On November 27 of last year, Kaituo Pharmaceutical-B (09939) plummeted when it opened. The company's stock price fell by more than 30%. The lowest intraday stock price reached HK$2.01, setting a new low in the company's stock price since its listing. The biggest drop reached more than 40%.

The reason for such a big market panic is that Kaituo Pharmaceutical revealed top-line data on the third phase clinical trial of its core product KX-826 to treat androgen alopecia before the market on the same day. The results showed that compared with placebo, although the KX-826 group TAHC improved at various study points, the differences were not statistically significant. This is also the third time that Kaituo Pharmaceutical has experienced problems in phase III clinical trials of key products after proclamide.

Since then, Kaituo Pharmaceutical's stock price has continued to decline and fell to an intraday low of HK$1.18 on January 31 this year, setting a new low since its listing, down 67.2% from the intraday high of HK$3.60 on November 24 last year. However, on February 2, Kaituo Pharmaceutical's stock price seemed to have reached a turning point.

After a single drug fails, can a combination of drugs be used to “prolong life”?

The Zhitong Finance App learned that after the market on February 1, Kaituo Pharmaceutical disclosed news that the company's self-developed Kx-826 combined with minoxidil to treat male hormonal alopecia in Chinese male patients was approved by NMPA.

Stimulated by this favorable news, in early trading on February 2, Kaituo Pharmaceutical's volume surged, and the stock price went high. At the end of the session, the increase exceeded 50%, and finally closed with a high increase of 51.67%. On the same day, Kaituo Pharmaceutical had a turnover of 167 million shares, a turnover of HK$273 million, and a turnover rate of 37.23%. This turnover set a new record in nearly 1 year since pioneering the pharmaceutical industry.

The rebound of this magnitude in the secondary market is enough to show the negative impact of the early KX-826 single-drug phase III clinical failure and the market's expectations for this drug combination treatment.

Looking at the previous single-drug phase III clinical trial, the KX-826 phase III clinical trial was a multicenter, randomized, double-blind, placebo-controlled study to evaluate the efficacy and safety of using KX-826 twice daily at a concentration of 0.5% to treat adult Chinese male alopecia patients. The main end point of the study was the average change in non-trimesters (TaHC/cm2) in the target region compared to the baseline at the end of 24 weeks, and safety indicators included the type, incidence, and severity of adverse events.

The analysis results showed that the overall safety of the test was excellent. The KX-826 showed excellent safety performance, and no major adverse effects were reported during the test. After 24 weeks of treatment, the KX-826 group TAHC results showed that KX-826 promoted hair growth compared to baseline, which was statistically significant (P<0.0001). However, compared with placebo, although TAHC in the KX-826 group improved at all study points, the differences were not statistically significant.

In short, KX-826 was safe in this clinical trial, but its efficacy was not obvious, and it failed to bridge the gap with placebo. The reason for the sharp drop in Kaituo Pharmaceutical's stock price at the time was that there was a big gap between this result and KX-826's previous phase II clinical data performance.

On May 11 of last year, Pioneer Pharmaceutical announced the successful completion of the US Phase II clinical trial of prednisone (KX-826) to treat hair loss. The results of this phase II clinical trial showed that compared with the baseline, KX-826 can promote hair growth, and the results measured by the number of hairs in the target area (TAHC) are statistically and clinically significant. Furthermore, the 0.5% dose group of KX-826 reached the main TAHC endpoint at 24 weeks, which was a significant increase of 15.34 pcs/cm2 (P=0.024) compared to the placebo group. Most subjects saw efficacy at 12 weeks.

At the same time, Pioneer Pharmaceutical also announced that KX-826 0.5% concentration BID is the optimal dosage for the phase II clinical trial, which is consistent with the phase II clinical trial of male alopecia in China. This dose was determined as the recommended dosage for the US/global male alopecia phase III clinical trial.

From the above data, it is easy to see that the stock price of Pioneer Pharmaceutical has soared this time, in large part due to the outstanding performance of phase II clinical results before KX-826. Another reason is that in the field of androgenic baldness drugs, the effects of combined medication are better or better than single drugs.

