Collagen is becoming the new generation of hyaluronic acid.
Despite the comparable popularity, there is a significant shortage of effective supply in the market. Currently, only WeiYiMei under Jinbo Biology has obtained three types of medical device qualifications.
With the accelerated entry of domestic and foreign giants such as LVMH, L'Oreal, and P&amp;G, the market is eager to see manufacturers make progress in approval progress and technological breakthroughs, especially in solving the problems of less supportive than animal-derived collagen and high production costs, in order to fill the supply gap in the market and grow the market together.
The leading companies that have taken the lead in layout have begun to translate their advantages in technology and certification into performance growth.
On the evening of March 25th, Giant Biology released its 2023 annual performance report. During the reporting period, sales revenue reached RMB 35,241 million, a year-on-year increase of 49% compared to 2022, and annual profit reached RMB 14,482 million, a year-on-year increase of 44.6% compared to 2022.
Last week, another leading company Jinbo Biology disclosed in its annual report that its current income and net profit attributable to the parent company increased by 99.97% and 174.6% year-on-year, respectively.
<h2>KFM contributes 80% of the revenue</h2>
The performance increment mainly comes from its brand KFM. According to the financial report, KFM achieved brand revenue of RMB 27,883 million during the reporting period, a growth of 72.9% compared to the same period in 2022, accounting for nearly 80% of the revenue.
Among them, the proportion of KFM dressings has decreased from 90% in 2019 to about 30% in 2023, the proportion of secondary essence has increased from 0% to 30%, the proportion of other skincare products is 40%, and the online proportion has increased from 16% in 2019 to 66.2% in 2023.
In 2023, the company has basically completed the transformation from offline dressings to online core skincare products.
It is worth mentioning that even though the company's cosmetics business has been accelerating since 2022, with the 2023 6.18 and Double 11 already entering the high base stage, the two major promotions still doubled growth beyond expectations. This is mainly attributed to the incremental growth brought by the Douyin platform and the continuous hot sales of the star product KFM Collagen Stick. According to the financial report, during the 2023 6.18 period, the GMV of Collagen Stick increased by over 700% year-on-year; during the Double 11 period, the GMV of Collagen Stick increased by over 200% year-on-year.
This trend is still continuing. According to Magic Mirror data, in February 2024, the beauty and skincare industry achieved sales of 8.7 billion yuan on Tmall Taobao, a year-on-year decrease of 37.6%; and achieved sales of 9.63 billion yuan on Douyin, a year-on-year increase of 40.3%. Giant Biology's online sales of beauty and skincare products in January and February increased by 127% year-on-year.
In the 38 major promotions this month, although KFM's discount intensity has weakened, its sales still doubled, with Collagen Stick and dressings remaining the main products in terms of categories
Comparing with the industry benchmark Perrisome's 10 billion sales in 3 years for its Double Anti-Aging Essence, the Collagen Stick by Kefumei, which broke 800 million sales in 2 years, has become a super blockbuster. With the launch of the Order series and the improvement of the product matrix, some analysts predict that its sales are expected to reach 2 billion.
However, in the long run, in the beauty industry, Giant Bio still needs more blockbuster products to emerge.
Compared to the explosive growth of Kefumei, another sub-brand, Kelijin, performed slightly flat. During the reporting period, Kelijin achieved brand revenue of 616.6 million RMB, which was flat compared to the same period in 2022, accounting for 17.5% of total revenue, with a volume only 22% of Kefumei.
Kefumei and Kelijin, the two major brands, although each focusing on soothing repair and anti-aging effects, both rely on the core ingredient of Giant Bio - recombinant collagen protein. In order to create brand differentiation in the minds of consumers, it is necessary to launch more targeted and impactful products to differentiate. For example, while Kefumei focuses on secondary throw essence, Kelijin can extend to bottled essence, creams, and eye creams with stronger anti-aging effects, but Kelijin has not yet produced a pillar anti-aging blockbuster.
