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Analysis of the Upstream Medical

Cosmetology Market in China

July 2018

76 Canon Street, London

[email protected]

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◼ Laser cosmetology can be applied to a range of surgical procedures

◼ Such treatments include etching, photothermal therapy and photochemical

interactions

◼ In 2016 the laser cosmetology market held a 19.46% share of the global medical

cosmetology market, expected to gradually increase to 20.84% in 2020

◼ According to a report by Medical Insight, in 2016, the global non-invasive and

minimally invasive medical device market reached $8.4bn, and is expected to grow

to $13.9bn by 2021, with an compound annual growth rate (“CAGR”) of 10.5%. It is

estimated that global direct sales revenue of medical devices from the US will

increase from $2.7bn in 2016 to $4.4bn in 2021, with a CAGR of 10.4%

➢ The medical cosmetology market can be segmented into the following; laser cosmetology, facial cosmetics, breast implants and dentistry, this article will

mainly focus on laser cosmetology and facial cosmetics.

Breaking Down the Medical Cosmetology Market

Laser cosmetology

◼ Facial cosmetics is a made up of a combination of medical cosmetology treatments,

which can help reduce wrinkles, frown lines and rejuvenate facial skin

◼ Subcutaneous injection and the use of botulinum toxin (“btx”) are the two major

facial medical cosmetology treatments

◼ Subcutaneous and lip injections help enrich tissue and restore collagen, lost due to

aging. Collagen and hyaluronic acid support improve the skin’s firmness and

elasticity

◼ In 2016, the facial cosmetics market held a 34.13% market share of the global

medical cosmetology market, expected to grow to 36.28% in 2020

Facial cosmetics

Laser cosmetology market share and forecastFacial cosmetics market share and forecast

$10.0bn$10.8bn

$11.5bn$12.4bn

$13.3bn$14.3bn

19.17% 19.46% 19.78% 20.11%20.47%

20.84%

2015 2016 2017E 2018E 2019E 2020E

$17.6bn$18.9bn

$20.2bn$21.7bn

$23.2bn$24.9bn

33.55%34.13%

34.70%35.25%

35.76%36.28%

2015 2016 2017E 2018E 2019E 2020E

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Supply Chain Analysis

◼ In the medical cosmetology

supply chain, the upstream

component mainly consists of

cosmetic products and

consumables, drugs and

equipment.

◼ Upstream, manufacturers will

sell products directly to

medical institutions which

encompasses all kinds of

medical service providers. As

such, patients, represented as

consumers which make up the

downstream component, can

only compare and contrast the

efficacy and pricing of

cosmetic consumables. and

products through their past

experience with medical

institutions seated in the

middle of the supply chain.

◼ Medical cosmetic materials

and consumables are mainly

used for facial cosmetics,

whilst most of the energy-

based devices are laser

treatments.

3

The medical cosmetology supply chain

Medical cosmetic devices

(laser-based radio frequency,

liposuction apparatus, cosmetic

syringes)

Large

hospital

chains

Medical cosmetic materials and

consumables (artecoli, collagen,

hyaluronic acid, whitening, btx,

placenta extract)

Public

hospital

cosmetic

departments

Small private

clinics

Private

cosmetic

hospitals

Consumer

Upstream: Manufacturers

Midstream: Medical Institutions

Downstream:End Market

Promotion

channelsBeauty

salons

Leaflet

advertisements

Search

engines

Cosmetic-focused

apps

Online-to-offline

platforms

DistributorsDirect sales from

the manufacturer

Sales

agent

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Medical Cosmetology Materials and

Consumables

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Selected Product: Hyaluronic Acid◼ Non-surgical cosmetic treatment –

hyaluronic acid market

– Hyaluronic acid has many uses, it can

be used as a filler in medical

cosmetology and, is inserted into

connective tissue and skin of a human

– It is used in many fields, such as in

medical cosmetics (injection filling),

cosmetics (moisturizing cream), food,

healthy food, medicine (additives) and

surgery (viscose injection used in

intraocular lens implantation and

arthritis surgery fillers)

