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Cosmedicine Gets a Second Chance With New Owner

Skin care range Cosmedicine is working to formulate a potent rejuvenating antidote: expanded retail distribution.

Cosmedicine, a skin care range with over-the-counter grade actives, is working to formulate a potent rejuvenating antidote: expanded retail distribution.

In October, the New York-based private equity firm Vertex Capital Management purchased the struggling brand’s intellectual property, including the name, and product clinicals and inventory, from Cosmedicine’s lender, Laurus, after TrueYou.com, the company that created the line, filed for bankruptcy. Vertex relaunched Cosmedicine under the corporate nameplate Costru Company. Laurus maintains a small equity stake in the new venture.

Under its new owner, Cosmedicine’s latest distribution plans include a 30-minute infomercial starring model Rachel Hunter, slated to premier on Saturday, said Larry Nusbaum, chief operating officer and a managing director of Vertex. The company also aims to align the brand with a midtier department store. Several of the products in the range include Medi-Matte Oil Control Lotion SPF 20, Opti-mologist Eye Cream with Lift Diffusers and Healthy Cleanse Foaming Cleanser and Toner in One.

When Vertex acquired Cosmedicine, the brand was sold in Sephora, Ulta, Macy’s and select Nordstrom doors.

The aim now is to resurrect what was then a $10 million brand at retail, losing $4 million annually, according to Nusbaum, into a clinical skin care powerhouse with lines in the prestige and mass market channels.

To that end, Cosmedicine has partnered with a major mass retailer to introduce the formulas in smaller sizes and different packaging that will retain the line’s signature light blue color. The products, which will likely range between $14 and $30, will hit the mass retailer’s shelves in April, said Nusbaum. He declined to name the retailer, but said its decision to partner with the premium Cosmedicine brand “is a direct swing at CVS’ Beauty 360 [concept].”

The infomercial, plus a dual-distribution strategy, could reap sales of roughly $30 million this year, and climb to $80 million next year, said Nusbaum. In the company’s latest quarter, it reported a $500,000 profit after 48 quarterly losses under its previous owner, TrueYou.com, which introduced Cosmedicine in 2006 to complement its spa business, Klinger Advanced Aesthetics.

The concept put forth by then-chief executive officer and chairman Richard Rakowski was for TrueYou.com to create a spa that would house all cosmetic and medical services that improve one’s appearance — hair care, makeup, nail care, spa treatments and cosmetic dentistry and surgery — under one roof. It failed to come to fruition and losses mounted.

Faced with declining revenue and cash flow, TrueYou.com sold the spa business in spring 2007 and the new owner, Angela Krivulka, filed for Chapter 11 several months later. The legendary spa shuttered its doors in December 2007.

At the time the company sold Klinger to Krivulka, TrueYou.com retained Cosmedicine, but internal and external troubles continued to dog the business. Many cited mismanagement and excessive spending, and some have speculated that Cosmedicine’s exclusive ties to Sephora stunted its growth potential.

Sephora exclusively launched the line in spring 2006, dressing its windows with the product and Cosmedicine’s tag line, “Truth Is Beauty.” Both companies touted the line’s relationship with Johns Hopkins Medicine, which Cosmedicine recruited to consult on the clinical trials and quantitatively measure product benefits. Signaling their union, Sephora and Klinger also opened a side-by-side retail concept in NorthPark Center in North Park, Tex. The two units were connected via a breezeway, allowing customers to funnel back and forth from the spa to Sephora.

Several industry sources said Sephora invested $5 million in Cosmedicine. Sephora declined to comment. But Cosmedicine’s troubles ran deeper than distribution, said several former company employees, who named inflated executive pay and an overly ambitious corporate strategy as factors in the company’s undoing.

“It was a mismanaged brand with a failed management team,” said Nusbaum.

Despite Cosmedicine’s checkered history, Nusbaum said Vertex bought the brand, which was backed by lots of product marketing and frequently mentioned in the press, because, “I believed in the science behind it, and the quality [of the products].” He added, “I thought it would be a good brand to apply the informercial strategy to.”