Changewave Research: Cosmetic Medicine

ChangeWave Research: Cosmetic Medicine

ChangeWave Research Report:

Cosmetic Medicine

Cosmetic Procedures Market Still Skyrocketing

Overview

This report presents the latest ChangeWave Alliance survey on Cosmetic Medicine. Our previous survey (May 2004) showed escalating interest in cosmetic procedures and a growing perception that they are becoming routine.

To follow-up, we went back to our healthcare members to examine how the healthcare industry and patients are dealing with cosmetic surgery issues – including those procedures that have the most momentum. The survey was completed March 21, 2005, and a total of 116 Alliance members participated, including 58 doctors.

Key Findings:

· Surging Interest in Cosmetic Procedures. More than a third of responding doctors (38%) report a “Significant Increase” in patient inquiries/requests for cosmetic procedures over the past 12 months – a 14-point surge since our May 2004 survey. Another 38% say they have seen a “Small Increase.”

· Cosmetic Procedure Growth Rates. More than two-thirds of doctor respondents (69%) say the growth rate for cosmetic procedures is faster than the average growth rate for medical services generally, 14-points more than our May 2004 survey.

· Consumers Increasingly Considering Cosmetic Procedures at Younger Ages. Fifty-six percent (56%) of responding doctors say the average age of patients making inquiries or requests about cosmetic procedures has decreased over the past year, compared with 41% in May 2004.

· More Patients are Viewing Cosmetic Procedures as Routine. Nearly nine-in-ten doctors (89%) report that patients in their work locales increasingly view cosmetic procedures as something routine, compared with 82% previously.

· Procedures With Most Momentum – Last 12 Months. Doctors chose Botox Procedures (Net Difference Score = +64) and Gastric Surgical Procedures to Limit Eating (+39) as the cosmetic procedures that have increased most over the past 12 months, followed by ‘Surgical Procedures to Treat the Face’ (+35) and ‘Collagen and other Dermal Filler Procedures to Treat the Face’ (+26).

· Dysport Sticking it to Botox? Better than one-in-four doctors (28%) see Dysport – if approved – capturing more than 25% of the Botox market in the first year it becomes available. This is an 8-point increase over our May 2004 survey results.

· The Isolagen Process. If approved, one-third of responding doctors (34%) believe that between 1 and 10% of patients that currently use Dermal Fillers/Botox treatments would migrate to Isolagen. ChangeWave Research Director Michael Shulman finds the projected market acceptance rate to be higher than current company estimates.

· Hyaluronic Acid-Based Dermal Fillers. The survey results also suggest that Hyaluronic Acid (HA) based dermal fillers could eventually be a competitive product. A third of doctors (34%) believe that more than 20% of patients currently using Dermal Fillers/Botox treatments will migrate to HA when it becomes available.

Bottom Line: The survey results show a continuing surge in patient interest and in the overall growth rates for cosmetic procedures. Moreover, consumers are increasingly considering cosmetic procedures at younger ages and viewing it as something routine.

Botox and Gastric Surgery are the cosmetic procedures that appear to have increased most over the past 12 months. Dysport looks to be a serious competitor to Botox once it becomes available. Hyaluronic Acid Based dermal fillers also could eventually become a competitive product. Isolagen, if approved, looks to capture only a small percentage of the current Botox market, but the Alliance findings suggest its market acceptance rate could be higher than the Street currently estimates.

The ChangeWave Alliance is a group of 5,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™

www.ChangeWave.com

Table of Contents

Summary of Key Findings 4

The Findings 5

ChangeWave Research Methodology 13

About ChangeWave Research 14

I. Summary of Key Findings

Introduction

II. The Findings

Total Respondents (n = 116)

Doctor Respondents (n = 58)

All Other Respondents (n = 58)

(1) Question Asked: Based upon what you are seeing in your work locale, has there been an increase, decrease, or no change over the past 12 months in patient inquiries or requests for cosmetic procedures?

Doctors
Current
Survey
Mar ‘05 / Doctors
Previous
Survey
May ‘04
A Significant Increase Over Past 12 Months (10% or More) / 38% / 24%
A Small Increase Over Past 12 Months (Less Than 10%) / 38% / 51%
No Change Over Past 12 Months* / 22% / 20%
A Decrease Over Past 12 Months / 0% / 0%
Don't Know / 2% / 4%
Other / 0% / 0%

*Note that in the previous May 2004 survey this choice was “No Increase Over Past 12 Months”, whereas in the current survey it is “No Change Over Past 12 Months”.