– In the medical cosmetology space,

hyaluronic acid is used as a filler in

rhinoplasty, to reduce wrinkles in the

chin and lips

– The global hyaluronic acid filler market

will grow at a CAGR of 12% from

$1.7bn in 2016 to $2.7bn in 2020

◼ Injectable hyaluronic acid products

– At present, there are 13 hyaluronic

acid-based products that have licenses

to sell in China, 4 are imported and 9

are produced by Chinese companies

domestically

– Restylane was the first imported brand

to enter the Chinese market. The

hyaluronic acid produced by Q-Med AB

in Sweden was first certified by US-

based FDA, therefore it comes with

high safety standards

– Domestically produced Biohyalux is

produced by Hong Kong listed

Bloomage Freda

– The price of the domestic products are

roughly 50% lower than that of

imported products, and some products

the price difference can reach 80%

◼ At present, more and more plastic surgery

centres use hyaluronic acid as a gateway

product, the pricing for the product is

becoming increasingly competitive.

Discounted promotions are popular for

attracting customer traffic

CFDA approved products and manufacturers

Product

typeSource

Brand

nameCFDA approved Manufacturer

Production

locationPrice per millilitre (RMB)

Hyaluronic

acidImported

Restylane,

type 2Dec 2008 Q-Med AB Sweden 6,000 - 8,000

Yvoire Jul 2013 LG Life Science, Ltd South Korea 5,000 - 7,000

Elravie Jan 2015 Humedix Co., Ltd South Korea

Juvederm Jun 2015 Allergan U.S. 7,800 - 10,000

Domestically

produced EME Oct 2009 Imeik Technology Beijing 4,000 - 6,000

Biohyalux Jul 2012 Bloomage Freda Shandong 4,600 - 6,800

Bonita Oct 2012 Imeik Technology Beijing 4,000 - 6,000

Matrifill Sep 2013 Shanghai Qisheng. Shanghai 4,000 - 6,000

Shuyan Feb 2014 Beijing Mengborun Beijing

Facille Feb 2014 SciVision Taiwan 10,000 - 20,000

I'Fresh Apr 2015 Imeik Technology Beijing

Singfiller Jul 2015 Hangzhou Xiehe Hangzhou

Formaderm Apr 2016 Maxigen Biotech Taiwan

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➢ At present, 13 companies have the license to sell hyaluronic acid products, 4 are imported into China and 9 are produced in China.

Manufacturers of Hyaluronic Acid Products for

Injections

◼ Founded in 2007, China-based Haohai Biological Technology is high-tech bio-pharmaceutical

enterprise focused on R&D, production and sale of medical absorbable biological materials and

consumables. The firm targets fast-growing therapeutic fields within the medical absorbable

biological materials market, including orthopedics, plastic surgery & wound care, ophthalmology,

anti-adhesion and hemostasis

Haohai Biological Technology (昊海生物科技)

◼ Allergan is a California-based multi-disciplinary medical company with operations in nearly 100 countries

and regions. Its products cover the central nervous system, eye treatment, medical cosmetology, digestion,

gynecology, urology and anti-infection, amongst other fields

◼ Medical cosmetic products include the world-famous wrinkle-removing product Botox®, an injectable btx

type A consumable. Products also include Juvederm®, a cross-linked sodium hyaluronic gel formula for

injection. The firm also produces a silica gel breast-implant product line named Natrelle® and

McGonagall® a single-cell silica gel breast implant. In 2014, the medical cosmetic product line was

estimated to have achieved sales revenue of about $4bn

◼ Juvederm is a well known brand priced at the high end of the market. In December 2015, it was given

market authorisation. Its solution uses Hylacross’s patented technology to enhance its hyaluronic gel

offering, allowing the solution to have a more fluid texture, the gel can be sustained in the human body for

12-18 months

Allergan (艾尔建)

◼ The company’s hyaluronic acid product Shuyan obtained a product registration certificate for

medical instruments in February 2014. Shuyan leverages a market exclusive cross-linking

technology that enables a closer engagement with hyaluronic acid. This enables a more fluid

structure in the subcutaneous tissue. The product is highly compatible with skin, is safe and has a

long lasting effect. The firm focuses on the medical cosmetology market, operating a direct sales

model in Beijing and distribution function in other regions. At present, it has established partnerships

with a number of hospitals including the Peking Union Medical College Hospital and the Beijing

Huangsi Plastic Surgery Hospital.

