Core Viewpoint - In 2024, Kangzhe Pharmaceutical's core cardiovascular business faced revenue and profit declines due to unsuccessful bidding in centralized procurement, prompting its subsidiary Dermavon to apply for an IPO on the Hong Kong Stock Exchange despite ongoing losses in its skin care segment [3][4]. Group 1: Company Overview - Dermavon, established in 2020 and spun off from Kangzhe in 2021, focuses on skin prescription drugs and skin care products, holding three marketed drugs and a developing skin care brand [4][6]. - Kangzhe Pharmaceutical's revenue in 2024 was 7.469 billion yuan, a decrease of 6.8% year-on-year, with net profit dropping by 32.3% to 1.613 billion yuan [4]. Group 2: Financial Performance - Dermavon reported revenue growth from 384 million yuan in 2022 to 618 million yuan in 2024, but net losses increased from 55.17 million yuan to 106 million yuan during the same period [8][9]. - Sales expenses for Dermavon rose from 246 million yuan in 2022 to 388 million yuan in 2024, consistently accounting for around 60% of revenue [9][10]. Group 3: Market Position and Challenges - Dermavon's core product, Yilvqu (for psoriasis), lacks price competitiveness compared to established competitors, which impacts market penetration and necessitates high marketing expenditures [11][12]. - The skin care segment, particularly the He Ling series targeting sensitive skin, faces intense competition from established brands like Winona, which reported revenue of 4.91 billion yuan in 2024, significantly overshadowing Dermavon's performance [13][14]. Group 4: Future Outlook and Strategic Goals - Dermavon aims for a compound annual growth rate of over 50% over the next five years, targeting sales exceeding 10 billion yuan by 2029, although achieving this goal poses significant challenges given the current market dynamics [14][18]. - The company's reliance on Kangzhe for resources and sales channels raises concerns about its independence and long-term viability, as it struggles to establish a self-sustaining business model [16][17].

Company Dynamics - Kangzheng Pharmaceutical plans to spin off its subsidiary, Demai Pharmaceutical, which focuses on skin health, for independent listing on the Hong Kong Stock Exchange [3] - Kangzheng holds 90.8% of Demai's shares, with the remaining 9.2% held by employee incentive platforms [3] - The spin-off is expected to be executed through a distribution of shares to existing shareholders [3] Financial Performance - Demai Pharmaceutical's revenue from 2022 to 2024 is projected to be 384 million, 473 million, and 618 million respectively, totaling nearly 1.5 billion with a compound annual growth rate of 26.89% [4] - Despite revenue growth, Demai has reported losses of 55.17 million, 4.703 million, and 106 million over the same period, attributed to high sales and R&D expenses [4] - The company has successfully entered the skin-level skincare market, with related business revenue exceeding 10% of total revenue [3][4] Market Implications - No skin-level skincare companies have successfully listed on the Hong Kong Stock Exchange to date, making Demai's potential listing a significant milestone for the sector [4] - A successful listing would signal positive developments for the skin-level skincare industry in the capital market [4]