Take minoxidil and finasteride, the two drugs currently approved in China to treat male androgenic alopecia, as an example. According to an observation report on the efficacy of oral finasteride combined with minoxidil linimide in the treatment of male androgen, the efficacy rate of 5% minoxidil alone was about 70%, and the effectiveness of taking 1mg of finasteride was between 80% and 90%; in terms of efficiency, the single-drug group was only 20.5%, and the combined drug group reached 67.7%. The difference between the efficacy of a single drug and a combination drug was obvious.

As the only clinically proven and approved topical treatment product for androgenic alopecia, Minoxidil is expected to once again be successful in combination with KX-826 due to its excellent performance in combination drugs.

How to survive in the “minoxidil market” with a high market share?

It is worth noting that the current rise in Pioneer Pharmaceutical's stock price is only due to phase IB/III clinical approval of the co-drug. Next, pioneering the pharmaceutical industry will also usher in a number of key milestones, such as the disclosure of key data and the launch of final products. Especially now that the domestic anti-hair loss market is expanding, the minoxidil-based army is expanding sales in large quantities, and market competition is gradually heating up.

From a market perspective, according to GrandViewResearch's research report, the global hair loss treatment market is 8.2 billion US dollars. It is expected to grow at a compound annual growth rate (CAGR) of 9.0% from 2023 to 2030, and the market size is expected to reach 16.02 billion US dollars in 2030.

At home, according to the latest data from the National Health and Health Commission, the number of people with hair loss in our country has exceeded 250 million, which is equivalent to an average of 1 out of every 6 people suffering from hair loss. Among them, there are about 163 million men and 90 million women, accounting for 90% of patients with male pattern baldness; moreover, the alopecia group showed a youthful trend. The proportion of people under 30 who lost their hair reached 84%, accounting for the largest proportion of young people aged 26 to 30, up to 41.9%.

According to the “Hair Loss Prevention Industry Market In-depth Analysis Report 2023", China's hair health industry will grow at a rate of 260% per year in the next 10 years. The domestic market for hair loss medications is expected to reach 15.5 billion yuan in 2031, and the compound annual growth rate is expected to reach 32% from 2021 to 2031.

In the context of the continuous expansion of the market, as an OTC drug for external use to treat hair loss certified by the Drug Administration, Minoxidil is also “expanding drastically” in the domestic market.

Currently, the domestic minoxidil terminal market is about 1.5 billion yuan. Among them, Mandy and Dafexin have a total market share of over 90% of domestic minoxidil products. Take Mandy, which has a market share of over 70% in 2022, as an example. The product began explosive growth in 2019. Through vigorous expansion of pharmacies and online channels, Mandy's sales increased from 250 million yuan in 2019 to 891 million yuan in 2022, maintaining a rapid growth trend.

In addition to the above two products, there are currently 10 types of minoxidil products on the market in China, which are mainly divided into 4 types: tinctures, liniments, sprays, and gels.

According to the Zhitong Finance App, there are currently more than 20 drugs under development for alopecia areata globally that have entered phase II clinical phase II, and there are a wide variety of drug types. The layout includes domestic companies Hengrui Pharmaceuticals, Colon Pharmaceuticals, Zejing Pharmaceuticals, etc., as well as multinational pharmaceutical companies Pfizer and Eli Lilly. Last year, Eli Lilly's JAK inhibitor baritinib (alemine) for treating severe alopecia areata in adults and Pfizer's ritexitinib toluene sulfonate capsules (levunol) for treating severe alopecia areata in adolescents and adults aged 12 and above were approved domestically, further increasing competition in the domestic male baldness drug market.

This is clearly not a favorable market pattern for developing the pharmaceutical industry, especially when the company is about to hit the “red line of cash.” Kaituo Pharmaceutical continued to lose money after three years of listing, and the cumulative loss amount has exceeded 2 billion yuan. As of the end of June last year, the company's cash and cash equivalents were only 691 million yuan, and the cash flow situation was not optimistic. Even if KX-826 is successfully approved for listing in the future, developing the pharmaceutical industry will require sufficient capital to develop the market and compete with Minoxidil. With this expectation, the stock price spree that pioneered the pharmaceutical industry is probably just a fleeting thing.