SL Pharm (双鹭药业)

◼ The company is an international organisation focused on biomedical related fields. Its main

subsidiaries are manufacturers and distributors of sodium hyaluronic acid, namely producing

Biohyalux for injectable purposes

◼ The company mainly engages in development, manufacturing and sales of different hyaluronic acid

raw materials and end products. The firm covers pharmaceuticals, plastic surgery, cosmetics,

medical devices and healthy foods. Currently, it is the worlds largest R&D organization and

manufacturer of hyaluronic acid, with a global market share of 20% and a market share of 60% in

China

◼ The company’s hyaluronic acid raw material products can be classified into the following: injectable

grade, eye drops, cosmetic grade, foods. Cosmetics holds the largest share at 56%. The company

is the owner of the famous Biohyalux brand. The brand has various domestic uses, in 2013 and

2014, sales hit $0.87bn and $1.6bn respectively, holding a 30% market share of end consumers

◼ It acquired French-based Laboratoires Vivacy for $192m. The firm designs, produces and distributes

injectable medical devices in the field of medical cosmetology

Bloomage BioTechnology (華熙生物)

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◼ Non-surgical medical cosmetic treatment – the btx market

– Btx is made from the toxin produced by a bacterium called clostridium botulinum

– Btx has a wide range of uses, not only can it be applied to striated muscle, but also to smoothen muscle and certain parts of the cholinergic systems (such as as sweat glands and

salivary gland secretions), skin wrinkles caused to dystonia and hyperhidrosis, and wrinkles caused by diseases to the digestive and urinary systems. As such there are a variety of

commercial applications for btx

– The global market size of btx reached $360m in 2016 and is expected to grow at a CAGR of 9%, with the market expected to grow to $510m by 2020

– Btx revenue in China increased from RMB310m in 2010 to RMB1.13bn in 2015, with a CAGR of 29.73%. Over the same period, the CAGR of products Baotuo and Hengli were

76.96% and 14.87% respectively. Botox‘s share of the btx market increased from 11.01% in 2010 to 52.50%, surpassing that of Hengli. Based on an CAGR of 29.73% total market

sales in China were to have reached 2016 reached RMB1.6bn

◼ Products relating to injectable btx materials and consumables

– Only US-produced Botox and Hengli (produced by the firm Lanzhou) have the license to be sold in China

– Hengli

– Its the biological product to be exported from China. The injectable btx Type A received the drug certificate in 1993 from the Ministry of Health, and was officially approved in

China in 1997. After the U.S. and the U.K. it was the 3rd country that produced and used a type A btx

– It was not officially approved for medical cosmetology until 2009, at which point it was only initially used to remove frown lines;

– Hengli targets the mid-market, setting a price per ml of approximately RMB2,000-3,000

– Botox

– Is the worlds best known brand of btx, over the last 20 years it has been approved in 83 countries

– It is the only domestic product to have acquired China-based FDA approval, setting a price per ml of approximately RMB3,000-5,000

– Reforms made to the CFDA approval system has led analysts to believe there will be a large number of medical cosmetology materials and consumable manufacturers entering the

Chinese market, increasing the competitive landscape

◼ CFDA approved btx products and manufacturers

Materials and Consumables – Botulinum Toxin

Year of Investment: 2009

Product type Source Brand name CFDA approved ManufacturerProduction

locationPrice per millilitre (RMB)

BtxDomesti

cHengli 1997

Lanzhou Institute of Biological

ProductsLanzhou 2,000 - 3,000

Imported Botox Apr 2009 Allergan U.S. 3,000 - 5,000

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Manufacturers of Btx Injection Materials and Products➢ The CFDA has only given product market authorisation to US imported Botox and Lanzhou produced Hengli (U.K.’s Dysport, South Korea’s Meditoxin, U.K.’s Myobloc, Germany’s Xeomin and

South Korea’s Neuronox have not received regulatory approval in the Mainland).

➢ Botox and Dysport are made up of a mix of auxiliary proteins (enhancing the stability of btx and effects) defect: easily produces antibodies, repeated injection will lead to effect immunity.

