Medical Care, Beauty Products, is Smoore up to Something New?

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This article is solely focused on the research of the global vaping industry and does not involve any brand or product recommendations.

This article is intended solely for research purposes on the global atomization industry development and does not involve any capital market evaluation or investment advice. This article should not be considered as a basis for any investment.

This article focuses exclusively on the business sphere and does not include any commentary on regulatory policies. 

Medical Care, Beauty Products, is Smoore up to Something New?

How has Smoore strategically positioned and engaged in the atomized medical and atomized beauty sectors? 

Author | 2FIRSTS 

If you were to build a laboratory, what kind of research would you consider? The answer from leading atomization industry company Smoore International (hereinafter referred to as "Smoore") might seem unusual – they have decided to study "skin health".

According to a press release from China Pharmaceutical University, Smoore International subsidiary, Shenzhen Moer Nebulization Healthcare Technology Co., Ltd., has collaborated with China Pharmaceutical University to establish the "Joint Laboratory for Skin Health and Nebulization Delivery." At the signing ceremony, Vice President of the Smoore Board of Directors, Wu Junlan, and Zhang Bingjie were both in attendance.

Considering the popularity of the concept of "big health" in the capital market in recent years, the medical and health industry has been continuously expanding over the past decade, and the medical device field in particular has been in high demand. The giant in the nebulization field, Smoore, has partnered with research institutions to establish a laboratory in the field of "nebulization health". However, Smoore's ambitions go beyond this. They are exploring the innovative combination of "nebulization + medical and beauty" to expand into new business areas while maintaining their existing resources. This has become a highly discussed issue.

Engaging in Research Collaboration with Universities

According to the report, the joint laboratory established in collaboration with China Pharmaceutical University aims to leverage the advantages of the "Transdermal Drug Delivery and Cosmetics R&D Platform" of the college. The focus will be on key technological breakthroughs and product development in transdermal drug delivery and skincare preparations. It is worth noting that Zhang Bing emphasized the concept of Smoore's continuous exploration of the innovation and application boundaries of atomization technology at the scene. He stated that the joint laboratory will further explore innovative applications of atomization technology in the beauty industry.

The article states, "The joint laboratory will focus on studying the skin delivery mechanism of skincare ingredients in aerosol form. At the same time, it will explore the potential skin damage caused by light medical beauty projects from three aspects: skin balance, resistance, and self-healing. This research aims to provide a scientific and technological foundation for the development of aerosol beauty products in the future."

This is not Smoore's first collaboration with a university on atomization projects. In 2022, the School of Pharmacy at South-Central University for Nationalities signed a formal cooperation agreement with Smoore's wholly-owned subsidiary, Shenzhen Maxwell Technology Co., Ltd. The two parties will engage in in-depth collaboration in areas such as the transformation of scientific research achievements, product co-development, and comprehensive scientific research consulting. It should be noted that, after signing the agreement, the two parties will organically integrate atomization technology with market demands in the field of holistic health, starting from consumer pain points, and focusing on the research and development of new holistic health products related to atomized drugs, atomized traditional Chinese medicine, cosmetics, etc. During the research and development period, the cooperating enterprise will inject a total of 9.4 million yuan into the team for research and development expenses.

Three Priorities for Smoore 

Smoore's expansion into the beauty industry is by no means a novelty anymore.

In 2022, a research report by Guohai Securities provided a detailed analysis of Smoore, a company involved in the field of nicotine vaping. The report also mentioned Smoore's expansion beyond nicotine vaping. In December 2020, Smoore registered Shenzhen Moor Vaporized Health Medical Technology Co., Ltd. According to publicly available information, Shenzhen Moor Vaporized Health has applied for trademarks such as "AUBREEZ," and "AIRSMOOTH." The report stated that Smoore has indicated that the first batch of cosmetic and vaporized medical products is currently under development and will be launched in the market soon.

During the first half of 2022, at the performance report meeting, Chairman Chen Zhiping of Smoore's board of directors also clarified his vision for Smoore's future development during the Q&A session. He stated that Smoore will solely focus on a few core business areas for the foreseeable future:

First is the new type of tobacco, which serves as the main source of income and represents a vast market opportunity. Second is the beauty industry. Lastly, the healthcare sector includes the treatment of respiratory diseases such as asthma and chronic obstructive pulmonary disease by Western medicine, as well as research conducted by traditional Chinese medicine.

After establishing its three main business lines, Smoore has increased investment in the beauty and medical sectors. According to its 2022 performance report, Smoore has allocated RMB 1.372 billion for research and development expenses, representing a year-on-year growth of 104.6%. Of this amount, 12% is dedicated to aerosol medical and beauty products, while nearly 14% is allocated to specialized aerosol products and related technologies.

