Typesetting/Coriander under the stars

There is no shortage of topics in the medical aesthetic industry.

From the high growth of the three musketeers of hyaluronic acid to the slowdown in the expansion of offline physical institutions, the mythical medical aesthetic industry in the past is somewhat lacking. However, the nature of human beauty will never change, and there will always be a promising next direction for the beauty industry. For example, this year's windy recombinant collagen, many eyes are staring at this track.

On December 3, Shangmei Co., Ltd. (02145) announced the establishment of a joint venture company to officially enter the recombinant collagen market. On the 5th, Giant Biotech (02367) announced that its "recombinant collagen filler for injection (acceptance number: CQZ2402149)" was given priority approval by the Food and Drug Administration. On the 12th, Marubeni, which has been researching recombinant collagen for 22 years, announced that it had changed its stock abbreviation to Marubeni Biotech (603983), which shows its determination. With so much news flying in just one month, this subdivision track is really hot.

In fact, judging from the performance in 2024, the performance of existing manufacturers such as Jinbo Biotechnology (832982) has indeed maintained rapid growth, after all, the current compliant products are still very limited, and the blue ocean pattern will not change greatly in the short term. In the turbulent medical aesthetic industry, recombinant collagen is indeed like a safe haven.

1. The main players in human tissues and organs

As we all know, the medical beauty industry is very dependent on ingredients, from hyaluronic acid, botulinum toxin, squalene to today's recombinant collagen, which has been leading the way for hundreds of years. Even a layman like the author who has never been exposed to medical aesthetic procedures is definitely familiar with these ingredients.

Regarding the recombinant collagen that we will focus on in this issue, let's first briefly understand the concept.

Let's talk about collagen first, collagen is widely distributed in various tissues and organs of the human body, and 30% to 40% of the total protein in the human body is collagen, which is deeply involved in the repair and regeneration of tissues and organs. To a certain extent, the process of skin aging is indeed the process of collagen being broken down and lost, so collagen has been considered an ideal medical beauty ingredient since very early on, and this is how the saying "eating pig's trotters for beauty" comes from.

Humans have also begun to study how to prepare collagen, and the first application is collagen extracted from animal sources, but such products have problems such as susceptibility to infection, sensitization and insufficient production capacity. Later, recombinant collagen technology emerged, which uses yeast and other strains as a host to express collagen, so as to achieve industrial preparation.

Collagen structure Source: P. Fratzl (ed.), Collagen: Structure and Mechanics, Springer (2008), Genes Biologics Prospectus

Second, the upstream and downstream breakthroughs, the space is broad

However, there is a problem with recombinant collagen, which is that collagen has a triple helix structure, which allows collagen to remain supportive in human tissues for a long time. However, it is difficult for recombinant collagen to present this structure in the same way as natural collagen, so the biological characteristics are questionable. At this stage, the recombinant collagen medical aesthetic products that have been marketed in China are mainly aimed at superficial lines, and it is estimated that the support is relatively weak. This restricts the product strength of recombinant collagen, so that it does not have a significant advantage over hyaluronic acid products.

In the past two years, this problem has begun to be solved, for example, the upstream raw material giant Peptide Source Bio announced that its technology of efficiently secreting and expressing full-chain long collagen in yeast has been authorized by the Intellectual Property Office, and if it can achieve mature industrialization, it will lay the foundation for the application and development of recombinant human collagen. According to data from the Food and Drug Administration, as of November 2024, more than 700 recombinant collagen medical devices have been registered in China.

The

permeability of collagen continues to rise Source: "White Paper on Recombinant XVII Collagen" "White Paper on Domestic High-quality Collagen" Prospectus of Giant Bio

Breakthroughs are being made in both upstream preparation and downstream applications, and the market space is naturally imaginable.

According to Giant Bio's prospectus, the market share of collagen-based professional skin care products has surpassed that of plant-based active ingredient products in 2020 and is expected to surpass hyaluronic acid products in 2026. And it should be noted that the entire domestic skin care products market itself is also growing at a high rate, with Frost & Sullivan predicting a CAGR of up to 35%+ from 2022 to 2027. Under the combination of these two factors, the market potential of recombinant collagen products is still very large.