Surging Interest in Cosmetic Procedures. More than a third of responding doctors (38%) report a “Significant Increase” in patient inquiries/requests for cosmetic procedures over the past 12 months – a 14-point surge since our May 2004 survey. Another 38% say they have seen a “Small Increase.”

(1A) Question Asked: Year over year consumption of medical services in general is increasing by double digits. How would you characterize the growth rate for cosmetic procedures?

Doctors
Current
Survey
Mar ‘05 / Doctors
Previous
Survey
May ‘04
Growth rate for cosmetic procedures is faster than the average growth rate for medical services generally / 69% / 55%
Growth rate for cosmetic procedures is similar to the average growth rate for medical services generally / 22% / 37%
Growth rate for cosmetic procedures is slower than the average growth rate for medical services generally / 7% / 2%
Don't Know / 2% / 6%

Cosmetic Procedure Growth Rates. More than two-thirds of doctor respondents (69%) say the growth rate for cosmetic procedures is faster than the average growth rate for medical services generally, 14-points more than our May 2004 survey. Another 7% say the growth rate for cosmetic procedures is slower, and 22% say the rates are similar.

(2) Question Asked: Which of the following statements best reflects what you have personally observed in your work locale over the past year?

(a) Patient Age

Doctors
Current
Survey
Mar ‘05 / Doctors
Previous
Survey
May ‘04
The average age of patients making inquiries or requests about cosmetic procedures is increasing / 27% / 27%
The average age of patients making inquiries or requests about cosmetic procedures is decreasing / 56% / 41%
The average age of patients making inquiries or requests about cosmetic procedures has not changed / 16% / 24%
Don't Know / 2% / 8%

Consumers Increasingly Considering Cosmetic Procedures at Younger Ages. Fifty-six percent (56%) of responding doctors say the average age of patients making inquiries or requests about cosmetic procedures has decreased over the past year, compared with 41% in May 2004.

(b) Patient Attitudes

Doctors
Current
Survey
Mar ‘05 / Doctors
Previous
Survey
May ‘04
Patients are increasingly viewing cosmetic procedures as something routine / 89% / 82%
Patients are increasingly becoming more reluctant to undergo cosmetic procedures / 0% / 2%
Patients attitudes have not changed about the use of cosmetic procedures / 7% / 12%
Don't Know / 4% / 4%

More Patients are Viewing Cosmetic Procedures as Routine. Nearly nine-in-ten doctors (89%) report that patients in their work locales increasingly view cosmetic procedures as something routine, compared with 82% previously.

(3A) Question Asked: Based upon the number of patient requests or inquiries you are seeing in your work locale, which of the following cosmetic procedures would you say have increased the most over the past 12 months? (Check All That Apply)

Doctors
Current
Survey
Mar ‘05 / Doctors
Previous
Survey
May ‘04
Botox Procedures to Treat the Face/Facial Area* / 71% / 67%
Gastric Surgical Procedures to Limit Eating** / 53% / 39%
Collagen and other Dermal Filler procedures to Treat the Face/Facial Area / 40% / NA
Surgical Procedures to Treat the Face/Facial Area*** / 40% / 47%
Liposuction Procedures to Reduce Body Fat**** / 36% / 41%
Hair Removal Procedures / 31% / NA
Breast Cosmetic Surgical Procedures***** / 31% / 33%
Varicose Vein Procedures****** / 28% / 39%
Procedures to Eliminate Scars/Tattoos/Blemishes / 26% / 37%
None of the Above / 0% / NA
Don't Know / 3% / 6%
Other / 7% / 4%

(3B) Question Asked: And which cosmetic procedures would you say have increased the least over the past 12 months? (Check All That Apply)

Doctors
Current
Survey
Mar ‘05 / Doctors
Previous
Survey
May ‘04
Varicose Vein Procedures****** / 24% / 24%
Liposuction Procedures to Reduce Body Fat**** / 19% / 22%
Procedures to Eliminate Scars/Tattoos/Blemishes / 19% / 20%
Hair Removal Procedures / 17% / NA
Collagen and other Dermal Filler procedures to Treat the Face/Facial Area / 14% / NA
Gastric Surgical Procedures to Limit Eating** / 14% / 27%
Breast Cosmetic Surgical Procedures***** / 14% / 22%
Botox Procedures to Treat the Face/Facial Area* / 7% / 10%
Surgical Procedures to Treat the Face/Facial Area*** / 5% / 8%
None of the Above / 2% / NA
Don't Know / 26% / 20%
Other / 2% / 0%

* In the previous survey, the response was “Procedures to treat aging of the face/facial area through injections/implants.”

