Dr. Zein Obagi made his name developing and marketing rejuvenation products that do a better job penetrating skin than typical department store potions.
Now, after developing a big following among cosmetic surgeons, the Beverly Hills dermatologist is hoping that his pharmaceutical-grade skin lightening, peeling and other products will draw an even wider customer base.
And that goal may not be out of reach, as the private company he founded in the 1980s Obagi Medical Products Inc. enters its first year as a publicly traded corporation.
Obagi has new products appealing to dermatologists and other doctors, additional offerings in its core lines and recent clinical data supporting claims of efficacy. As such, it has set its sights on a public profile similar to that of Allergan Inc., the Irvine maker of the hugely successful wrinkle relaxer Botox.
"It's truly turned out as I envisioned when I set out to create science-based products that would improve the cellular function of the skin," said Dr. Obagi, who no longer serves on the company's board but is a paid advisor and is the second largest shareholder with 18.6 percent of outstanding shares.
The celebrity dermatologist now operates three skin care clinics independent of the corporation, including the recently expanded Obagi Skin Care Institute in Beverly Hills, where the corporation leases space for its marketing and physician training center.
Obagi targets the physician-dispensed cosmeceuticals segment of the $20 billion facial skin care market. Products are marketed to doctors as high-margin additional income for their practices. The products are priced to be competitive with department store lines.
Obagi's flagship Nu-Derm system of over-the-counter and prescription skin lightening products is considered the market leader, generating $53.2 million in product revenue last year.
However, the line is 19 years old and still accounted for 70 percent of the company's $73.9 million in product revenue last year, with sales growing 23 percent in the fourth quarter alone. And though the company had diversified into Vitamin C, Retin-A and chemical skin peel products over the years it has been seen as badly in need of diversification.
Now, Obagi is expanding at a time when aging baby boomers are increasingly sophisticated about the options for preserving the appearance of youth and willing to spend a premium to achieve it.
It's entered the fiercely competitive $2.2 billion topical acne treatment market, dominated by mass market brands such as Neutrogena and premium lines such as Perricone and Murad. Obagi hopes to make its best inroads with dermatologists seeking a study-backed product they can sell in their offices.
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