Megalabs Acquires Majority Stake In Hair Growth Brand DS Laboratories To Boost Dermatology Business

Pharmaceutical and supplement company Megalabs has acquired a majority stake in DS Laboratories, a brand specializing in hair growth products, to heighten its presence in dermatologists’ offices.

Terms of the deal weren’t disclosed, but industry sources estimate Megalabs paid more than $100 million for DS Laboratories, which is known as DS Labs and on track to surpass $60 million in sales this year. Headquartered in Canelones, Uruguay and owned by the billionaire brothers Andreas and Thomas Struengmann, Megalabs is keeping Miami-based DS Labs’ workforce of around 200 people intact, and CEO Fernando Tamez, who’s retained a minority stake in the brand, is staying on board.

Tamez says Megalabs’ “penetration in the Latin American market is incredible, and we saw them as a strategic fit for our products. They are paying way more attention to dermatology because it’s their biggest revenue driver. That’s the reason we decided to partner with them. Globally, we have 40 medical reps, and they have over 3,000 dermatology reps.”

DS Labs’ largest markets are the United States, Mexico and China. It has 30 products across haircare and skincare priced from $25 to $40, and hair loss products account for 80% of its sales. Along with doctors’ offices and its own website, the brand sells at online retailers, most notably Amazon, and Costco. Half of its sales are generated by e-commerce, and half are generated by brick-and-mortar retailers and doctors’ offices.

DS Labs’ bestsellers include Revita High-Performance Hair Density Shampoo and Conditioner and Spectral.DNC-N Hair Density Serum with Nanoxidil 5%. Key differentiators for the brand’s products are that they’re formulated with ingredients at levels Tamez describes as “proven clinically to work” and use proprietary nanosome technology that encapsulates active ingredients to deliver them effectively to the scalp.

Two months ago, DS Labs released an extra strength version of Revita High-Performance Hair Density Shampoo and sold out of three months’ worth of inventory of the product within a week. Going forward, Tamez suggests the brand will push innovation with its hair growth formulations by combining cutting-edge drug ingredients with cosmetic ingredients. A deeper bench of skincare products could be in its future, too.

“We are going to be one of the leading companies in hair loss and hair growth.”

“Everybody is jumping into the hair growth and hair loss market, but it’s not an easy market,” says Tamez. “There are a lot of players that don’t have a clear plan for the products they want to launch or know why they are launching them. They think it’s just another trend, but I think it’s going to grow bigger and faster. We are going to be one of the leading companies in hair loss and hair growth.”

DS Labs has a history with many twists and turns. In the mid-2000s, Tamez was on the way to becoming a plastic surgeon when Daniel Khesin asked him to give his thoughts on a hair growth product Khesin was developing for thinning hair. Tamez, who’d been worried about hair loss for as long as he could remember because his father went bald at 28 years old, provided his feedback and promptly went into business with Khesin at DS Labs. Tamez took on the role of expanding the brand abroad, particularly in Mexico and Brazil.

DS Labs launched in 2007 as part of Divine Skin, a company later called DS Healthcare Group that at one point had other brands such as Sigma Skin and Polaris Research Laboratories. Its assortment was a mishmash of hair loss products, bestsellers out of the gate, and ancillary products that included feminine hygiene and acne offerings.

In 2012, after Tamez built DS Labs’ profitable international business, the company went public on the NASDAQ. Tamez recounts that its stock surged from 69 cents to $5 a share before cratering amid losses. DS Healthcare Group’s losses amounted to roughly $39 million between 2012 and 2018, and Khesin became the subject of investigation by the U.S. Security and Exchange Commission for inflating revenues. Dismayed by the management of the business, Tamez presented a restructuring scheme, but was summarily fired.

In 2018, DS Labs’ sales hit $2 million, and Tamez acquired the company for $1.2 million, although he figures the total tab ended up being $3 million with fees factored in. In 2019, no longer connected to DS Labs, Khesin settled with the SEC without admitting to or denying the allegations against him.

In control of DS Labs, Tamez went about implementing restructuring strategies. He streamlined the brand’s architecture and concentrated on strengthening its relationships with doctors’ offices and online retailers as well as igniting its direct-to-consumer channel. He also amassed a medical advisory board with dermatologists Jerry Shapiro, Antonella Tosti, Sergio Vano, Hassan I. Galadari, Maria Abril Martinez and Rodrigo Primez to lean into medical and scientific positioning.

“Our medical advisory board helps us formulate, clinically test and launch products.”

“Our medical advisory board helps us formulate, clinically test and launch products,” says Tamez. “They are always bringing new ideas about active ingredients. We are trying to stay ahead of competitors.”

Through e-commerce, DS Labs is currently available in 50-plus countries. Tamez notes the brand can assist Megalabs with shoring up its e-commerce capabilities as Megalabs assists DS Labs with professionalizing its back-end systems and increasing its dermatology reach.

Megalabs’ business spans over 20 countries and 1,800 products. It has 18 production plants and seven research and development centers. The company’s U.S. distribution extends into retailers like Walmart, CVS, Walgreens, Amazon and Target with the brands Prunelax, Abintra and Enterex.

Megalabs has been acquisitive of late. Prior to securing a majority stake in DS Labs, it purchased nutritional products and medical devices company Victus, digestive products company Garden House, hyaluronic acid syringes company Croma-Pharma, and probiotic, botanical and enzyme supplements company Fr!ska.

For its transaction with Megalabs, DS Labs was advised by investment bank Raymond James, management and accounting firm Alvarez & Marsal, and law firms Cowan, DeBaets, Abrahams & Sheppard and Recalde Law Firm. Megalabs was advised by law firm Greenberg Traurig.