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Finasteride blocks the enzyme 5α-reductase, which normally converts testosterone into dihydrotestosterone (DHT) — the androgen most responsible for shrinking scalp hair follicles in genetically susceptible men. By lowering scalp and serum DHT (typically 60–70% reduction at the 1 mg dose), it slows follicle miniaturization and can partially regrow hair, without directly altering testosterone levels themselves.