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Aesthetics in the Limelight

Leading domestic players should benefit from the ongoing replacement of smuggled products and international brands. With higher affordability, a younger consumer profile, and a favourable change in attitude, @JessieXu sees potential upside.

On the supply side, we expect scrutiny to squeeze out black market products and the replacement effect to continue. Given the high barriers to entry, leading players with differentiated licensed products should benefit.

We see increasing demand in China’s botulinum toxin market, given the surging popularity for anti-aging and scarcity of licensed botulinum toxin in China. Because of the lengthy approval cycle (3-8 years for botulinum toxin versus 2-4 years for others), candidates with a license or a head start in the pipeline should benefit the most.

We also see great potential in collagen stimulator. With the first batch of NMPA-approved products entering the market in 2H21, we expect to see exponential growth, although the ramp-up speed might be relatively slower than HA (hyaluronic acid) amid weak macro and policy uncertainties. HA should remain the largest segment, but with a moderating growth momentum due to intensified competition and lack of differentiation.

Short-term disruption is inevitable. We do not expect the new round of inspection to slow market adoption. New scrutiny is likely to benefit industry leaders in the long run, as smuggled and counterfeit products are being squeezed out. The new guidance on advertising issued in August 2021 is a near-term uncertainty, while the market awaits the final document next year.