This paper is a final project from the course I teach at the NIH Foundation for Advanced Education in the Sciences — TECH 566: Biotechnology Management
Mention the word “biotechnology” to the average person and he or she turns to scientific landmarks like the Human Genome Project, or the U.S.’s stem cell ethics debate. Most laymen fail to realize or are even aware of how biotechnology impacts their daily lives. Even fewer would believe that biotechnology is an integral part of their morning routine from mouth wash to sun block. But as the emerging biotechnology field generated a plethora of revolutionary data, industries with even a modicum of pharmaceutical overlap took notice.
Biotechnology is a wunderkind field that impacts a wide-range of markets from the oil industry to the more obvious pharmaceuticals. So it is no surprise that the cosmetics industry, so closely aligned to that of pharmaceuticals, would similarly benefit from a biotech marriage. With the rise of consumer awareness, disposable income, and internet markets, the cosmetic field serves as an alternate path to profit and sustainable growth at a time when pharmaceutical companies are focused on their next takeover, division spinoffs, and pursuit of the billion dollar product. Seven of the world’s top drugs by sales will go into generic status this year alone. Industry forecasters estimate a quarter-trillion dollars in sales of patent-protected drugs will be at risk of competition due to patent expirations by 20151. As these profits depart from big pharma’s coffers, the cosmetic industry enters stage left.
The increase in global literacy has created a buyer who may not have a scientific degree, but one who knows that enlightenment is just a Google search or Wiki-page away2. From actual chemical structures to Pubmed abstracts on formulation and compound efficacy, a buyer can now search for products to address a specific health, or in this case, beauty need. If you notice that your Retin-A prescription is close to running out, a simple web search will help you find dozens of alternatives such as Obagi’s Tretinoin cream, or SkinMedica’s Tri-retinol Complex3,4. Both products are commercially available in a range of formulations, and most importantly, available without a prescription. What does this mean for a buyer in the midst of a recession and possibly unemployed: prescription strength beauty is still available without a doctor visit, a co-pay, or medical insurance policy. And this knowledge is shared freely through beauty blogs, and on vendor websites like SkincareRx5.
Another reason why these cosmetic industry alternatives to a pharmaceutical product might be important is that profit margins and revenue drives cosmetic companies in the same way as pharmaceutical companies with three major differences: reduced FDA oversight, decreased development cost due to truncated clinical trials, and shorter timeline to market. Currently, the cosmetic industry falls almost exclusively under the Federal Food, Drug and Cosmetic Act (FD&C) and the Fair Packaging and Labeling Act (FPLA)6. The FDA guidelines regarding cosmetics can be condensed into two simple rules:
- Cosmetic products and ingredients are not subject to FDA premarket approval authority, with the exception of color additives;
- Inclusion of the following label on cosmetic packaging when a developer or manufacturer fails to adequately substantiate the safety of a cosmetic product or its ingredients prior to marketing – “Warning–The safety of this product has not been determined.” (21 CFR 740.10)”6.
These two rules eliminate much of the overhead associated with pharmaceutical product development and launch: INDs, multi-stage clinical trials, and NDAs7. This is not to say the cosmetic industry is a lawless realm reminiscent of a period western with charlatans selling “cure-all” snake oil. The FD&C Act along with FPLA have strict regulations regarding adulterated and/or misbranded products along with ingredient declaration6. While regulations applicable to marketing a cosmetic product are significantly less than that of a pharmaceutical, this is not a license to defraud or flagrantly misrepresent the efficacy of the marketed product. As such, the cosmetic industry falls within the purview of the Federal Trade Commission as well. FTC serves as a safeguard for the consumer, and enforcer when consumer rights are violated. That being said, at a time when pharmaceutical companies are spending somewhere between $800 million to $1.7 billion on developing new drugs which may not even reach market status, the cosmetic industry offers an affordable alternative8.
Currently the beauty and personal care industry generates roughly $400 billion in global sales with several rapid growth areas such as the men’s skin care, and “green” or organic niche markets9. The U.S. men’s cosmetic market alone was valued at $4.8 billion in 200910. Meanwhile, BRIC (Brazil, Russia, India, and China) countries are forecast to contribute approximately $21.5 million of the industry’s growth between 2009 through 201411. And like the pharmaceutical industry, frontier markets such as Mexico and Indonesia are already being targeted by the cosmetic industry looking to capture untapped billions. With publicly-held biotech companies generating estimated global revenue of $80 billion in 2010, a marginal amount when compared to that resulting from pharmaceutical sales, it stands to reason growth into the cosmetic industry can only help drive biotechnology revenue. Revenue produced at a significant capital savings when compared to pharmaceutical product development8.