By the first half of 2023, the total research and development expenditure of Smoore reached nearly 615 million yuan, representing a year-on-year increase of 1.8%. Of this total expenditure, approximately 13.4% was allocated to the research and development of specialized aerosol products and solutions, slightly higher than the 13.3% recorded in the same period last year. Furthermore, around 18.5% of the total expenditure was dedicated to the research and development of aerosol medical and beauty products, a significant rise from the 4.3% reported in the previous year.

Smoore clearly needs the support of cutting-edge scientific research to guide its path, building upon the existing technological accumulation. As mentioned in the preceding text, Smoore has entered into a collaboration with the School of Pharmacy at South-Central University for Nationalities. The research is led by Professor Liu Ji-kai, who has spent nearly 30 years conducting in-depth studies on the chemistry of fungi and active ingredients. Prof. Liu has acquired extensive knowledge of underlying technologies such as natural product extraction, purification, structural analysis, and evaluation of activity and functional components. His efforts have led to a series of major innovative achievements and successful development experiences in the field of natural medicines and related products.

As a force in scientific research, this may provide Smoore with a strong research foundation, accelerating its research progress in natural medicine and potentially providing innovative directions and practical experience for the development of new products. At the same time, this could potentially help the scientific community find suitable talent and further expand this business.

Application of Electronic Atomization Technology and Products in Healthcare

On July 10, 2020, Smoore, a company specializing in e-cigarettes, made its debut on the Hong Kong Stock Exchange. However, Smoore aims to expand its presence beyond the e-cigarette industry as it ventures into the capital market. According to an article by Sina Finance, one of the key focuses for Smoore in its next phase of research is to apply its electronic vaporization technology and products to the healthcare industry.

According to the latest updates, Smoore has targeted lung disease treatment with its medical atomization products. In its 2022 financial report, Smoore announced that it has independently developed a respiratory machine-compatible atomization delivery device in China, for which it has obtained the production license. The company has also completed the development of two drug delivery devices specifically designed for asthma and chronic obstructive pulmonary disease (COPD) and has initiated the development of related formulations.

In comparing recent reports released by Smoore, it is evident that medical atomization is being elevated to a central focus in their main operations.

In comparison to the mid-year report of 2022, the annual report of the same year expands the main business from two parts to three parts for the first time. In addition to providing research, design, and manufacturing of closed-system electronic vaporizing devices, electronic vaporizing components, HNB devices and components, and specialty vaporizing products for several leading global tobacco companies, independent e-vapor and other corporate clients, and retail customers, the annual report also includes the addition of new businesses such as "vaporizing medical products that use vaporizing technology as a basis for providing inhalation therapy to patients.

Smoore did not disclose the rationale behind the new additions, but it is worth noting that during the period between the publication of the two reports (September 7, 2022 – April 20, 2023), the mandatory national standard for e-cigarettes was implemented on October 1, 2022. As a result, all fruit-flavored e-cigarettes in the domestic market will be taken off the shelves, and the national e-cigarette trading management platform will only provide tobacco-flavored e-cigarettes that comply with the national standard and smoking devices with child locks.

Before the implementation of the "new national standard," Vice President of Smoore International, Qiu Lingyun, had stated that the introduction of new regulations for e-cigarettes in China would result in a decrease in the availability of various flavors in the domestic market. Consumers' level of adaptation to tobacco flavors may vary, leading to a short-term decline. However, in the long term, comparing with the United States' experience of implementing new regulations for e-cigarettes, their market also went through a period of volatility for 2 to 3 months before returning to its previous state. It is estimated that after the domestic market reaches a new low, it will rebound.

Healthcare, wellness, and beauty are the key areas Smoore International is actively expanding into. Extensive research has been conducted in these fields, particularly in the realm of atomized beauty products, which are planned for release in the second half of this year or the first half of next year. However, the development of atomized healthcare solutions is still in the research phase," said Qiu Lingyun during the March 2022 performance conference.

More than a year later, in the mid-year report of 2023, Smoore highlighted that its research and development in the field of aerosolized healthcare is steadily progressing. In the second half of 2023, the company aims to continue developing various pharmaceutical projects according to the established plan.

However, the addition of "medical atomization" and other content in its main business undoubtedly demonstrates Smoore's future strategic direction to the capital market. This exposes Smoore's concern about "medical atomization." However, whether this concern can convince investors to have confidence in its future development is a matter of different opinions. The biggest doubt lies in the fact that the medical field itself requires long-term investment and multiple repeated experiments by companies. The pre-listing review is even more challenging, and it is difficult to achieve commercial application in a short period of time.

One concrete example comes from Philip Morris International (PMI). In 2021, PMI successfully acquired medical inhaler manufacturer Vectura for $1.36 billion. However, just two years later, PMI is now considering selling its stake in Vectura. According to The Wall Street Journal, this decision stems from Vectura's failure to submit its inhalation product for review to the U.S. Food and Drug Administration (FDA) after unsuccessful clinical trials. As a result, PMI is actively seeking a partner to support Vectura's expansion in the pharmaceutical manufacturing sector.