** In the previous survey, the response was “Procedures to limit the ability of the body to eat (e.g. gastric bypass). “

*** In the previous survey, the response was “Procedures to treat aging of the face/facial area through surgery.”

**** In the previous survey, the response was “Procedures to reduce body fat (i.e. liposuction). “

***** In the previous survey, the response was “Procedures to increase breast size.”

****** In the previous survey, the response was “Procedures to eliminate/reduce varicose veins. “

Net Difference Score – Doctors

Increased
the Most / Increased
the Least / Net
Difference
Botox Procedures to Treat the Face/Facial Area / 71% / 7% / +64
Gastric Surgical Procedures to Limit Eating / 53% / 14% / +39
Surgical Procedures to Treat the Face/Facial Area / 40% / 5% / +35
Collagen and other Dermal Filler Procedures to Treat the Face/Facial Area / 40% / 14% / +26
Liposuction Procedures to Reduce Body Fat / 36% / 19% / +17
Breast Cosmetic Surgical Procedures / 31% / 14% / +17
Hair Removal Procedures / 31% / 17% / +14
Procedures to Eliminate Scars/Tattoos/Blemishes / 26% / 19% / +7
Varicose Vein Procedures / 28% / 24% / +4

Procedures With Most Momentum – Last 12 Months. Doctors chose Botox Procedures (Net Difference Score = +64) and Gastric Surgical Procedures to Limit Eating (+39) as the cosmetic procedures that have increased most over the past 12 months, followed by Surgical Procedures to Treat the Face (+35) and Collagen and other Dermal Filler Procedures to Treat the Face (+26).

(4) Question Asked: Historically, insurers/payors have not reimbursed for cosmetic procedures other than those directly related to a patient's health (e.g., gastric bypass) or to correct a major disfigurement (e.g., repair of cleft palate). Are insurers/payors exhibiting an increased willingness or a decreased willingness to pay for cosmetic procedures?

Doctors
Current
Survey
Mar ‘05 / Doctors
Previous
Survey
May ‘04
Insurers/payors exhibit an increased willingness to pay for what was previously considered elective cosmetic procedures / 7% / 2%
Insurers/payors exhibit a decreased willingness to pay for what was previously considered elective cosmetic procedures / 19% / 22%
No change in insurer/payor willingness to pay for what was previously considered elective cosmetic procedures / 71% / 67%
Don't Know / 3% / 8%

Slight Increase in Cosmetic Procedure Reimbursement. Seven percent (7%) of doctors now say Insurers/payors exhibit an increased willingness to pay for elective cosmetic procedures compared to 2% in May 2004. Also, fewer doctors in the current survey report seeing a decreased willingness to pay for these procedures than in May (19% currently vs. 22% previously).

(5) Question Asked: A Botox competitor called Dysport, manufactured by Inamed, is currently in trial. Dysport requires fewer injections for the same results as Botox. If approved, what percent of the Botox market do you think it would command in its first year on the market?

Doctors
Current
Survey
Mar ‘05 / Doctors
Previous
Survey
May ‘04
0-5% / 3% / 2%
5-10% / 19% / 12%
11-25% / 17% / 35%
26-50% / 21% / 10%
Over 50% / 7% / 10%
Don't Know / 33% / 31%

Dysport Sticking it to Botox? Better than one-in-four doctors (28%) see Dysport – if approved – capturing more than 25% of the Botox market in the first year it becomes available. This is an 8-point increase over our May 2004 survey results.

(6) Question Asked: Which of the following vendors do you think will gain the most traction in the marketplace over the next 12 months and why? (n = 15)

Candela / 47%
Laserscope / 33%
Syneron / 13%
Palomar Medical / 13%
Cutera / 0%

Candela (47%) is the top choice of respondents for vendors likely to gain the most traction in the marketplace over the next 12 months, followed by Laserscope (33%).

Sample of Alliance Member Responses:

(a) Candela

· Doctor DRM7263 writes, "Candela. Strong market presence & state-of-the-art technology."

· JOH9038 writes, "Candela. Largest player in cosmetic lasers. Margins tight and others may not survive."