Having explained the financial “why” of a biotechnology and cosmetic industry marriage, let’s delve into the “how”. As mentioned previously, increased consumer education has changed most commercial markets from “Buyer Beware” to “Buyer Aware”. By 2020, industry analysts anticipate five billion internet users and more than 22 billion devices communicating over the internet12. As a result, most companies regardless of industry are focused on social media marketing, and developing various methods of connecting to current and potential clients via smartphone apps, facebook deals, or twitter specials. Gone are the days of advertising in your local newspaper hoping to reach customers in your tri-state region now that internet presence connotes global access. And this global access similarly serves as the groundswell for consumer demands in the cosmetic industry. From the pursuit of organic or “green” products to the European ban on animal testing, the cosmetic industry is increasingly turning to Mother Nature for its latest and greatest biologically and/or functionally active ingredients.
Consumers are becoming increasingly concerned with the sustainability of their food, materials, ingredients, packaging, etc. which leads businesses to do the same if they want to retain and capture new buyers. There are numerous reasons as to why a cosmetic company would turn to marine and plant extracts to replace previously used chemicals such as dyes, parabens and silicones:
- The natural cosmetic market is estimated to reach $14 billion in 201513;
- Currently natural and organic products account for 2% of global cosmetic sales13;
- Active and/or functional compounds isolated from plant and marine sources often fall under FD&C regulation versus FDA as they are not necessarily considered drugs.
Dyes isolated from algae to skin moisturizers isolated from nuts and seeds, the face of North American and European beauty is growing increasingly green. While the rest of the world has been slow to follow this trend, posting 13.9% five-year compound annual growth would indicate that it is following none-the-less14. This surge in natural isolates serves as the cornerstone for the cosmeceutical market: fusion of cosmetic products with biologically active or functional ingredients. In an effort to remain at the forefront of the market, biotechnology actives serve as the future of the cosmeceutical niche.
This cosmeceutical trend similarly drives advances and technologies that are non-invasive and/or more affordable alternatives to plastic surgery. This similarly applies to high-end services formerly offered solely by dermatologists. Stem-cell based breast augmentation and face lifts are currently reserved for the wealthy; however, isolation of stem cells from apples, grapes and plants such as edelweiss has placed stem-cell based therapies well within the reach of the average consumer. These stem-cell advances serve as the cutting edge of anti-aging and sun damage reversal products. For each new epidermal/dermal pathway discovered relating to aging and cellulite formation, there is a complimentary peptide, antioxidant, telomerase extender, liposome, or signal pathway blocker isolated and developed for market. In this way, cosmetic companies that are tied to the leading edge of biotechnology similarly remain at the forefront of the cosmetic industry. This partnering enables cosmetic companies to profitably respond to increasing consumer demand for active ingredients. Development of home or personal use devices is on the rise as well. Below are examples of previously spa or dermatologist treatments replaced by personal devices sold through online retailers and even local drug stores at a fraction of their original cost:
- Laser hair removal
- Tooth whitening
- Acid peels
In the quest for a more youthful and aesthetically pleasing appearance, the cosmetic industry serves as a never-ending source of revenue for biotechnology innovators.
The U.S. market for cosmetic products containing specialty actives was valued at $240 million in 2010 with anticipated annual growth of 3.8% through 201515. A prime example of this growth is the use of active ingredients such as retinols and peptides which was unheard of in 2005 but quickly expanded to 200 registered compounds and 1200 marketed products by 2012, respectively16. Even Botox, a bacterial protein isolate with paralytic activity turned wrinkle freeze-ray, has its more affordable alternatives on the market in the form of functional peptides. Yet these fairly new to market developments are already giving way to more advanced therapies evolving from animal and insect venom isolates. The cosmetic industry of today relies heavily on biotechnology to meet the growing beauty needs of sun-worshippers worldwide and the “baby boomer” demographic. For biotechnology, this is a mutually beneficial arrangement considering the U.S. anti-aging market is expected to reach $114 billion by 201517.
Another growing arena lead by biotechnology is the microencapsulation and even nanaoencapsulation of active ingredients like titanium dioxide, main active ingredient in sunblocks. Shrinking the size of these compounds while maintaining or even enhancing functional activity yields a cosmetic product with increased efficacy. This is due to the fact that these smaller compounds are better able to cross the skin’s upper stratum corneum layer and penetrate into the dermis without losing efficacy…something that will appeal to the enlightened buyer. Other natural anti-aging therapies growing in popularity include: affordable human growth hormone alternatives like DHEA, antioxidants like Vitamin C and E, and fruit enzymes to resurface the skin like papain.
While the therapies and methodologies discussed here are in high demand, they in no way encompass the vast array of options that continue to evolve from synergy of the biotechnology and cosmetic industries. And with “cosmeceutical” as the cosmetic industry buzz word of the decade, biotechnology can’t help but flourish by funneling many of its advances and breakthroughs into the cosmetic industry.
