Market performance
The pharmaceutical and biological sector closed down 0.78% for the whole week, ranking seventh among the 28 sub industries of Shenwan. Since the beginning of 2021, the pharmaceutical and biological sector has increased by 5.4%, ranking 18th in 28 primary sub industries. This week, the six pharmaceutical sub sectors were significantly differentiated, of which the medical service sector suffered the largest decline, with a decline of 5.66%; The traditional Chinese medicine sector rose the most, up 9.09%.
Industry perspective
This week's key events include the publication of the document on centralized volume procurement of Chinese patent medicines such as Guangdong alliance Qingkailing and the publicity of the proposed winning results of centralized volume procurement of inter provincial alliance of Chinese patent medicines.
We believe that the rise of traditional Chinese medicine is a strong rebound catalyzed by multiple factors such as performance, policy and innovation. From the perspective of performance, by the third quarter of 2021, the operating revenue of traditional Chinese medicine sector had reached 248.85 billion yuan, a year-on-year increase of 11.31%; The net profit attributable to the parent company was 26.26 billion yuan, a year-on-year increase of 20.79%; From the perspective of policy, since 2021, the state has intensively issued many heavy documents, and the support for traditional Chinese medicine has been significantly strengthened; From the perspective of innovation, in 2021, the State Food and Drug Administration approved a total of 11 new traditional Chinese medicine drugs to be listed, becoming the year with the most new traditional Chinese medicine approved in recent five years.
Despite the recent good performance of the traditional Chinese medicine sector, the state is gradually strengthening the regulation of the traditional Chinese medicine sector. The purchase of traditional Chinese medicine with quantity directly refers to the varieties of traditional Chinese patent medicines with large dosage and high amount. Therefore, we believe that the state is guiding the development of traditional Chinese medicine industry from two aspects: on the one hand, strengthen the support of traditional Chinese medicine industry from the top-level policy design; On the other hand, through centralized procurement, Chinese patent medicine enterprises are forced to continuously improve quality and upgrade, transition and innovation, and further give play to the "power of Chinese patent medicine" on the international stage. Our views on this week's segment are as follows:
(1) Innovative drugs: since 2015, policies such as drug review reform, MAH, priority review and approval and medical insurance payment policies have gradually improved the accessibility of innovative drugs. First, we emphasize the focus on enterprises in transition and innovation, which have the characteristics of low valuation, stable profit and top R & D. It is suggested to focus on Huadong Medicine Co.Ltd(000963) , Sichuan Kelun Pharmaceutical Co.Ltd(002422) , Zhejiang Medicine Co.Ltd(600216) Wait. Second, investors are suggested to pay attention to FIC enterprises in research with high R & D investment and strong innovation ability, and it is suggested to pay attention to Shanghai Junshi Biosciences Co.Ltd(688180) , Cinda biology, Baiji Shenzhou, etc.
(2) Traditional Chinese medicine: driven by multiple factors such as performance, policy and innovation, the traditional Chinese medicine sector has rebounded strongly recently. However, the state is gradually strengthening the regulation of the traditional Chinese medicine sector, and the procurement of traditional Chinese medicine with volume is directed to the varieties of traditional Chinese medicine with large consumption and high amount. For, we suggest investors to pay attention to traditional Chinese medicine enterprises with exclusive varieties and layout in the international market, such as Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) , Yunnan Baiyao Group Co.Ltd(000538) Dong-E-E-Jiao Co.Ltd(000423) , Shijiazhuang Yiling Pharmaceutical Co.Ltd(002603) etc.
(3) Vaccine: Omicron's roll has brought new challenges to epidemic prevention all over the world. We believe that covid-19 vaccine will build an "epidemic prevention barrier" together with drugs. Considering that the country has significantly strengthened the third vaccination recently, investors are advised to pay attention to covid-19 pneumonia epidemic prevention targets, such as Chongqing Zhifei Biological Products Co.Ltd(300122) , Cansino Biologics Inc(688185) , Shenzhen Kangtai Biological Products Co.Ltd(300601) .
Risk statement
Policy implementation is not as expected, drug price reduction risk and drug R & D risk
