Key investment points
Global investment and financing trend: weak consistency with the overseas performance trend of local CXO
1) weak consistency with the growth trend of global cro market scale. We believe that this is mainly due to the high proportion of top14mnc R & D investment in global biomedical R & D investment (in 2020, top14mnc R & D investment accounted for 58.59%). 2) The consistency with the growth trend of overseas income of local CXO is weak. On the one hand, compared with the R & D investment of the global pharmaceutical industry, the overseas revenue volume of local CXO enterprises is still small (accounting for only about 2%), on the other hand, it may be that the overseas revenue of local CXO enterprises is equivalent to that of MNC and biotech customers as a whole, which hedges the consistency of the revenue with the growth trend of MNC R & D investment and global investment and financing.
China's investment and financing trend: it is highly consistent with the income growth trend of local CXO China
1) strong consistency with the growth trend of cro scale in China: we expect that this is mainly because local biotechs and traditional pharmaceutical enterprises enter the field of innovative drug R & D at roughly the same time point, resulting in a large number of biotechs dominated by R & D investment. 2) Strong consistency with the growth trend of local CXO China's revenue: we think this also reflects the dominant position of biotech customers in local CXO China's revenue. This also means that we take China's medical and health investment and financing yoy as a forward-looking indicator of China's order prosperity of local CXO enterprises, which has a certain reference value. 3) CXO performance is more detailed and forward-looking indicators: refer to capital expenditure, orders, etc. The change trends of capital expenditure, inventory, contract liabilities, personnel and orders on hand can more accurately guide the marginal change of income growth in the next 1-3 years.
CXO Market: it has weak correlation with investment and financing, and still has the most investment value in the medium and long term
1) in the short term: the consistency between the annual market of CXO and the annual growth trend of investment and financing is weak. 2) In the medium and long term, the income of CXO sector is highly consistent with the trend of investment and financing. From 2019 to 2021, the CXO sector has a significant excess return (361% vs 93%) compared with the biomedical sector (Shenwan pharmaceutical biological index). From a longer dimension, it can be seen more clearly that the excess return of the CXO sector may be more consistent with the medium and long-term high boom of global investment and financing. Based on the text data analysis, we play down the judgment of the consistency between the monthly / single year investment and financing change trend and the performance and performance of local CXO, and suggest paying more attention to the multi-year investment and financing change trend with stronger consistency with R & D investment.
Outlook: CXO is still possible to accelerate in the medium and long term, with prominent investment value
1) valuation: significant adjustment. From 2021 to 2022, the valuation of CXO has been adjusted to a record low due to the disturbance of policy + short-term investment and financing. However, based on the previous analysis, the consistency between short-term (annual) investment and financing and CXO stock price performance is weak. We still emphasize that the monthly fluctuation of investment and financing has little reference value for the medium and long-term prosperity of innovative drug industry and CXO orders. 2) Acceleration: the faucet can be expected. From 2021 to 2024, the compound growth rate of CXO's leading revenue is still possible to accelerate, supporting the medium and long-term investment value.
Split of global R & D Investment: global investment and financing account for 14%, mnc60%
We believe that the R & D investment of innovative drugs can be divided as follows: R & D investment of innovative drugs = annual R & D investment of biotech investment and financing + annual R & D investment of biotechipo / fixed increase placement + R & D investment of MNC in the current year. In 2020, global biotech R & D investment accounted for 30% of the total (investment and financing accounted for 14%, IPO / post IPO refinancing accounted for 16%), and top14mnc accounted for 60%. This means that the proportion of R & D investment converted from the global health investment and financing indicators to the current year or even the next two years is still low, which can not fully guide the overall R & D investment trend of the innovative drug industry and the overall order boom of the CXO industry. Referring to the history of MNC's acquisition of high-quality biotech enterprises, we expect that the change of MNC's R & D investment will still be the main effective tracking indicator of CXO order prosperity in the next 5-10 years.
Split of R & D investment in China: biotech accounts for nearly 80%
China's biotech R & D investment is more from IPO and post IPO refinancing than PE / VC and other primary market investment and financing (in 2020, China's biotech R & D investment accounted for 79%, of which investment and financing accounted for 32% and IPO / post IPO refinancing accounted for 47%). The high proportion of biotech R & D investment also shows that the financing data (PE / VC investment and financing + IPO / fixed growth) are of great value in guiding the prosperity of China's innovative drug industry and the order prosperity of local CXO industry.
Investment advice
Focus on cdmo whose performance is expected to enter a new round of acceleration period: 1) entering the funnel effect cashing period, cdmo leaders Wuxi Apptec Co.Ltd(603259) and Asymchem Laboratories (Tianjin) Co.Ltd(002821) . 2) Cdmo with continuously built capacity and expected to continuously improve profitability: Pharmaron Beijing Co.Ltd(300759) (CMC extends to cdmo), Porton Pharma Solutions Ltd(300363) (CRO extends to CMO), Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) (cdmo proportion continues to increase), Pharmablock Sciences (Nanjing) Inc(300725) (CRO extends to cdmo), etc. Clinical cro: the leader of clinical cro in the transition of international ability Hangzhou Tigermed Consulting Co.Ltd(300347) . Preclinical cro: benefit from Chinese market dividends and increase the proportion of businesses with higher profitability: Wuxi Apptec Co.Ltd(603259) (safety assessment and biological analysis business), Pharmaron Beijing Co.Ltd(300759) (Bioscience business), Joinn Laboratories (China) Co.Ltd(603127) (safety assessment), Shanghai Medicilon Inc(688202) , Fangda holdings, etc.
Risk tips
The volatility risk of China's drug trial policy, the risk of the fluctuation of the investment and financing cycle of the primary market, the risk that the expansion of new business is less than expected, exchange risk and competition risk.
