Core Viewpoint - Huaxi Biological Technology Co., Ltd. (688363.SH) criticized certain brokerage reports for misleading the market regarding the comparison between hyaluronic acid and recombinant collagen, claiming these reports lack scientific basis and are intended to promote a competing product [1][3][6] Group 1: Company Response - Huaxi Biological reported that it has communicated with regulatory authorities regarding the misleading content in brokerage reports and received apologies from some institutions [1][4] - The company emphasized that the reports are part of a broader issue of "hasty capital" creating a false narrative in the market [3][4] - Huaxi Biological expressed disappointment that relevant parties are not engaging in scientific discussions but are instead focusing on social media commentary [4][5] Group 2: Brokerage Reports - The reports in question were authored by multiple brokerage firms, including Huatai Securities and others, which Huaxi Biological claims are biased towards a competitor, Juzhi Biological [3][6] - Analysts involved in the reports defended their work, stating that the content was compliant and based on objective public data, and denied any intent to promote Juzhi Biological [2][7][8] - The reports highlighted the advantages of recombinant collagen over hyaluronic acid in various applications, which Huaxi Biological disputes as lacking scientific evidence [3][6][8] Group 3: Market Context - In 2024, Juzhi Biological reported a revenue of 55.39 billion yuan, a 57.07% increase, surpassing Huaxi Biological's revenue of 53.71 billion yuan, which declined by 11.61% [6] - Juzhi Biological's core brand, Kefu Mei, contributed 82% of its revenue, showcasing the competitive landscape in the beauty and medical aesthetics industry [6]

Core Viewpoint - The article discusses the internal turmoil and strategic challenges faced by Huaxi Biological, particularly in light of its declining performance and the need for significant internal reforms to address corruption and strategic misalignment [3][4][5]. Group 1: Internal Challenges and Strategic Issues - Huaxi Biological's CEO Zhao Yan issued an ultimatum for employees involved in corruption to resign by March 31, indicating a critical need for internal restructuring [3]. - The company is experiencing a significant decline in revenue and profits, with a reported drop of over 70% in profits for 2024, highlighting the urgency of the situation [3][4]. - The internal issues are compounded by strategic missteps, particularly the failure to adapt to market changes and the overproduction of hyaluronic acid, leading to an oversupply situation [9][15]. Group 2: Market Dynamics and Competitive Landscape - The hyaluronic acid market has shifted from a scarcity to an oversupply, with average prices dropping from 210 RMB per gram in 2017 to 124 RMB in 2021, a decline of 41% [9]. - New competitors in the collagen market have emerged, capturing consumer interest and market share, which has further pressured Huaxi Biological's traditional hyaluronic acid business [11][12]. - The company has been slow to diversify into collagen products, missing out on a significant market opportunity that could have alleviated current pressures [12][15]. Group 3: Financial Performance and Cost Management - Huaxi Biological's sales and management expenses have surged from 38.23% in 2018 to 61.72% in 2023, with sales expenses alone increasing from 284 million RMB to 2.842 billion RMB during the same period [27]. - Despite maintaining a high gross margin of around 73%, the net profit margin has plummeted from 33.56% in 2018 to approximately 9.27% in 2024, indicating severe profitability issues [27][28]. - The company's strategy to cut costs and improve profitability through internal reforms may provide short-term relief, but long-term success will depend on genuine operational improvements [29][30].

Core Insights - The domestic market is on the verge of launching its first PDRN product, with Jiangsu Wuzhong completing clinical trials and planning to submit for market approval in the second half of the year [1][2][3] - PDRN, known as "salmon needle" in the aesthetic medicine market, has gained significant attention due to its ability to stimulate collagen and elastin production, making it valuable for skin repair and anti-aging [3][5] - The global PDRN market is projected to grow fivefold in the next five years, reaching $285 million by 2029, with China expected to have the highest growth rate at a compound annual growth rate (CAGR) of 49.02% from 2023 to 2029 [9][10] Industry Dynamics - Over 20 domestic companies are currently involved in the PDRN sector, including major players like Huaxi Biology and Jiangsu Wuzhong, indicating a competitive landscape [3][5] - The initial applications of PDRN were in wound healing and tissue regeneration, but its efficacy in anti-aging has led to a shift towards aesthetic applications [5][6] - The entry of domestic companies into the PDRN market has been accelerated by significant investments and acquisitions, highlighting the commercial potential of PDRN products [6][19] Market Competition - The current market is dominated by imported PDRN products, primarily from South Korea, which poses a challenge for domestic brands to establish themselves [10][12] - The success of Korean brands in China has been attributed to tailored product offerings and effective marketing strategies, including partnerships with beauty institutions [15][19] - Domestic PDRN products have the opportunity to capture market share by focusing on compliance and quality, as existing products lack regulatory approval [18][19] Future Outlook - The first approved PDRN product is expected to create a significant market opportunity, potentially becoming a blockbuster in the aesthetic medicine sector [18][19] - The competition among aesthetic products, including PDRN, PLLA, and PCL-based injections, will intensify as companies innovate and seek to differentiate their offerings [21][23] - The strategic focus on product compliance, market education, and efficient distribution will be crucial for domestic companies to succeed in the evolving landscape of aesthetic medicine [19][23]