◼ Founded in 1934 it is one of the oldest biological research institutes in China. The company independently

developed the btx type A product, which won the second prize of National Science and Technology

Progress Awards. It has exclusive rights to manufacture and sell select biological products in China. It has

obtained the Korean FDA approval, and the first locally produced biological product to be exported

◼ In 1997, the CFDA approved the firm’s btx type A product Hengli, for use on adult patients with

blepharospasm, as well as certain types of strabismus, specifically acute paralytic strabismus

◼ Hengli is diluted with pig gelatin plastic, whilst US based Botox is produced using human albumin, therefore,

Hengli can be more susceptible to allergies

◼ Botox’s vacuum drying method makes it difficult to product antibodies, Hengli uses a freeze drying method ,

which facilitates the production of toxins, of which the toxins then produce antibodies, however, those

produced by tiromycin have no effect

◼ Compared with other domestic brands, the price is affordable, comprising of a 100 unit vial and a 50 unit

vial

◼ Priced at RMB480-1500 per 100 unit vial

Lanzhou Institute (兰州生物制品研究所)

◼ Allergan is a California-based multi-disciplinary medical company with operations in nearly 100 countries.

Its products cover the central nervous system, eye treatment, medical cosmetology, digestion, gynecology,

urology and anti-infection and other fields

◼ Medical cosmetic products include the world-famous wrinkle-removing product Botox®, an injectable botox

type A product. It also include Juvederm®, a cross-linked sodium hyaluronic gel for injection, a silica gel

breast-implant line of product named Natrelle® and McGonagall® a single-cell silica get breast implant. In

2014 the medical cosmetic product line was estimated to have achieved sales revenue of about $4bn

◼ “BOTOX prosperity” has been clinically applied across the globe for more than 20 years. In 2002, Botox

was approved by the FDA. In September 2009 it passed the CFDA’s approval for application in temporary

treatment of moderately to severe frown lines. In 2012, it gained approval for temporary moderate-to -

severe treatment of eyebrow lines

◼ Allergan’s medical cosmetic’s revenue derived from products in the 1st quarter of 2018 reached $327.7m,

growing from revenues of $318.7m over the same period the previous year


Allergan (艾尔建)

◼ Manufactured by German-based MERZ, it has 2 product offerings, a 50 unit vial, sold in Europe and

named Bocouture, the other, a 100 unit vial and sold in the US and in certain parts of Asia, named Xeomin

◼ As it does not contain accessory proteins it reduces changes of immunity, so it does not produce

antibodies. Multiple applications do not worsen with usage, it is the only botulinum toxin capable of sitting

at room temperatures over a period of 3 years

◼ It is 1 of 3 brands globally approved by FDA related bodies. It is a major brand across American and

European hospitals. Because it is a pure btx free from complex proteins and it can be transported at room

temperature, unlike others, without needing to be frozen. It is very effective on muscle, and doesn’t

produce antibodies.

◼ At present, Xeomin is unable to enter the Chinese market, therefore consumer knowledge is low, as a

consequence imitation is low in comparison to other products, which is not the case in Korea, where there

are a number of counterfeit Botox product imitations


Xeomin (德国西马)

◼ Manufactured by U.K.-based Ipsen, Dysport a Type A btx, which has already been approved by the FDA

for application in plastic surgery. In Europe, it is the most sold product, however, in China it is yet to obtain

approval in China by the CFDA

◼ The production phase has gained KGMP certification, with the Hong Kong Department of Health. It is

clinically proven, safe and effective compared to other similar btx products. It has been sold in over 40

countries, widely used in the US, European and Asian region, particularly South Korean and Taiwan

◼ 1 unit (“U”) of Botox equals to 1 unit of Hengli equal to 4 units of Dysport, therefore it is a strong dosage,

having a more pronounced effect

◼ The chances of damage and reactions is less that its peer in the market due to its makeup of proteins

◼ Dysport became a new contender as of its FDA approval in 2009, challenging the status of Botox and

trying to gain a larger market share. Dysport is considered to be a better wrinkle-removal treatment than

Botox, with longer lasting effects and less expensively priced


Dysport (英国丽舒妥)

-

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Medical Cosmetology Devices

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Energy-based Device Market Analysis

◼ High price, frequent return

visits

◼ Skin care market growth has

surpassed the industry

average and has set a new

high

– Skin management is

another non surgical

medical treatment

– Through radio frequencey

is it possible to achieve

whitening of the skin, less

wrinkles and improve the

skin’s moisture

– Because consumers need

regular treatment, hospitals

can often recommend skin

care treatments to

consumers

Non-surgical treatment – skin care

Skin care treatments

Type Treatment Source Cost of care Visit

frequency

Effects

Laser Invasive laser (CO2

laser, Ebrium laser)