Giant Bio highlighted the new product &#34;Jiaojun Eye Cream&#34; in its financial report at the end of last year. As of March 8, 2024, the flagship store of Jiaojun Eye Cream on Tmall has sold over 3,000 units, but due to still being in the market cultivation period, the sales volume is not large; meanwhile, &#34;Jiaojun Face Cream&#34; was also newly launched in March, and the sales performance of both products during the 618 promotion needs to be observed.
It can be confirmed that, following essence and masks, the company is seeking to create new growth points in categories such as eye cream and face cream that have potential but have not yet produced pillar blockbuster products. The &#34;Jiaojun&#34; series will be a key point for the company to open up the anti-aging track of Kelijin, which is also a test of its long-term growth potential.
<h2>The second recombinant collagen protein medical device is about to be approved</h2>
Another test of medium to long-term growth comes from medical aesthetics injections.
In 2023, recombinant collagen protein showed high growth potential in both cosmetics and medical aesthetics injections, being touted as the next hyaluronic acid. Jinbo Bio's Weiyimei achieved 5 billion in shipments in the initial stage of volume production.
According to medical aesthetics institutions, collagen protein injections have firmly occupied the top tier in the medical aesthetics field, with an average growth rate of 40-50% in each hospital; followed by regenerative injections, which also maintain a year-on-year growth of about 30%; then there are differentiated high-end hyaluronic acids, such as Haohai Bioscience's Haimie, while the low-end market has shown signs of stagnant growth.
Currently, Giant Bio has reserved 4 products in the field of recombinant collagen protein injections: Recombinant Collagen Protein Liquid Formulation (Hydrogen Light), Recombinant Collagen Protein Solid Formulation (Improving Crow's Feet), Recombinant Collagen Protein Gel (Targeting Moderate to Severe Neck Wrinkles), Cross-linked Recombinant Collagen Protein Gel (Targeting Moderate to Severe Marionette Lines). The first two are expected to be approved in the second quarter of this year; the latter two are estimated to be approved in the first half of 2025
Despite the fact that the recombinant collagen injection products will not make a significant contribution in 2024, as the second company to possess three types of recombinant collagen devices, as long as the progress goes smoothly, there will still be a continuous approval of products in the future, ensuring a high certainty of medical aesthetics contribution for the company.
Currently, Juzi Biotech's recombinant collagen injections in the market face competition mainly from &#34;Pluryan&#34; (produced by Xiu Li Ke) and &#34;Vivime&#34; (produced by Jinbo Biotech), both of which have weaker support. Clearly, subsequent support and duration will become key indicators for recombinant collagen medical fillers. Breakthroughs in research related to the triple helix structure by leading companies will be a focal point in the market.
On March 13, 2024, Juzi Biotech announced a technological breakthrough in the high-efficiency expression of recombinant human collagen by CHO cells, which is an important milestone for research on natural triple helix (high-temperature tight triple helix) structured recombinant human collagen.
The study shows that under high-temperature conditions, the triple helix structure of collagen constructed by CHO cells remains stable, which means that after injection into the human body, it may have a longer duration in the body's 37-degree environment and a stronger adaptability to temperature changes.
However, due to the high cost of this technology, mass production is still challenging. If the expression efficiency can be further improved and production costs further reduced in the future, this natural triple helix recombinant human collagen will have broader prospects for clinical applications.
With the approval of Juzi Biotech's three types of devices, concerns have also arisen in the market about the intensifying competition in the recombinant collagen injection market. However, the majority of experts believe that the industry is still in a rapid growth period where supply stimulates demand, with a large market capacity. According to some securities institutions' predictions, by 2030, the recombinant collagen market size is expected to exceed 20 billion, and the leading companies that are compliant, have obtained certification first, and are leading in research and development will continue to enjoy a period of market dividend under increasingly stringent compliance regulations

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Short-term focus on cosmetics, long-term reliance on medical beauty?

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