Incident: (1) Xinkeli Aesthetics, a wholly-owned subsidiary of Huadong Pharmaceutical, Hangzhou Industrial Investment, Gongshu Guozhu Chongqing Yuyan Pharmaceutical Co., Ltd. and their shareholder representatives jointly signed an equity investment agreement. Each investor subscribed to Chongqing Yuyan's additional registered capital of RMB 210.226 million, corresponding to a total of 8.5714% of shares after this transaction; of this, Xinkeli Aesthetics invested RMB 150 million. After this transaction, Chongqing Yuyan held 4.2857% of the shares (according to this estimate, Chongqing Yuyan's valuation is 35). (2) Huadong Pharmaceutical signed an exclusive distribution agreement with Chongqing Yuyan to obtain exclusive commercialization rights for recombinant botulinum toxin type A YY001 products owned by Chongqing Yuyan in the field of medical and aesthetic indications in mainland China, Hong Kong Special Administrative Region, and Macau Special Administrative Region.
From an industry perspective, botulism use is high, and the Chinese market is huge and growing rapidly. According to ISAPS, botulinum toxin is the most commonly used non-surgical aesthetic program. In 2022, plastic surgeons performed 9.22 million cases worldwide, accounting for 48.9% of all non-surgical aesthetic programs, an increase of 26.1% over the previous year, all higher than hyaluronic acid. The botulinum toxin market in China is huge and is characterized by rapid growth. According to Frost & Sullivan's data, in 2017-2021, the market size of botulinum toxin products in China increased from RMB 1.9 billion to RMB 4.6 billion, with a compound annual growth rate of 25.6%. The market size is expected to reach RMB 12.6 billion and RMB 39 billion respectively in 2025 and 2030, with a compound growth rate of 25.4%.
Recombinant botulinum toxin YY001 has higher safety and lower preparation costs compared to natural botulinum toxin.
According to Frost & Sullivan's report, natural botulinum toxin has: ① Immunogenicity issues: Natural botulinum toxin usually contains auxiliary proteins and other clostridium proteins. These proteins are inactive during injection and may increase immunogenicity, causing safety issues. ② High production costs: The production process of natural botulinum toxin is complicated, and it is necessary to maintain a cold chain during storage and transportation, resulting in high costs. As a recombinant botulinum toxin produced through a novel recombinant protein production route, YY001 has the following advantages: ① High purity and safety: the 150 kDa neurotoxin ratio of YY001 can reach 98%, far exceeding the 150 kDa neurotoxin ratio in natural botulinum toxin products. Its high purity reduces the entry of exogenous proteins into the human body and avoids related immunogenic risks, improving product safety. ② Low preparation costs: Products can be efficiently prepared from simple media through expansion and repetition, effectively reducing YY001 production costs. In terms of clinical progress and production capacity, YY001 was approved by the China Drug Administration to conduct clinical research in March 2022. Currently, it has successfully completed phase I/II drug clinical trials for improving moderate to severe eyebrow lines, and is actively promoting phase III clinical trials. Its freeze-dried formulation production line has been put into use in Q1 2023, with an annual production capacity of 2 million bottles.
After the reorganization Botox joined, the company's botulism pipeline was further enriched, and we will continue to cooperate to explore long-term botulism research and development in the future. The Korean botulinum toxin product ATGC-110 recently introduced by the company is botulinum toxin with zero complex protein components. It reduces drug resistance by removing non-toxic proteins that cause drug resistance, and has the advantage of being relatively safe for repeated treatment and high-dose treatment. In terms of product effectiveness, the two botulinum toxin products, YY001 and ATGC-110, can meet the rejuvenation and high safety needs of beauty seekers according to differentiated efficacy; from a market coverage perspective, ATGC-110 will mainly focus on the global medical and aesthetic botulinum toxin market, and plans to start registration work simultaneously in many countries and regions around the world. YY001 mainly covers mainland China, Hong Kong & Macau Special Administrative Regions; judging from clinical registration progress, YY001 will be marketed in the Chinese market earlier than ATGC-110. In terms of future R&D cooperation, the company will reach a long-term strategic cooperation with Chongqing Yuyan and make full use of their respective advantages to cooperate in developing long-term botulinum toxin products, which is expected to achieve differentiated competition in the botulinum toxin market.
Profit forecast: Since this year, the company's domestic medical and aesthetic core product, has continued to grow brilliantly, and overseas medical aesthetics is expected to achieve profit this year, and the profitability of the company's overall medical and aesthetic business continues to increase. Furthermore, liraglutide weight reduction indication products are also continuing to increase. It is expected that in 24 years, there will be a better contribution to the company's revenue and profits. The recent improvement in the layout of the botulism pipeline will help the company build a “one-stop” facial rejuvenation and shaping program. The overall competitiveness of the company's medical and aesthetic business is expected to continue to be strengthened. We expect the company's net profit from 2023-2025 to be 29.42/36.08/4.371 billion yuan, up 17.7%/22.6%/21.2% from the previous year, respectively, corresponding to PE 25/20/17X.
Risk factors: R&D clinical progress falls short of expectations, marketing results fall short of expectations, and increased competition for medical and aesthetic products.