Topix Pharmaceuticals Inc. has acquired Derma E, a natural skin-care brand.
Derma E makes natural, vegan and cruelty-free skin-care products sold through the natural grocery channel as well as online and at Ulta Beauty. The brand’s products include Microdermabrasion Scrub, $29.99; SunKissAlba Radiant Glow Oil, $19.99, and Overnight Peel with Alpha Hydroxy Acids, $18.99. WWD reported the business was looking for an investor in March 2017.
Topix, which is backed by private equity firm New Mountain Capital, sells skin-care brands like Replenix, Glycolix and Resurfix through the physician channel. New Mountain backed the business in 2016 and spent the first year of investment focused on organic growth, said Andre Moura, managing director at New Mountain. Topix has doubled its sales force, tripled marketing and R&D budgets and launched new products, according to Moura. Now, with the hire of Steve Pinsky, senior vice president of corporate development and M&A at Topix, the business is looking to build through acquisition as well.
“As we look to grow, our focus is not to build on commoditized products, it’s to build on efficacious, defendable products that serve a need in the marketplace,” Pinsky said. “We look for products that are [differentiated], efficacious, that fill a need that most other products out there do not, and Derma E…checked those boxes.”
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Founded 34 years ago, Derma E is growing at more than 30 percent annually. The business sits in an on-trend space — natural skin care — but also has repackaged and expanded its distribution in places like Ulta Beauty. Derma E’s co-founders, Linda Miles and David Stearn, credited their senior vice president of marketing, Barbara Roll, who spearheaded everything from social media to new packaging, with boosting the brand’s growth.
“We have that Ulta, natural-channel stance, and that has worked extremely well for us,” said Miles. Miles will remain involved with Derma E as a consultant, and Stearn, who has been acting as chief executive officer, will retire.
For Topix, Derma E adds a new type of distribution, which Moura said would allow the business to reach more consumers at whatever points they are looking to buy skin care products. Combined, industry sources estimated Topix and Derma-E have close to $100 million in wholesale sales.
Looking forward, expansion opportunities for Derma E include deeper penetration in existing distribution channels, online and international, according to Pinsky. “We see a tremendous growth opportunity across multiple channels and across multiple product categories,” he said.”It can be extended significantly into the whole health and beauty area.”
“The market is catching up to something Linda and David identified 34 years ago, which is the importance of natural and eco-ethical, combined with science and efficacy,” Moura said. “We see growth accelerating given additional resources.”
Natural beauty brands have been of increasing interest to buyers lately. Other recent transactions include Procter & Gamble’s acquisitions of Snowberry and Native deodorant, Unilever’s purchase of Schmidt’s and BWX’s acquisitions of Mineral Fusion and Andalou naturals.