A user of the investor-oriented social platform "Snowball" expressed that the idea of atomized medication makes sense logically, and there are already many atomized treatments available. Going forward, the focus should be on improving efficiency and enhancing safety. However, in the medical field, whether it is traditional Chinese medicine or Western medicine, extensive research and empirical evidence are needed to support advancements.

There are some optimistic people who believe that "aerosolized medical treatment and aerosolized beauty care are likely the last two possible directions, and if they are truly realized, Smoore's value will need to be reassessed." However, there are also some who express the view that "besides e-cigarettes, it is difficult to find scenarios and killer applications for other aerosolized applications. I hope Smoore does not dig itself into a hole.

Beauty Starting From Outsourcing

Choosing the beauty industry may be due to the fact that this market is currently not saturated and there are no dominant giants in its development and niche areas. According to Deloitte's "China Medical Aesthetics Industry 2022 Insight Report," China started late in the field of medical aesthetics, with a penetration rate of only 3.6% in 2019, compared to 11%, 17%, and 21% in Japan, the United States, and South Korea respectively during the same period.

Smoore has identified its niche in the field of beauty atomization, building upon its expertise in atomization technology. Unlike companies that directly enter the beauty industry to develop new products, Smoore is testing the waters by venturing into the familiar realm of contract manufacturing, specifically for beauty products.

According to public reports, Dongguan Swoire Technology Co., Ltd., a subsidiary of Smoore, is engaged in OEM manufacturing for the "Misoli" beauty device. The report claims that this is the first product to utilize Smoore's developed ultrasonic atomization technology. Dongguan Swoire has obtained a cosmetics production license approved by the Guangdong Provincial Administration for Drug Supervision, allowing it to manufacture skincare water and skincare cleansing products. The license, with the certificate number "YueZhuang20210230", is valid until August 19, 2026.

On the other hand, behind the mist beauty vaporizer "Wuyixi" lies Shenzhen Wuyixi Technology Co., Ltd. According to Tianyancha, the company was established in 2022 and is located in Shenzhen, Guangdong Province. It primarily focuses on research, experimentation, and development.

According to the company registration information, Shenzhen Shuimu Biotechnology Co., Ltd. and Ningbo Yueran Enterprise Management Partnership Enterprise (Limited Partnership) jointly invested in the establishment of the company, with ownership percentages of 60% and 40% respectively. At that time, some media pointed out that the actual controller of Ningbo Yueran might be Cai Yuedong, the founder of YOOZ, as the legal representative of Ningbo Yueran was Cai Yuehang, who is also the statutory representative of Beijing Qiwu Technology Co., Ltd. and Bengbu Qiwu Electronic Technology. However, on March 8, 2023, the business registration information of the company was updated, and both Shenzhen Shuimu Biotechnology Co., Ltd. and Ningbo Yueran Enterprise Management Partnership Enterprise (Limited Partnership) have withdrawn from the company.

In another article introducing the "Wuyixi" product, it is explicitly mentioned that "Wuyixi" officially joined Tmall on January 3, 2023, and began promotion on social media platforms such as Xiaohongshu (Little Red Book).

After a year, both flagship stores were located on Tmall. The product page displays three products, with the highest-priced "Wuyixi Atomized Beauty Device" priced at 1299 yuan. This product is mainly targeted at the female demographic. On the detailed page of this product, the slogan "20 seconds every day, daily water-glossy skin" is highlighted. From the product's appearance, it is positioned against traditional face masks, claiming that "using Wuyixi for 20 seconds is equivalent to using one sheet of face mask."

The product comes equipped with devices and two atomization chambers. The sales data indicates that it has been sold once, with no customer reviews for this particular product. Meanwhile, the store's best-selling item is an eye protector, with a sales record of "200+", and it is priced at 129 yuan.

Currently, these products are still being sold, but the sales figures may not be satisfactory for investors. When asked about the "Wuyixi" beauty device, Smoore responded, "This beauty device is indeed a new attempt by Smoore in the field of atomization... We appreciate everyone's attention and look forward to introducing more atomization products in the future."

However, there has been little public disclosure from Smoore regarding its "beauty atomization" business after the initial product launch. When examining Smoore's latest mid-year report for 2023, "beauty" is mentioned only twice in the context of "research and development."

In a highly competitive and unpredictable market, every new attempt may not always lead to success. Smoore still has the opportunity to experiment, but market investors seem less optimistic about its performance. After another year has passed, its stock price has nearly halved, dropping from 12 yuan per share to 5.3 yuan per share.

For Smoore's next steps in expanding its beauty business, a careful evaluation of market demand and competitive conditions is essential. 2FIRSTS will continue to monitor the latest developments from Smoore to understand the company's future strategies in the beauty business.