Currently, the innovative drug industry is still experiencing a winter period and the underlying "water shortage" dilemma has not been fundamentally alleviated, forcing many companies to make difficult choices such as selling pipelines and selling equity.
In this stage, how can innovative pharmaceutical companies break through?
Recently, Kaituo Pharmaceuticals released its mid-term financial report for 2024, with a sharp decrease of 66.3% in net losses in the first half of the year, and a year-on-year decrease of 76.1% and 33.8% in research and development costs and administrative expenses, respectively. At the same time, the company has approximately 0.34 billion yuan in cash and cash equivalents and time deposits, with ample cash on hand.
Through the financial report, it can be seen that as a biotech company that has been deeply involved in the field of innovative drugs for many years, Kaituo Pharmaceuticals has made key moves in its development strategy, such as entering the beauty industry and focusing on dermatological drug research and development, showing significant positive marginal changes that cannot be ignored.
From an investment perspective, Kaituo Pharmaceuticals is gradually moving away from a single innovative drug valuation logic and opening up a new development situation of "innovative drugs + cosmetics".
Entering the beauty industry, the first globally marketed cosmetic product.
In July, with the international naming of the active ingredient of KX-826, independently developed by Kaituo Pharmaceuticals, the company's cosmetics containing KX-826 as the main ingredient have been successfully sold in 26 countries/regions including mainland China, the United States, the United Kingdom, Germany, and France. It is the first topical anti-hair loss serum for androgenetic alopecia (AGA) under the company's new high-end cosmetics brand KOSHINÉ. It is worth noting that in August, the company has launched independent online sales, and will continue to expand the global layout of this product.
The launch of the new product not only marks the first commercial attempt of KX-826 in the dermatology field but also symbolizes the company's successful transformation from the pure research and development stage to the commercial operation stage.
However, there are still some doubts about the effectiveness of KX-826 in treating male androgenetic alopecia in the market. These concerns mainly stem from the company's previous announcement that KX-826 (0.5% concentration) did not achieve statistically significant results in Phase III clinical trials compared to placebo.
Upon further investigation, it can be confirmed that KX-826 does have some effect in the treatment of male androgenetic alopecia.
According to Phase III data, 0.5% concentration of KX-826 can increase patients' total hair count by more than 10 hairs per square centimeter compared to baseline, and the effect is superior to placebo. Compared to minoxidil, the 0.5% dose of KX-826 also showed a similar range of effects on baseline changes. In addition, KX-826 also demonstrated good safety.
It is reported that in February and May of this year, KX-826 and minoxidil combination therapy for adult male alopecia in Phase Ib/III clinical trials, and the clinical trial of KX-826 topical treatment for adult male alopecia in China (1.0% concentration) have been approved by NMPA, which indirectly confirms the effect of KX-826 in treating adult male alopecia. Preclinical studies have shown that compared to the 0.5% concentration formulation, the 1.0% concentration formulation of KX-826 significantly increases the retention concentration in human scalp cells, which is expected to improve clinical effectiveness.
In addition, at the 8th Hair Research Conference of the Chinese Medical Association in August of this year, the company also attended and presented the long-term safety and efficacy of KX-826 (0.5% concentration) in the treatment of adult male androgenetic alopecia.
This study recruited all participants as of November last year. According to the latest clinical data, as of August 6th this year, approximately 80% of the participants saw an increase in hair count or at least no further decrease compared to baseline after using KX-826. The hair growth of the participants improved to varying degrees, indicating that KX-826 has a good therapeutic effect. Additionally, in terms of safety, KX-826 (0.5% concentration) used in the treatment of male androgenetic alopecia showed overall good safety and tolerability, and no drug-related serious adverse events were found throughout the study period.
From the perspective of realizing the commercial value of the product, the large consumer group provides a solid foundation for a market worth hundreds of billions for hair loss prevention.
According to a research report by Grand View Research, the global hair loss treatment market is expected to reach $16.02 billion by 2030. In China, data released by the National Health Commission shows that over 250 million people are facing hair loss problems, with 1 in 6 people on average being affected.
It is expected that with the external anti-hair loss solution KX-826, KaiTuo Pharmaceuticals will successfully enter the beauty industry and is expected to expand into the European and Japanese markets in the second half of this year. This is not only expected to bring stable income and cash flow to the company, but also provide positive expectations for its future growth and achieve dual value enhancement of the brand and products.
What's your opinion on KaiTuo Pharmaceuticals at the moment?
So, from an investment perspective, what is the fundamental situation of KaiTuo Pharmaceuticals?
In my opinion, KaiTuo Pharmaceuticals integrates the development of innovative drugs with the cosmetics business, and its differentiated layout and rich pipeline reserves provide ample guarantee for the company's sustained development through the industry's winter. Currently, these products are also about to enter the stage of commercial value realization and are expected to gradually contribute to the performance of KaiTuo Pharmaceuticals.
It is reported that the company has already launched Pro version anti-hair loss products on Tmall International on August 26th, and it is expected to gradually launch 5 series of products in the fourth quarter of this year, including the 939 series for whitening, removing spots, and eliminating chloasma, as well as the 826 hair loss and acne removing ointment series.
Among them, the core ingredient KT-939 of the 939 series has applied for compound patents this year, demonstrating stronger tyrosinase inhibitory activity, which is significantly better than the whitening cosmetic raw materials on the market. It can not only effectively inhibit the generation of melanin, but also has antioxidant and anti-inflammatory effects, showing good safety in the body.
With the gradual launch of these beauty products this year, whether it is KX-826 or KT-939, as patented compounds independently developed by KaiTuo Pharmaceuticals, once they achieve successful sales in domestic and foreign markets, they may bring continuous cash flow to the company and further improve the company's financial situation.
On one hand, strong sales in the cosmetics business can not only provide stable cash flow to the company, but also support the company's investment in the development of innovative drugs, thereby marginally improving the company's financial condition and accelerating the improvement of its profitability.
On the other hand, the company is currently focused on the research and development of its two core dermatology products, KX-826 and GT20029. This year's key clinical trials include long-term safety trials for KX-826 in the treatment of hair loss, phase III clinical trials for KX-826 (1% concentration) in the treatment of hair loss, and phase II clinical trials for GT20029 in the treatment of acne.
Summary
In general, the development of high-end cosmetics business in the pharmaceutical industry has already taken off and is becoming a major driver of the company's growth.
In July of this year, Dr. Tong Youzhi, Chairman of the Board of Directors and Executive Director and CEO of Development Pharmaceutica, increased his shareholding in the company three times, with a total investment of 1.0265 million Hong Kong dollars to increase his shareholding by 0.9955 million shares, which fully demonstrates the confidence of the company's management in future performance and value growth.
From an investment perspective, the core underlying logic of the company's valuation has also shifted to the "cosmetic + innovative drug" logic, which may lead to a revaluation of its value.