Laser RMB1,000 per time,

5 time treatment

6 months - 1

year

◼ A laser is a device that emits light through a process of optical amplification based on the

stimulated emission of electromagnetic radiation

◼ Lasers have the strongest therapeutic effect due to wavelength-induced energy concentration

◼ The principle of invasive laser treatment is to peel off the target tissue, ensuing a needed

recovery period for the skin. It has a variety of uses including the removal of epidermal

neoplasms such as fat particles and skin resurfacing

◼ CO2 has a wavelength of 10,600 nanometers (“nm”)

Non-invasive laser

(Alexandrite laser,

infrared laser)


5 time treatment

6 months - 1

year

◼ The non-invasive laser has a wavelength of 755nm. It is easily absorbed by melanin and

therefore melanin is a main target area

◼ It enables the removal of all kinds of the skin’s spots, redness, hair removal, skin rejuvenation

Lattice laser / Pixel

laser


5 time treatment

6 months - 1

year

◼ The laser beams are deployed onto the skin following a particular pattern, slight better

technically than that of the invasive laser. Similar to the invasive laser, the energy is a little

weak and possible damage is reduced

◼ The laser makes micropores in the treated area that stimulates the skin to initiate a self repair

mechanism, thus rejuvenating the skin

◼ Its stimulatory effect on collagen regeneration sits between the invasive and non-invasive laser

◼ It is used for the treatment of various scars (such as acne scars and burns) and well as facial

rejuvenation (such as wrinkles, firming, shrinking pores and improving skin pigmentation)

Freezing depilate Laser RMB1,000 - 3,000

per time, 5 time

treatment

2 - 3 months ◼ Dependent on the selected light, it pursues red hair follicles and surrounds stem cell activity

◼ Permanent removal of hair

Photon Photo-rejuvenation Intense pulsed light

(IPL)

RMB1,000 per time,

6 time treatment

6 months - 1

year

◼ Emission from the xenon reaction, enables a computer controlled emission of high intensity

light with a wavelength of 500-1200nm

◼ The biggest characteristic of photon is the wide spectrum of light emitted, enabling wider

coverage and more light but a weaken strength to that of the laser

◼ Uses include skin rejuvenation, whitening, removal of many varieties of spots and the targeting

of haemoglobin (the red blood cells)

Cold photon (red/blue

laser acne

removal/rejuvenate skin)

Light emitting diode RMB1,000 per time,

6 time treatment

6 months - 1

year

◼ The fundamental characteristics of cold photos are similar to that of normal photons, the major

difference between the is that it is a little stronger

◼ Target acne

Radio

frequen

cy

(“RF”)

Ultherapy Electromagnetic

waves

RMB30,000 - 48,000 2 - 3 months ◼ Using a non-intrusive method, the ultrasonic waves target a single point to generate high

intense energy, acting on the fascia layer and regenerating collagen

◼ There are several sized probes, at depths of 1.5mm, 3.0mm and 4.5mm. Max. depth is 4.5mm

below the skins surface

◼ Ultherapy is FDA approved in the US to firm and tighten skin, as of yet there have been no

Mainland-approved treatments

Thermage Electromagnetic

waves

RMB10,000 - 20,000 2 - 3 months ◼ A non-invasive process, through the use of high-energy RF, heating the skin’s dermis enables

the production and stimulation of collagen, thus, improving skin’s firmness and surface

◼ A type of RF, it penetrates the skin at a depth of 3.5mm, it comes with a temperature heat

warning and skin cooling protection system

◼ Wide FDA approval confirms it is the worlds most effective skin tightening and wrinkle removal

treatment, also permitted to be sold in China

Plastic beauty

treatment

Electromagnetic

waves

RMB30,000 –

40,000

3 - 5 months ◼ High-intense energy, RF band E

◼ Enabling the firming of the skin, hair removal, skin elasticity alongside other applications

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Supplier of Energy-based Devices➢ Devices in this market mainly comprise of laser therapeutic apparatus, RF apparatuses and liposuction systems amongst others.

➢ There are more and more brands of energy-driven instruments entering the market. Competition among upstream manufacturers is rising, a number of

counterfeit manufacturers have also entered the ring, creating problems for original manufactures.

