After a year of transitions and adjustments, Huaxi Biological, a pioneering player in the field of hyaluronic acid, has released its performance forecast for the year 2024. The company predicts a net profit attributable to shareholders of between 146 million to 175 million yuan, representing a staggering decrease of 70.47% to 75.36% compared to the previous yearAdditionally, the net profit after excluding non-recurring items is expected to fall sharply to between 80 million to 109 million yuan, signifying a reduction of 77.78% to 83.69% year-over-year.

This announcement sheds light on the ongoing challenges that Huaxi Biological is facingThe company noted six critical factors contributing to this performance downturn, including adjustments in high-revenue business sectors, management changes leading to increased costs, and persistent investments in forward-looking research and development (R&D). Over the past year, these reasons have manifested themselves in the company’s resultsIn 2023, Huaxi Biological already reported significant declines in both revenue and net profitSo far in 2024, the company only saw an increase in revenue and net profit during the first quarter, while the following quarters experienced consecutive declines in both metrics.

Compounded by the cuts in both revenue and profit margins, Huaxi Biological continues to pour substantial funds into R&DHowever, with the financial strain becoming increasingly pronounced, investor patience seems to be wearing thinSince peaking at 309.42 yuan per share on July 5, 2021, the company’s stock price has plummetedAs of February 7, 2025, shares closed at 49.08 yuan, translating into a market capitalization of approximately 23.6 billion yuanIn comparison to its peak, Huaxi Biological has lost about 125.4 billion yuan in market value.

One significant reason for this decline is the intense competition which has emerged in the hyaluronic acid sectorAs more players join the market, Huaxi Biological's previously clear advantages have started to blur

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Competing companies have identified the potential of hyaluronic acid, or hyaluronan, and its applications within various industries, further saturating a once-thriving marketFaced with this reality, Huaxi Biological is exploring new trends and innovation avenues, particularly by leveraging synthetic biology technology to develop new materials and seek out second growth curves.

For Huaxi Biological, it is imperative to stake a strong claim in this new material revolutionThe stakes are high, as the company must achieve success with these innovations without the option for failureThe substantial decline in performance continues to be felt across the organization.

The significant drop in Huaxi Biological’s overall performance can be traced back across recent quartersPrior to the annual forecast release, the company had already disclosed two consecutive quarters showcasing a drastic decline in both revenue and net profitSpecifically, in the second quarter of 2024, Huaxi Biological recorded revenue of 1.45 billion yuan, down 18.09% year-on-year, alongside a net profit of 98.4 million yuan, which represents a 56.1% decreaseIn the third quarter of 2024, their revenue further decreased to 1.064 billion yuan, down 7.14% year-over-year, with net profit attributable to the shareholders plummeting to 20.26 million yuan, a staggering decline of 77.44%. The company’s core revenue stream—functional skincare products—accounted for 49.29% of its business and saw revenues tumble to 1.381 billion yuan, reflecting a 29.74% drop.

The ongoing adjustment of the functional skincare product business directly correlates with the company’s recent strugglesWhile the raw materials and medical terminals experienced growth of 11.02% and 51.92% respectively in the first half of 2024, the main segment struggled profoundlyThe issue lies within the intensifying market competition, industry cycles, and strategic shiftsFor Huaxi Biological, the drop in functional skincare products has been prioritized in the analysis of performance changes.

The turbulence for Huaxi Biological extends beyond just market performance; 2024 was marked by substantial management and organizational shifts

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The company also faced significant personnel changes; several key technology personnel, including former core technical staff, have stepped down or altered their responsibilitiesBy early 2025, notable retirements further affected performance continuity.

These management shifts have undeniably impacted overall performanceRecent reports suggest that Huaxi Biological incurred various one-time costs throughout the year, which have substantially hindered overall output; estimates indicate that these costs exceeded 70 million yuanProvisions were also made against accounts receivable, inventory, and goodwill, among other assetsWhile some of these burdens are temporary, they symbolize existing challenges the company will need to overcome in order to rebound and regain investor trust.

Historically, Huaxi Biological rose to prominence during the rapid expansion of the hyaluronic acid industry, establishing itself as a global leader through innovative production methodsThe company leveraged microbial fermentation techniques to secure its position as the foremost supplier of hyaluronic acid on a global scaleWith a concerted effort to penetrate both B2B and end-consumer markets, Huaxi catered to diverse customer needsThe organization pioneered China's first disposable hyaluronic acid serum, “Run Bai Yan,” in 2018, which generated revenue of 1.5 billion yuan by 2022 and maintained an annual growth rate of 100% post-launch.

However, as the hyaluronic acid market matured, intensifying competition ensuedWell-established competitors such as Fufeng Group, Focus Huada, and Anhua Bio all began to stake significant claims in the raw material market while other companies like Aimeike and Haohai Keji expanded through innovative products and acquisitions.

The growing competition illustrates that the market potential for hyaluronic acid has not gone unnoticedHyaluronic acid is pivotal in aesthetics and skincare, serving as a filling agent with applications across the cosmetic spectrum—including moisturizers and serums

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Furthermore, hyaluronic acid’s role extends beyond topical applications; its medical uses are still being unearthed.

Interestingly, hyaluronic acid’s potential as a viscoelastic agent is explored in ocular surgeries while also acting as a lubricant in orthopedicsThe chairman of Huaxi Biological, Zhao Yan, has noted that polysaccharides like hyaluronic acid convey critical information within the human body, surpassing that carried by nucleic acids and proteins combined, hinting at the untapped potential in this research domain.

In this light, Huaxi Biological is eager to explore novel applications for hyaluronic acid and is currently broadening its usage horizonThe company has partnered with Bausch + Lomb to embed small molecules of hyaluronic acid in contact lens solutions, improving hydrating, lubrication, and antibacterial propertiesAdditionally, Huaxi has ventured into hyaluronic acid-based consumables with various new product releases, including hyaluronic acid-infused drinking water and wellness drinks.

Nonetheless, the consumer reaction to these health products has been lukewarm, resulting in a disappointing performance in the functional food business, which saw a revenue drop of 11.23% in early 2024. For Huaxi Biological, understanding market acceptance is of paramount importance amid the fierce competition and shifting consumer sentiment.

This constant search for new trends reveals Huaxi Biological's intent to combat its present challenges through a fresh technological focusThe forecasted opportunities may lie in synthetic biology, a sector Huaxi has started investing heavily in over the past few yearsR&D expenditures have soared from 284 million yuan in 2021 to an eye-watering 446 million yuan in 2023.

In the first half of 2024 alone, Huaxi Biological reported R&D expenses of 200 million yuan, showcasing a 7.4% increase year-on-yearRecent progress hints at the potential for synergy between synthetic biology innovations and an enhanced base of product offerings, which could ultimately translate into operational improvements through a more efficient production chain.

Currently, Huaxi is making strides in developing various bioactive materials such as collagen and ergothioneine

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