L’Oréal Takes 10 Percent Stake in Galderma

PARIS — L’Oréal is digging deeper into the burgeoning dermatological products market by taking a 10 percent stake in Galderma — the pure-play dermatology leader worldwide and among the largest in injectable aesthetics — which it originally cofounded.

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L’Oréal said Monday it had acquired the share in Galderma Group AG from Sunshine SwissCo AG, a consortium led by EQT, Abu Dhabi Investment Authority and Auba Investment Pte. Ltd.

“In today’s world, where life expectancy is rising, people of all ages are increasingly starting to adopt more holistic approaches to care for their well-being and their well-aging,” Nicolas Hieronimus, chief executive of L’Oréal , said during a call with financial analysts and journalists Monday, a few hours after the announcement.

“As a result, consumers are now incorporating additional elements into their beauty routines, including diagnostic tools, dermocosmetics and, of course, aesthetic treatments,” he continued, calling the latter adjacencies to L’Oréal’s portfolio.

L’Oréal and Galderma have additionally agreed to a new strategic scientific partnership, which will leverage Galderma’s expertise across a wide range of dermatological solutions for injectable aesthetics and therapeutic dermatology, and L’Oréal’s know-how in skin biology, diagnostic tools and evaluation methods.

“This partnership will also help us to further explore the synergies between injectables and topical treatments,” said Hieronimus.

Financial terms of the deal were not disclosed, but L’Oréal said the transaction will be made via an off-market block trade with the EQT-led consortium. L’Oréal will fund the deal, which is expected to close in the coming days, with its available cash and credit lines.

“L’Oréal and the EQT-led consortium do not intend to act in concert,” L’Oréal said in a statement.

Hieronimus underlined, as well, that L’Oréal will not seek representation on Galderma’s board of directors. L’Oréal has agreed to customary provisions for an investment of this type as part of a shareholders’ agreement entered into with Sunshine SwissCo AG.

The dermatological beauty market is percolating. The injectable aesthetics market alone reached 9.3 billion euros in 2023, having posted a 12 percent compound annual growth rate over the past five years, according to Hieronimus. He added the procedures’ penetration rates already stand in the mid-single digits and could double in the next decade.

“This clearly demonstrates a large potential for growth in the injectable aesthetics market,” said Hieronimus.

L’Oréal’s Dermatological Beauty division, which includes brands such as CeraVe, La Roche-Posay, SkinCeuticals and Skinbetter Science, helped bolster the company’s first-half sales this year. That division was the fastest-growing in the period, posting sales up 16.4 percent on a like-for-like basis to 1.78 billion euros.

The division registered a 29 percent CAGR between 2020 and 2023, and is L’Oréal’s most profitable.

“This growth has, in part, been fueled by our unique and long-term partnership with thousands of dermatologists around the world, and our complementary portfolio of brands, including three of the four most dermatologist-prescribed brands,” said Hieronimus.

“But consumers are increasingly tapping into adjacencies to our current portfolio, in particular injectable aesthetics,” he said, explaining many of those consumers already use L’Oréal brands as part of their beauty routine. “We also have a clear leadership in medical topical skin care, with a range of products designed to prolong the effect of aesthetic treatments.”

L’Oréal helped birth Zug, Switzerland-based Galderma, which was established in 1981 as a joint venture between L’Oréal and Nestlé. Galderma’s core brand, Cetaphil, dates back to 1947.

In 2014, Nestlé acquired L’Oréal’s 50 percent stake in Galderma. Five years later, EQT Partners investment group and a wholly owned subsidiary of the Abu Dhabi Investment authority purchased the skin care company, then called Nestlé Skin Health, for an enterprise value of 10.2 billion Swiss francs, or $11.99 billion. Afterward, the group was again rebranded as Galderma.

Galderma today is present in more than 90 countries and counts 6,500 employees worldwide. Its brand include Actinica, Benzac, Azzalure, Differin and Dysport, offering a wide-ranging portfolio of dermocosmetics, dermatological drugs, hyaluronic acid fillers, neuromodulators and biostimulators.

Galderma floated on the SIX Swiss Exchange in Zurich on March 22 to great success, ending its first trading day up 20.75 percent. The implied placement value of up to 2.3 billion Swiss francs made Galderma’s the largest IPO placement volume in Switzerland since 2017.

In a separate statement Monday, Galderma said: “Today’s announcement enables Galderma and L’Oréal to pursue new avenues and accelerate innovation in the field of dermatology in order to deliver new combined levels of performance against the signs of skin aging.

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“The expertise, capabilities and reach of Galderma and L’Oréal offer a collaboration that is uniquely positioned in a fast-growing and highly attractive consumer-focused segments of the dermatology and beauty markets,” Galderma continued.

L’Oréal said that it is increasingly taking a holistic approach to investing, as the world’s largest beauty giant and a beauty-tech company.

“This approach aims to blend diagnostic tools, high-performance topical products, consumer devices and aesthetic treatments, to deliver new combined levels of performance by correcting, repairing, preventing, anticipating and intercepting the signs of skin aging,” L’Oréal said.

Hieronimus said L’Oréal believes in Galderma’s vision and business model.

“We have strong respect for the management, and it’s a good investment,” he said. “It is an opportunity for us to explore and learn this market of injectable aesthetics, which is the part of Galderma that has developed the most over the [past] couple of years.”

That, coupled with the scientific partnership, will allow L’Oréal to be involved with the developments in the category “and to keep our options open for the future,” said Hieronimus.

“We assume this is a move to take control of Galderma over time,” Jefferies analyst Molly Wylenzek said in a research note. “[L’Oréal] is moving left field re: beauty tech/devices and now injectables, in a notable shift away from traditional cosmetics, perhaps a sign of a view on the future of the beauty wallet.”

Bruno Monteyne, senior analyst, European food, home and personal care, wrote in a note that L’Oréal’s investment in Galderma is positive and matters because, “one: Beauty changes faster than any other space. Two: L’Oréal wants to be in all forms of beauty, particularly in the newly emerging ones. Three: Most of L’Oréal’s market outperformance comes from mix: being in the right (fastest growing) place at the right time (early). Injectable aesthetics are the fastest-growing area of beauty, hence the logic.”

Monteyne wrote L’Oréal taking the stake also plays into two strong beauty trends — medicalization and premiumization of beauty.

L’Oréal and Galderma will maintain independent research-and-development organizations, while building a bridge between their teams with specific expertise. Focuses are being defined.

“Using our science to work to discover even further synergies between these products is very important for both companies,” said Hieronimus.

He highlighted that today, Galderma and L’Oréal are totally different companies in a wholly different market than a decade ago.

Galderma has more than doubled in size, growing from a 1.6-billion-euro to a 4.1-billion-euro company.

“But more importantly, it has moved from being a primarily therapeutic company, where drugs were their number-one category by far, to a pure-play dermatology company, with a majority of its business derived from both injectable aesthetics and dermatological skin care to date,” said Hieronimus.

“At the same time, the market of procedures has increased more than sixfold,” he said.

A couple of years ago, L’Oréal changed the name of its derm division from Active Cosmetics to Dermatological Beauty.

“It is a clear indication that we want to be the number-one partner to all the dermatologists around the world,” said Hieronimus.

The division’s strength heightened L’Oréal’s interest in the field of dermatological beauty. That, compounded with L’Oréal’s strong partnership with 200,000 dermatologists around the world, and Galderma’s transformation, “make this investment very relevant today, when it was less strategic 10 years ago,” said Hieronimus.

“Overall, we are very confident that this market will continue to grow,” he said.

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