With the US-China trade war brewing in the background, life sciences company Cellmid (ASX: CDY) has secured a deal to sell its évolis product in China – barely a week after agreeing to supply the same product into the US via retailing giant Bloomingdale’s.
Via its subsidiary Advangen, Cellmid has entered into an exclusive agreement with Beijing Fukangren Bio-pharm Tech. to distribute its évolis anti-ageing hair care products in China.
The terms of the deal stipulate that Fukangren will take on the responsibility of acquiring the necessary regulatory approvals from China’s industry regulator (the SFDA) including registering the évolis lotions as hair loss products.
The crux of the deal, however, is an exclusive distribution agreement for Fukangren to distribute the évolis lotions and shampoos for 5 years with “minimum order requirements for each year”.
Once upon a time in China
The US and China may have many differences, but one similarity is their converging prevalence for hair loss amongst their populations as socio-economic convergence brings their consumer’ spending patterns closer together.
In China, historical data shows the prevalence of pattern of hair loss in the population at approximately 20% of men and 6% of women, according to research done by Anais Brasileiros de Dermatologia in 2015. While overall, this appears lower than the reported prevalence in the West, rates of hair loss approach those seen in Western countries in older age brackets, researchers said.
With growing indications that historically reported early onset hair loss rates within the Chinese population may be changing more towards those being seen in Western countries, Cellmid thinks its évolis products are being shipped to the country at an opportune time.
According to Cellmid, the company carried out “extensive market research” on the Chinese market, concluding that its évolis cosmetics product would be a “first in class, best in class” contender including FGF5 inhibitor technology that carries strong scientific backing and providing its products with a “unique marketing proposition and a significant competitive edge” compared to local market rivals.
Judging by current market trends, Chinese consumers regard foreign-made products in high-profile locations such as Australia, Japan, Switzerland and the UK as highly desirable with a de-facto premium built-in simply because of the standards these jurisdictions are perceived to instil in their manufacturing methods.
Cellmid is confident that by adding further differentiation in the Chinese market with Australian and Japanese-made marketing labels, will provide even stronger sales momentum and brand loyalty in the country.
To achieve a rapid distribution of évolis throughout China, Fukangren will leverage its existing and well-serviced network of over 500 pharmacies, associated hospitals and clinics. Full educational support for the associated physicians and pharmacy professionals will also be provided and is specified under the terms of the agreement.
The deal also stipulates that the responsibility for marketing the évolis products within China “falls exclusively to Fukangren”, with a minimum advertising spend set as a percentage of the cost of goods required. Advangen will provide support in terms of training, branding aesthetics and assist with marketing collateral.
“Given our distribution capacity and customer reach, we are excited to take a unique and effective product like évolis to market through our pharmacy channels in China,” said Mr Jinjing Wang, CEO of Fukangren.
Growing sales momentum
Cellmid CEO Maria Halasz said that “this agreement is an important step towards bringing évolis to the Chinese people, and we believe Fukangren has the resources, capacity and market know-how to make évolis a success in China.
The Chinese market is a key element of Cellmid’s growth strategy and we expect it will contribute significantly to growing our revenues in the coming years.”
Earlier this year, Cellmid entered into an exclusive distribution agreement for Fillerina, a market leading anti-ageing skincare brand, in Australia and New Zealand. The distribution deal meant that Advangen had obtained its first skincare range and provided Cellmid with its first exposure to the Oceanic market.
The company also recorded a record A$2.2 million in receipts from customers this past quarter, an increase of 81% compared to the same period last year. The life sciences company also reported A$4.49 million in consumer health sales in past financial year.
With Chinese marketability peaking and emerging statistics showing increasing potential for évolis, Cellmid’s tandem move into both China and the US could be very lucrative in the years to come.
The magnitude of China’s population and the size of its new middle class is now estimated to exceed 100 million households with disposable incomes growing at almost double-digit rates annually in-line with the country’s surging GDP growth that far outpaces all other developed countries globally (currently at 6.8% per year, compared to 2.3% in the US, 0.1% in the UK and 0.4% in Australia).
The distribution arrangement with Fukangren therefore represents a significant milestone in the international expansion and potential success of the évolis product ranges.