Looking back from 2021 to the beginning of 2022, the yield of cro and cdmo sectors has returned to the starting point. The differences between the market and the sectors mainly focus on valuation, UVL list (geographical impact), investment and financing, R & D investment and transfer trend. This report combs and analyzes these five directions in the current period to explore whether the industry prosperity can be sustained.
Grasp the moment: the valuation is at the bottom of history, with limited influence of UVL, rapid growth of investment and financing, and the trend of R & D investment and transfer is expected to accelerate.
1) valuation: as of February 20, 2022, the average PE of the core sector in 2021 is about 77.1x, which is about 21.1% lower than the average PE (TTM) in recent three years. According to the mean regression theory, we believe that there is limited room for further exploration;
2) UVL list: ① we believe that the UVL incident is mainly caused by the epidemic, which makes it inconvenient for the staff of the U.S. Department of Commerce to travel. For its normal implementation procedures, there is no need to over interpret; ② The essence of cro and cdmo is service, intellectual property belongs to customers, and the possibility of trade disputes is low; ③ The R & D and production outsourcing industry improves the R & D efficiency of global innovative drugs, solves the production bottleneck of drug holders, and has a certain rigid demand; ④ With engineer bonus, policy encouragement, leading operation efficiency and integrated platform system, China's advantages are significant and continue to expand, which is the best landing point for the transfer of global outsourcing industry;
3) investment and financing: ① according to the data of arterial network, in 2021, the global pharmaceutical investment and financing will be + 32%, and China will be + 26%; ② We believe that the investment and financing of pharmaceutical biology has a certain cyclical fluctuation, but the overall trend is a spiral upward trend; ③ Historically, the revenue growth of China's top cro and cdmo companies has limited correlation with investment and financing. At present, the impact of investment and financing on the prosperity of the industry can be diluted;
4) R & D Investment: ① according to citeline data, the R & D pipeline outside China continued to increase rapidly in 2021, with global + 8.8% and China + 31.1%; ② The single variable of R & D pipeline has limited influence on the sector; ③ Global and Chinese R & D investment is expected to grow rapidly with the continuous improvement of the proportion of innovative therapies;
5) transfer trend: ① in 2020, the proportion of overseas revenue of head cro and cdmo companies in the global market increased to 3.9% (+ 1.2pp), showing a continuous upward trend; ② The number of front-end pipelines is relatively high in the world, while the proportion of back-end projects is low, but the value is high. With the continuous promotion of projects, the transfer trend of global industrial chain is expected to accelerate.
Looking ahead: the boom is expected to continue, and cdmo and clinical cro are expected to usher in a performance acceleration period. 1) Cdmo: the logic of "front-end diversion + back-end extension" is accelerated, the industrial performance of large orders is uncertain, the capacity expansion of the head company is accelerated, and the growth of cdmo is expected to accelerate; 2) Cro: the number of newly signed orders continues to increase. With the transmission of pre clinical cro projects to the downstream, clinical cro is expected to usher in a period of rapid growth.
Investment suggestion: the high-quality track with thick snow on Changpo and the business model of "front-end diversion + back-end extension" of the integrated platform accelerate the harvest, and continue to be optimistic about the comprehensive "leading white horse" Wuxi Apptec Co.Ltd(603259) , Yaoming biology, Pharmaron Beijing Co.Ltd(300759) , "specialized and special new" subdivision track leaders Joinn Laboratories (China) Co.Ltd(603127) , Pharmablock Sciences (Nanjing) Inc(300725) , Hitgen Inc(688222) and the accelerating growth of Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) , Porton Pharma Solutions Ltd(300363) , Shanghai Medicilon Inc(688202) , Jiangsu Sinopep-Allsino Biopharmaceutical Co.Ltd(688076) .
Risk warning events: the public materials used in the research report may have the risks of information lag or untimely update, failure of new drug research and development, exchange rate fluctuation, environmental protection and safety production, certain screening of data samples, or deviation from the actual situation
