Key investment points:
Market review: in November, the pharmaceutical and biological (Shenwan) sector increased by 4.08%, ranking 20th among the 28 first-class industries of Shenwan. As of December 8, 2021, the average PE (TTM) of the pharmaceutical and biological sector was 33.28 times, in the quantile of 25.20% since 2011.
DRG / Dip payment reform is accelerated, and products and services with cost reduction and efficiency increase are expected to benefit. In November, the National Medical Insurance Bureau issued the three-year action plan for DRG / Dip payment reform, marking that China’s DRG payment reform began to enter the stage of nationwide promotion. Referring to the results of DRG payment in Europe, America and some leading regions in China, The impact of DRG payment reform on the pharmaceutical industry mainly includes: (1) the income growth of medical institutions has slowed down, the income structure has been greatly adjusted, the proportion of drug and consumables income has decreased, and the proportion of medical service income has increased; (2) Medical institutions are more willing to reduce costs and increase efficiency, and the process of import substitution of domestic equipment, testing outsourcing and prescription outflow is accelerated. In general, products and services with improved efficiency and cost control will benefit.
In 2021, the medical insurance negotiation will be implemented, which will benefit high-quality innovative pharmaceutical enterprises. On December 3, the National Medical Insurance Administration officially released the 2021 version of the catalogue of Medicare drugs. In this medical insurance negotiation, 67 of the 85 exclusive drugs outside the catalogue were negotiated, with a success rate of 78.82% and an average price reduction of 61.71%, which was in line with expectations. The inclusion of 7 rare drugs into health care is expected to stimulate the enthusiasm of local innovative pharmaceutical companies in the field of rare diseases. In addition, innovative drugs are expected to achieve rapid volume after being incorporated into medical insurance, which will help pharmaceutical enterprises focus more on drug R & D and benefit high-quality innovative pharmaceutical enterprises.
Investment suggestion: maintain the “leading market” rating of the pharmaceutical and biological sector, It is suggested to pay attention to: (1) innovative pharmaceutical machinery and its industrial chain enterprises, such as Jiangsu Hengrui Medicine Co.Ltd(600276) (600276. SH), Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) (300760. SZ), Wuxi Apptec Co.Ltd(603259) (603259. SH), Chongqing Zhifei Biological Products Co.Ltd(300122) (300122. SZ). (2) medical service enterprises that develop in dislocation with public hospitals and benefit from consumption stratification and upgrading, such as Aier Eye Hospital Group Co.Ltd(300015) (300015. SZ), Topchoice Medical Co.Inc(600763) (600763. SH), Guangzhou Kingmed Diagnostics Group Co.Ltd(603882) (603882. SH), etc. (3) Leading enterprises in some subdivided fields, such as retail pharmacy leader Yifeng Pharmacy Chain Co.Ltd(603939) (603939. SH), blood products leader Beijing Tiantan Biological Products Corporation Limited(600161) (600161. SH), etc.
Risk warning: the price decline of consumables and drugs exceeds the expected risk; Failure risk of innovative drug research and development; Industry policy risk; Risk of intensified industry competition; Covid-19 epidemic recurrence risk.