◼ Set up in 2000, the multinational company manufactures medical cosmetic instruments such as light,

laser and radio frequency. The company is able to provide doctors with medical cosmetology

solutions to remove body hair, wrinkles and tattoo. It also improves the appearance of skin. The firm

owns three brands: Syneron, Candela and CoolTouch

◼ Syneron occupies 1/3 of the market and was purchased by Apax Partners in July 2017

◼ Syneron and Bloomage Bio entered into a strategic cooperation in 2016. According to the

cooperation agreement, Bloomage Bio obtains the exclusive operational right of the Adeline product

in China, including market promotion, sales and after-sales service. The product is derived

from Syneron-Candela patentented elōs™ technology and provides body and face skin rejuvenation

and smoothing treatments, as well as hair, spot and blemish removal

◼ The Syneron elos Plus multi-functional platform offers E-light, a strong light and radio frequency

technology

Syneron (赛诺龙)

◼ Set up in 1991 and headquartered in Boston; Cynosure is a high-tech laser company that develops,

manufactures, and markets various types of skin treatments and cosmetics. Products are widely

applied in multiple medical treatments, such as hair, acne and scar removal. It also treats rosacea,

certain types of tumors amongst other areas. Currently, it provides product, services and technical

support to more than 60 countries through wholly-owned subsidiaries and distributors

◼ Cynosure purchased ConBio and Palomar in 2011 and 2013 respectively. In March 2017, the

leading medical and diagnostics company Hologic acquired Cynosure, paying $66 per

share (totaling $1,650m)

◼ In 2012, the company launched the the world's first picosecond laser, Picosure, a 755nm

wavelength picosecond and laser device. Owner of the PressureWave treatment, enabled the gloal

medical cosmetology market to enter a new era

◼ In 2014, Cynosure and Evercare, a leading medical cosmetology chain collaborated to launch the

Smartlipo MPX, marking the start of liposuction utilising a customisable laser

Cynosure (赛诺秀)

◼ Israeli-founded Alma Lasers is an international professional medical laser manufacturer who entered

China in 2003. Products include an anti-ageing series, freezing depilates skin treatment, amongst

others

◼ In May 2013, Fosun Pharma acquired 95.6% of Alma Lasers through Sisram. Sisram is considered

the 5th largest provider of medical equipment. The transaction amounted to $240m. In September

2017, Sisram was listed on the main board of the Hong Kong Stock Exchange (“HKSE”)

◼ Based on 2016 revenues, Alma is the largest supplier of energy-derived medical cosmetic

equipment in the Chinese mainland (excluding Hong Kong, Macau, and Taiwan). In 2017, the

Chinese market revenue accounted for 20.6% of its overall revenue

◼ Main products: Soprano series - used for hair removal, Harmony series - up to 65 FDA approved

applications. Accent - used for body rejuvenation and firming. All products belong to the medical

cosmetology product line. FemiLift, a minimally invasive medical cosmetology instrument for treating

multiple female problems. The firm also offers life cosmetology product lines, such as Rejuve and

SPADEEP

Alma lasers (飞顿)

◼ First established in Silicon Valley in 1966. Strong-light manufacturer ESC was set up in 1991. In

2001, Lumenis was merged with ESC to set up a light and medical laser company, renamed

as Lumenis with the production base is America and Israel

◼ Lumenis entered China in 1992 offering products in the medical field, including hair removal and

urinary surgery amongst others. Equipment included LightSheer Duet, painless hair removal

equipment as well as the resurfacing treatment UltraPulseTM EncoreTM, popular in the Chinese

market

◼ In October 2015, XIO Group purchased Lumenis, the 4th largest by market share, (approx.

RMB510m). Following the acquisitional support, Lumenis acquired Pollogen in November 2015 to

expand further into the medical equipment space

◼ The firm’s market strategy surround the further development of its laser treatment system, laser

medical cosmetic technology (hair removal, weight loss amongst other uses), alongside other

products including a portable laser medical cosmetology device

Lumenis (科医人)

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➢ Medical cosmetology equipment is largely made up of laser therapy instruments, radio frequency therapy appartuses, liposuction systems, amongst

others.

➢ Competition amongst manufactures in this market has increased, leading to a variety of counterfeit supplies.

