The beauty and wellness platform behind Il Makiage and Spoiled Child is investing more than $100 million to acquire a biotech startup and open a U.S.-based lab in a bid to make the most effective cosmetic products on the market, the company announced Thursday.
Oddity is buying startup Revela for $76 million, its largest acquisition to date, and is putting another $25 million toward building Oddity Labs in Boston. The merger will bring to Oddity a team of scientists tasked with creating brand-new molecules, using artificial intelligence, that can be used in its cosmetics brands and future lines.
AI-based molecule discovery is a common tool used in the pharmaceutical industry to create new drugs, but it isn’t widely used in the beauty and wellness industry. Legacy brands have long relied on building products using proprietary formulations with a similar set of active ingredients, such as retinol, hyaluronic acid and peptides.
“While my competitors are doing more of the same for decades and serving consumers with the same ingredients in the same old channels, we are building the future of the category,” Oddity’s co-founder and CEO, Oran Holtzman, told CNBC in an interview.
“With this acquisition, we are using biologics to bring game-changing, science-backed beauty and wellness products to the market and to our users. This is our DNA, we are not here to do more of the same but to build something new,” he said.
Oddity hopes to develop new molecules designed to address specific pain points, such as hair loss, wrinkles and the myriad other concerns consumers have long turned to legacy brands to solve with varying results.
“People ask … why doesn’t pharma go into beauty?” said Evan Zhou, Oddity’s new chief science officer and Revela’s co-founder and CEO.
“I think it’s very hard because the cultures don’t align, right? So pharmaceutical companies kind of look down upon beauty, right? Because that’s not what they went into this industry for,” he said. “Everybody wants to cure cancer, that’s why people became scientists.”
Zhou said legacy beauty and wellness companies have traditionally faced difficulties in attracting top scientific talent. As a result, the industry has lagged in innovation and instead focused its investments on branding and marketing, he said.
But after personal experience with the limitations of beauty products — watching his mom spend thousands on hair serums that failed to reverse her hair loss, or seeing his wife buy pricey moisturizers with dubious promises — Zhou was inspired to bring his biotech prowess to the beauty and wellness industry to create products that could definitively work.
“I want someone who has issues to be able to ask something online, to be able to take a picture and then get the solution,” Zhou said. “I want them to be able to say, ‘Oh, yeah, I’m having, you know, this kind of hair loss, or I’m having these wrinkles here,’ and for us to be able to spit out a solution that works 100% of the time.”
Revela has developed two novel molecules that are already on the market in early stages – ProCelinyl, which boosts hair growth, including lashes and eyebrows, and Fibroquin, an anti-aging ingredient that Zhou says rivals the benefits of retinol — without the side effects.
Those molecules, and more that are currently in development, will be added to Oddity’s existing product lines and to future brands that are in the works.
“We have this very special opportunity to really deliver and create game-changing products with brand-new science-backed ingredients that the beauty giants of the world can only dream of,” said David Zhang, Oddity’s new head of bioengineering and co-founder and chief science officer of Revela.
Joining forces with Oddity gives Revela a “direct line to consumers at this incredible scale,” Zhang said. “Oddity knows exactly where the pain is most acute so you can imagine the best molecules for the most pressing issues.”
Launched in 2018 by Holtzman and his sister Shiran Holtzman-Erel, Oddity uses data and AI to develop brands and make tailored product recommendations for customers.
In 2022, the direct-to-consumer platform brought in $395 million in gross revenue and $500 million in sales, the company said. Those numbers don’t include returns. The 2022 sales figures represent slightly more revenue than earlier, preliminary results for the period.