3. Listed companies continue to grow

This corresponds to the performance of manufacturers, that is, the growth is still rapid, and the competition is still moderate in the short term.

Jinbo Biotech is a leading manufacturer in the commercialization of recombinant collagen in China, and its recombinant collagen implant Wei Yimei has achieved rapid sales since its launch in September 2021, and has achieved cumulative sales of more than one million bottles in 1,000 days (around mid-2024) after its launch. This also helped Jinbo Biotech continue to expand its business scale, and the company's revenue and net profit attributable to the parent company maintained high growth from 2016 to 2023, with CAGR of 47.5% and 47.9% respectively.

Recombinant collagen medical beauty product Wei Yimei rapid increase Source: Jinbo Biological Announcement, Open Source Securities Research Institute

Since Weiyimei is the only recombinant collagen Class III medical device that can be used for injection in China at this stage, the scarcity is still there. Moreover, Jinbo Biotech's recombinant collagen functional skin care product production line has also been launched, bringing 48 million yuan in revenue in 2024H1. Although the year-on-year growth is also 54%, the field of functional skin care products is fiercely competitive, and I am afraid that it will not be as difficult to compete as implants.

But it doesn't mean that there is nothing to do in this area of skin care products, Marubeni, which is also deeply involved in recombinant collagen medical beauty products, has chosen to start with skin care products, launched a series of products such as eye cream and face cream, and plans to launch recombinant collagen skin boosters (Class III certificate) in 2026. Juzi Biotech also entered the game from functional skin care products, and its e-commerce sales of brands such as Kefumei and Kelijin were expensive, and in 2024H1, Kefumei sold 2.071 billion yuan, a year-on-year increase of 68.6%. However, we can also find that the gross profit margin of Giant Biotech declined slightly in the first half of last year, which was attributed to the rich product matrix and the increase in the cost of sales.

Therefore, recombinant collagen medical aesthetic products, especially in the field of skin care, although the gross profit margin is still considerable, we must also be wary of the downward trend.

So how about breaking into overseas markets? In fact, overseas mature regions are not interested in recombinant collagen products, especially in the field of implantation, which is still the world of star ingredients such as hyaluronic acid, and there are no recombinant collagen-related listed companies. If you want to go overseas, I am afraid that market access and consumer education will be a big problem.

Therefore, recombinant collagen medical beauty products still have to be in China for a long time, but fortunately, this track will not be able to roll up for a while. In the field of functional skin care products, many products have been launched, although they are still in the stage of mass production, but the degree of competition will be higher; However, there are still very few compliant products in the field of implants, and the blue ocean situation will remain for a long time.

Fourth, a new generation of products is on the way?

In the face of a friendly market landscape, many players are ready to move. For example, hyaluronic acid giant Bloomage Biotech (688363) entered the collagen track in 2022 by acquiring a majority stake in Beijing Yierkang Biotech, and other unlisted manufacturers in Jiangsu Wuzhong also have products in the registration stage, and it is expected that a series of products will be intensively listed in 2025-2026.

Moreover, if we look at these products under development, we can also see that the recombinant collagen medical aesthetic products themselves are being iteratively upgraded. Some products are similar to existing products, with indications for improving skin condition, which is expected to have limited support; The indications of other products are nasolabial folds, neck lines, etc., and the product name also clearly uses cross-linking technology, which is estimated to be more supportive. If this kind of product can be successfully launched, it should rob part of the market of other products such as hyaluronic acid in the medical beauty industry, adding another fire to the penetration rate of recombinant collagen.

List of products under development (September 2024) Source: Giant Biotech Prospectus, Venture Health Medical Prospectus, Cosmetics Watch Official Account

In the medical aesthetic industry, where there is always the next topic, the player who hits the line first will always be full. Even if it cannot be asserted that recombinant collagen will definitely be the next hyaluronic acid, the dividend period for the leading manufacturers should be long. However, we should also pay attention to the approval and listing of products under development, and if there is a star single product with significantly better support than existing products, it may have a subversive disturbance to the industry.

Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.

View original image 219K