Suppliers of Energy-based Equipment

◼ Headquartered in Wuhan, Hubei, the company is listed on the New Third Board

exchange in 2015. It is the largest high-technology enterprise in China that

manufactures and sells high-potency laser for medical and cosmetic use

◼ By the first half of 2017, the company had obtained approval for 24 medical

instruments and 44 patents (including 1 U.S. patent) as well as the ISO 9001 and

ISO 13485 quality system certificate. Some of the products also passed Europe's

CE certification. By the first half of 2017 the firm has achieved an operating income

of RMB87.03m and a net profit of RMB21.17m

◼ Its products such as the super platform, water power and ruby lattice, amongst

others, have become the medical cosmetology standard in China. Today, the

company offers photoelectricity cosmetic solutions for users across the globe

Wuhan Miracale Laser (武汉奇致激光)

◼ Set up in 1964 and headquartered in Deggingen, Germany. Its marketing head

office is in the U.S. and has production sites across Europe, including Slovenia,

Denmark and Germany. As of 2015, Fotona had approximately 100,000 pieces of

equipment in operation globally. The firm entered the Chinese market in 2004 with

its China headquarters in Shanghai

◼ In April 2017, Fotona was acquired by Agic Capital

◼ Fotona’s medical laser-related offerings comprise of 7 key

products: FotonaQX Max: for the removal of spots with an erbium fractional

laser, Renuzit: a noninvasive private laser, Fotona 4D: plastic skin lifting

system. Tightlase is a noninvasive laser fat reducing treatment, a pioneer in blood

vessel treatment laser. The above products have been approved by the US-

based FDA, Europe's CE and Chinese SFDA

Fotona (欧洲之星)

◼ GSD was founded in Shenzen in 2004, China's innovation nuclei. GSD is

an international cosmetic provider. GSD is specialized in cutting-edge technology,

product research, manufacturing, sales and services in the cosmetics industry. The

business scope covers life cosmetology and medical cosmetology equipment,

medical cosmetology portable apparatuses, a skin care product range and beauty

salons

GSD (深圳)

◼ Set up in 2008, Peninsula Medical is a high-technology medical cosmetology

company that integrates international trade, product research and marketing

services into its offering. Its products and services serve over 1,000

dermatologists and plastic surgery clinics, within ownership of 10 domestic patents,

4 international patents, 30 utility models patents, 13 appearance patents, 12 pieces

of copyrighted software , 39 trademark registrations and 11 pieces of certified

medical equipment

◼ In 2013, it established a partnership with Zhao Guang Hospital of the Royal Air

Force. It has also worked with multiple clinic teams, such as Shanghai

9th Hospital, Xijing Hospital, Anzhen Hospital and Jiangsu Provincial Hospital of

Traditional Chinese medicine. At present, the company is going through a research

and investment period. Lead products are LiTi Gold and Tornado

Peninsula Medical (中国半岛医疗)

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Chinese Medical Cosmetology M&A

Activity

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Year of Investment: 2009

Valuation at time of Investment: £206M.

Time/resources being invested in Asia? Independently set up but under same management trading arm based in China.- http://www.farinia.com/companies/vivia-china

Increasing M&A Activity

◼ Between 2001 and 2016, medical

cosmetology M&A activity grew at

an annual average rate of 61%,

there has been steady growth in

deal volume and average size of

transactions across the selected

period

◼ According to data by Zero2IPO,

over the past 15 years, upstream,

there has been a total of 143

M&A deals with total deal value at

RMB36.6bn, holding 55% of total

industry activity, (excluding 2013–

2015) across both mid and

lowstream, there were a total of

154 transactions worth a total of

RMB32.4bn

◼ According to research conducted

by Zero2IPO, the main reason for

the high concentration of deals

upstream is because in the high-

tech focused medical

cosmetology industry, R&D

investment can flow across the

different components of the chain,

however, the added value of

profits is concentrated in the

upstream, thus increasing M&A

activity to obtain a competitive

edge

Share of M&A activity across the supply chain (2001-2016) (RMB1millions)