- “Get Ready for the Tidal Wave of Drug Patent Expirations” – Patrick Cox, Business Insider (4/12): http://articles.businessinsider.com/2012-04-10/news/31316252_1_ranbaxy-laboratories-lipitor-patent-protection
- United Nations’ Human Development Report: Regional and National Trends in the Human Development Index 1980-2011 (http://hdr.undp.org/en/data/trends/)
- Obagi Tretinoin: https://www.skincareheaven.com/product_detail.php?product_name=Obagi_Tretinoin_Cream_.05_Percent
- SkinMedica Tri-retinol Complex: http://www.skinmedica.com/skin-care-products/age-defense/tri-retinol-complex
- SkinCareRx: http://skincarerx.com/it:Retinol.html
- FDA Authority over Cosmetics: http://www.fda.gov/Cosmetics/GuidanceComplianceRegulatoryInformation/ucm074162.htm
- FDA – How Drugs are Developed and Approved: http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/default.htm
- The State of Biotechnology Today – Plunkett Research, Ltd. (2010): http://www.plunkettresearch.com/biotech-drugs-genetics-market-research/industry-and-business-data
- Personal Care Ingredients – APAC Sourcing Solutions (2012): http://www.apacss.com/what_we_do/domains/personal_care.php
- “The State of Cosmetics in 2011 with Exclusive Commentary about Becoming a Spa with a Conscience” – SkinInc (1/11): http://www.skininc.com/spabusiness/trends/113361329.html?page=2
- Euromonitor International – “Beauty and Personal Care 2011: Corporate Strategies in and beyond the BRICs” (2012): http://blog.euromonitor.com/2012/01/beauty-and-personal-care-2011-corporate-strategies-in-and-beyond-the-brics.html
- The Futures Report 2011 – Global Futures and Foresight (2011): www.steria.com/uploads/media/The_Futures.pdf
- Global Natural & Organic Beauty Product Sales Reach USD 9 billion, Organic Monitor in Eco Business.com (11/11) – http://www.eco-business.com/press-releases/global-natural-organic-beauty-product-sales-reach-usd-9-billion/
- “Natural Personal Care Markets Vibrant, Naturally Evolving” – SkinInc (3/12): http://www.skininc.com/spabusiness/trends/142459775.html
- “FDA Targets ‘Cosmeceuticals’ Straddling Regulatory Lines” – Anna Edney, Bloomberg – (3/12): http://www.bloomberg.com/news/2012-03-27/fda-targets-cosmeceuticals-straddling-regulatory-lines.html
- “Greater consumer awareness of actives leads to higher product expectations” – Simon Pitman, Cosmetic Design (9/11): http://www.cosmeticsdesign.com/Market-Trends/Greater-consumer-awareness-of-actives-leads-to-higher-product-expectations
- “Boomers Will Be Pumping Billions into Anti-Aging Industry” – David Crary, Huffington Post (8/11): http://www.huffingtonpost.com/2011/08/20/boomers-anti-aging-industry_n_932109.html
- “The BRICs and beyond: The lure of emerging economies for the beauty industry” – Euromonitor International (2010): http://blog.euromonitor.com/2010/10/the-brics-and-beyond-the-lure-of-emerging-economies-for-the-beauty-industry.html
- “The Green Economy Looms Even Larger” – Euromonitor International (2012): http://blog.euromonitor.com/2012/05/the-green-economy-looms-ever-larger.html#more
- “Cosmetics industry drives growth in marine biotech” – Katie Bird, Cosmetic Deisgn (3/08): http://www.cosmeticsdesign.com/Market-Trends/Cosmetics-industry-drives-growth-in-marine-biotech
- “Green is the New Black” – Michelle Yeomans, Cosmetic Design (4/12): http://www.cosmeticsdesign.com/Market-Trends/Green-is-the-new-black-says-Organic-Monitor
- “Eco-Labels: Environmental Marketing in the Beauty Industry” – GCI Magazine (2009): http://www.gcimagazine.com/marketstrends/segments/natural/52976687.html
- “Natural and Organic Beauty Maintains Strong Demand, Expected to Grow 10% Through 2016” – GCI Magazine (2012): http://www.gcimagazine.com/marketstrends/segments/natural/142476395.html?page=2
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- Update on cosmeceuticals. Kerscher M, Buntrock H. J Dtsch Dermatol Ges. 2011 Apr;9(4):314-26; quiz 327. doi: 10.1111/j.1610-0387.2010.07600.x.
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- Cosmeceuticals and active ingredients. Lintner K, Mas-Chamberlin C, Mondon P, Peschard O, Lamy L. Clin Dermatol. 2009 Sep-Oct;27(5):461-8. Review.
- Microemulsions and nanoemulsions: novel vehicles for whitening cosmeceuticals. Boonme P, Junyaprasert VB, Suksawad N, Songkro S. J Biomed Nanotechnol. 2009 Aug;5(4):373-83. Review.
- Liposomes in cosmeceutics. Rahimpour Y, Hamishehkar H. Expert Opin Drug Deliv. 2012 Apr;9(4):443-55. Epub 2012 Mar 13.
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About the Author:
Kristina Faulk is a research technician at the National Institutes of Health fascinated by the myriad ways biotechnology shapes our everyday lives. She may be reached at email@example.com.