Capital injection

Cosmetics filler maker inks deal with Koreans ahead of Hong Kong IPO


Botox is booming in China

Clostridium botulinum was first identified in 1895 after a botulism outbreak. Found in soil and the sediments of streams, lakes and coastal waters, the bacterium attacks the nerves, causing difficulty with breathing, muscle paralysis and even death. In 1946 Edward Schantz, an American scientist, successfully isolated clostridium botulinum’s toxin in crystalline form, which paved the way for research on its medicinal effects. It turns out that a type of botulinum toxin, trademarked as Botox by its distributor, Allergan, could treat a wide array of conditions including eye twitch, migraines, overactive bladder and even severe sweating.

But it was its ability to reduce the appearance of facial wrinkles, acknowledged by the US Food and Drug Administration in 2002, that caught the most attention. In the year before Covid-19 hit, Botox grossed $3.8 billion in sales, fuelling the buyout of Allergan by immunology drug developer AbbVie. With a price tag of $63 billion, the deal was one of the world’s 10 largest pharmaceutical acquisitions ever.

Over in China, Imeik Technology Development, a Shenzhen-listed cosmetics enhancement product maker, is eying the fast-expanding Botox market too. On June 24 it announced that it would buy a 25.4% stake in South Korea’s Huons BioPharma, which produces a proprietary botulinum toxin product under the brand Hutox. The transaction, pending approval from Imeik’s board of directors, is worth Rmb886 million ($137.2 million) and will effectively make the Chinese company the South Korean firm’s second largest shareholder. Huons Global, from which Huons BioPharma was spun out in April, remains the major stakeholder with a 74.6% interest.

The deal represents the deepening of an existing tie-up between the duo. Imeik has been serving as Huons’s exclusive partner in China since 2018, and it has conducted local clinical trials to secure regulatory clearances in the hope of distributing Hutox locally. Now set to enter Phase III clinical trials in China, Hutox is currently available only in South Korea, Bolivia, Iraq and Kazakhstan.

In a stock exchange filing, Imeik said it is valuing Huons at Rmb2.97 billion, or 74 times its net asset value as of the end of December. Much of the premium came from Huons’ patented technology – there are only a handful of botulinum toxin producers in the world.

Equally significant is the potential of China’s booming facial injectable market (see WiC470). With a forecast that Chinese sales of botulinum toxin products will reach $1.8 billion by 2025, or three times that of 2019, in February Hong Kong-listed Sihuan Pharmaceutical also struck a deal, this time with Hugel, another botulinum toxin maker from South Korea. Under the agreement, Sihuan has the rights to distribute Hugel’s products under the label Letybo exclusively in China. The plan is that Letybo seizes 30% of China’s botulinum toxin market within three years, given it is one of the four products of its type approved for use in the country so far.

The latest M&A transaction, said Jiemian, a local news outlet, is in line with Imeik’s plan to expand its range of offerings beyond sodium hyaluronate fillers and facial implant threads. The former accounted for 98.6% of Imeik’s revenue – totalling Rmb709.3 million – last year.

While hyaluronic acid is currently the most popular facial injectable in China, botulinum toxin is growing faster. According to So-Young, a Beijing-based online retail platform that sells cosmetic surgery packages, botulinum toxin accounted for 33% of China’s facial injectable market but had an outsized annual growth rate of 91% in 2019.

In February Imeik also made Beijing-based Rongzhi Bio, a developer of lipolytic drugs and local anesthetics, its fully-owned subsidiary by purchasing stakes that it did not already own. Last month its new derma filler, which contains Poly-L-Lactic Acid to help promote collagen synthesis, was also greenlighted by the National Medical Products Administration, making it the second company selling such an injectable after Changchun SinoBiomaterials.

Since going public on Shenzhen’s ChiNext last September, Imeik’s shares have soared in value nearly 12 times, trading at 313 times trailing earnings as of Wednesday. With a market capitalisation of Rmb169.5 billion, it is one of the 10 largest companies listed on Shenzhen’s growth board. The bull run is partly due to its robust growth in the first quarter, during which it more than tripled its revenue and quadrupled its net profit. Its plan to issue H-shares in Hong Kong has also stoked further investor interest.



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