Upstream

M&A deals

by value

Deal shareUpstream M&A

deals by valueDeal share

Total M&A

deal size

Number of

deals

2001 5 100% – 0% 5 1

2003 1 100% – 0% 1 1

2005 2,916 100% – 0% 2,916 1

2007 1,447 100% – 0% 1,447 1

2008 318 100% – 0% 318 4

2009 1,000 100% – 0% 1,000 4

2010 376 75% 126 25% 501 8

2011 579 57% 436 43% 1,015 18

2012 6,264 85% 1,130 15% 7,394 21

2013 6,426 42% 8,726 58% 15,152 46

2014 5,195 45% 6,304 55% 11,498 61

2015 8,643 40% 12,810 60% 21,453 86

2016 3,571 55% 2,873 45% 6,444 45

Total 36,741 53% 32,405 47% 69,144 297

Colour palette

Selected Deals in the Global Market

15

In March 2017, global market leader Cynosure was acquired by

Hologic for $1.65bn

In April 2017, the second largest player in the market, Zeltiq

Aesthetic was acquired by Allergan for $2.48bn

In July 2017, the third largest player by market share was

acquired by Apax Partners in a leveraged buyout, for $397m

In October 2015, Lumenis, 4th largest by market share, was

taken private in an acquisition worth $510m

In 2014, Solta Medical (Thermage) was acquired by Valeant

Pharmaceuticals for $235.6m

Germany-based Merz acquired U.S.-based Ulthera, a

manufacturer of medical cosmetology equipment. Deal value

was approximately $600m, the company producing only $88m in

operating profits

Acquisition

Deal type

Acquisition

Deal type

Acquisition

Deal type

Acquisition

Deal type

$1.65b

Deal size

$2.48b

Deal size

$397m

Deal size

$510m

Deal size

$235.6m

Deal size

$600m

Deal size

Acquisition

Deal type

Acquisition

Deal type

Colour palette

Selected Deals in the Chinese Market (2012 - 2017)

16

Sisram, ranked the 5th largest globally as a supplier of medical

cosmetology equipment. In 2013, Fosun Pharma established

Sisram, mainly for the acquisition of Alma. In May of the same

year it was acquired. In September 2017, the firm listed on the

HKSE

Bloomage acquired Laboratoires Vivacy for $192m. The target

company designs, manufacturers and sells medical cosmetic

devices

Jiansu High Hope successfully acquired Nanjing Medical for

RMB35m the business sells devices and offers medical services

SINO-KOR Plastic and Aesthetic acquires a total of 6 medical

beauty hospitals for an undisclosed amount

Crystal Medical acquired Chongqing South Hot Spring, a cell

research & preparation centre and anti-ageing plastic surgery

hospital for RMB386m

Suning Universal acquired 80% of medical cosmetic company

Ever Care, for approximately RMB208m

$222m

Deal size

$192m

Deal size

RMB35m

Deal size

n/a

Deal size

RMB386m

Deal size

RMB208m

Deal size

Acquisition

Deal type

Acquisition

Deal type

Acquisition

Deal type

Acquisition

Deal type

Acquisition

Deal type

南京医宁投资管理

A total of 6 medical

beauty hospitals

重庆南温泉国际

Acquisition

Deal type

Colour palette

China Market Trends

Colour palette

◼ China's medical cosmetology industry is at a stage of rapid development with market growth at 15-20%, with further large market size potential. It is the third largest market globally

offering strong development prospects with low industry penetration

◼ China's market is developing, however, it still has some distance from that of more matured markets of the U.S., South Korea and Taiwan. There is a lot of room for changing across

materials & consumables, devices, distribution channels to the end user and customer protection

◼ Traditional channels of acquiring customers, such as through big name search engines is reaching a bottleneck moment, marketing costs have had a sever impact on the development

of the industry. Medical cosmetology mobile applications will play an important role in the solving of the industry's bottleneck issue, enabling the industry to scale, shift traditional

business models and become an important industry hub

◼ Cosmetic materials, equipment research and manufacturers:

– Upstream plays a crucial role in the supply chain. Looking ahead, a combination of technological advancements and product quality enhancements will enable more products to be

domestically produced. This transition will secure the rapid development and status of China’s medical cosmetology market

– There are relatively few suppliers in the market, thus a high-level of concentration, companies with core technical strengths can enable high reaching market opportunities going

forward

– For the upstream segment, equipment manufacturers with developed technologies are optimistic about the long term prospects for those with strong R&D capabilities and core

operational technologies

– Upstream, the process of shifting product, equipment and material production from import-led to domestically manufactured looks promising given R&D alongside manufacturing

capabilities

Medical Cosmetology Upstream Industry Trends

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