Foreign institutional investors fear that Korean makers of botulinum toxin products and fillers might suffer a sales drop in China because of Beijing’s crackdown on “daigong,” an analyst said.

Daigong are merchants who purchase tax-free goods in Korea and sell them in China, an analyst said.

The Korean government has yet to approve Korean companies to sell Botox products, and a significant share of such Korean-made goods might have entered China through peddlers, industry sources said.

Seo Keun-hee, an analyst at Samsung Securities, said in a report that foreign investors raised concerns about a decline of sales of Korean botulinum toxin products due to the Chinese authorities’ enhanced regulations.

“Due to the tightening of the Chinese regulations on unauthorized goods, the Korean cosmetics sector is expected to experience a slowdown in 2019 earnings,” Seo said in the report. “Foreign investors raised questions about a slowdown in the export of botulinum toxins and fillers by Korean companies,”

Foreign investors asked about the possibility that Korean exports might slow down due to Beijing’s crackdown on unauthorized toxins market, she said. They have also pointed out the uncertainty of Korean products obtaining sales license in China due to the replacement of the director of the China Food and Drug Administration.

Korea’s exports of botulinum toxins to China have recently plunged, along with the Beijing government’s war on smugglers.

Exports of botulinum toxins to China went down by 70.8 percent to $9 million between July and September, compared to $15.38 million a year earlier.

However, Korean companies’ seeking approval in China will be favorable to attract investment, Seo said.

“Medytox is expected to win approval for Neuronox in China within 2019,” Seo said. “It is important for Korean firms to enter advanced markets, too. Medytox is soon to begin a phase-3 trial on Innotox, which the company licensed out to Allergan. Another significant momentum will come as Daewoong Pharmaceutical aims to obtain the nod for Nabota from the U.S. FDA by Feb. 2, 2019.”