects can last either one, two, three or four years.

Ellanse is in fact taking market share from more long term HA fillers, as well as other collagen stimulators. Allergan, Galderma and Merz each have their own long acting fillers, which currently dominate the market, but Ellanse is competing head on and managing to take market share from them.”

Sinclair have recruited US-based Thermi to help them conquer the US

In April 2015, Sinclair’s Silhouette insta-lift product received FDA clearance, allowing them to sell the product to the American aesthetics market – the biggest aesthetics market in the world.

“At the time we were going through a strategic review to see how we could access the US market once we had that approval. Following the FDA clearance we announced a deal with US-based company Thermi, a pure aesthetics business who already sell heat devices to plastic surgeons. As plastic surgeons are the core user group for Silhouette, we now have access to a huge aesthetic market through their sales force.”

Alan believes this deal with Thermi will give Sinclair’s value a tremendous boost. Not only could sales of Silhouette amount to the region of $200 million, but the contract allows Sinclair to keep hold of the product rights far more firmly than other companies might be able to in similar situations

“Our agreement with Thermi is a comparatively short term distribution agreement. Typically, for the US market, a partner would want an agreement to last seven to ten years. We, however, only have a four year initial agreement with Thermi, because we want to keep the potential in-market sales. We have a structure whereby we have the opportunity to bring the rights back for insta-lift: if we can launch successfully, we can then trigger the clause in the contract to bring the rights back. Here we have another opportunity to add significant value to the group.”

Sinclair’s decision to focus on aesthetics has balanced its books well

Sinclair used to dabble in other, more medicinal areas of dermatology. However, over the last five years it has altered its strategy to focus entirely on aesthetics. This decision to streamline the business has added to its value significantly, helping to vanquish much of the £60 million in debts accrued during the acquisitions the company took part in in 2014.

“We struck a deal with Alliance Pharma in the UK at the end of 2015 to sell our non-aesthetics business, which has enabled us to focus the business. This non-aesthetics arm meant that we encountered a number of issues one encounters in the pharmaceutical industry: price controls, price cuts, lower margins and low growth. But the future for Sinclair is very much in the aesthetics market, which has a very different growth profile to the dermatology industry as a whole.

Our balance sheet’s current strength comes from this decision to streamline the business by selling the medicinal portfolio and focusing purely on aesthetics. We’ve significantly reduced the number of partners we deal with, as well as reducing our number of contract manufacturers from nineteen to three! We’ve also reduced our headcount, as Alliance took on forty employees from Sinclair. All in all we’ve managed to vastly simplify the business.”

This business simplification has allowed for unprecedented levels of company growth.

“We set a target outside the US for 40% growth over calendar year 2016. This is a fairly high target to have made publically, but we announced at the half year mark that we were pretty much half way there: we had sales just over £17 million in the first six months of the year, out of a target of £35 million for the full year.”

Sinclair has multinational ambitions, but its business is affected by political and social turbulence

Sinclair currently has sales forces in four European countries: the UK, France, Germany and Spain. Having also just established a direct presence in Brazil, another key aesthetics market, Sinclair now have their sights set on China.

“The aesthetics market in China is very attractive, as it’s very highly priced for Western products. We have a partnership with a company in China looking to register three of our brands at the moment, which will hopefully come to market in 2018 or 2019.”

Sinclair does, however, face challenges; the kind faced by any dynamic, growing company that’s operating across multiple geographies. Being geographically diverse brings many potential stumbling blocks.

“For example, Russia is a very strong aesthetics market, but given the political instability seen in Russia over the last few years, we’ve seen a significant decline in sales. Also, the recent terrorist attacks in France have really hurt our French business, because people are not visiting clinics. You would normally get quite a lot of tourists coming to Paris for aesthetic treatments, but that flow of tourists has dried up, so business in Paris has been poor. In the last few months we’ve also seen the coup attempt in Turkey, and our Turkish partner has seen a massive drop off in sales over a very short period of time.”

These are events that we have no control over, and they can happen at any time. You just have to deal with those as they come along.”

Sinclsinclair-pharma.jpgair are a pure-play aesthetic dermatology company, providing a range of devices for – in their own words – ‘facial rejuvenation’, offering collagen stimulation for volume loss, thread lifting for facial contouring and dermal fillers for wrinkles and lines’. Having orchestrated several important mergers, acquisitions and deals in recent years, and with a strong focus on direct trading and training to plastic surgeons, Sinclair are poised to break not only the US, but further afield as well.



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