Ping An View:
Industry perspective: the government work report plans the focus of the pharmaceutical industry in 2022, focusing on the release of annual report performance in the short term. On March 5, the fifth session of the 13th National People’s Congress opened. Premier Li Keqiang made a government work report, which mentioned the priorities of the pharmaceutical industry in 2022.
1) medical insurance payment will be further improved and remote payment will be further guaranteed: medical and health service capacity will be improved, and the per capita financial subsidy standard for residents’ medical insurance and basic public health services will be increased by 30 yuan and 5 yuan respectively, so as to promote the provincial overall planning of basic medical insurance; More outpatient expenses such as common diseases will be included in the scope of medical insurance reimbursement, and the inter provincial direct settlement rate of hospitalization expenses will reach 60%; Strengthen the guarantee of drug use for rare diseases; Improve the direct settlement method for cross provincial and non local medical treatment, and realize the basic unification of the scope of medical insurance drugs throughout the country;
2) strengthen medical service capacity and make up for service shortcomings: focus on promoting hierarchical diagnosis and treatment and optimizing medical order to improve the ability of disease prevention and treatment at the grass-roots level; Standardize the charging services of medical institutions and make up for the shortcomings of maternal and child Pediatrics, mental health, geriatrics and other services; Gradually improve the level of cardiovascular and cerebrovascular disease prevention and treatment services.
3) further support the development of traditional Chinese medicine industry: support the revitalization and development of traditional Chinese medicine and promote the comprehensive reform of traditional Chinese medicine;
4) centralized purchase and normalization to ensure the supply of drugs and consumables: promote the centralized procurement of drugs and high-value medical consumables to ensure production and supply.
In this work report, we see that Medicare further adheres to the principle of “ensuring basic and wide coverage”, increases the subsidy standard, and increases the drug guarantee for chronic and rare diseases. China’s medical industry will further improve its medical service capacity, make up for weak weaknesses, explore reasonable payment methods and strengthen graded diagnosis and treatment. At the same time, the focus of work in 2022 will further ensure and support the development of traditional Chinese medicine industry. The normalization of centralized procurement will further highlight the investment value of pharmaceutical enterprises and medical consumables enterprises with real innovation ability.
As of March 4, 2022, the valuation of the pharmaceutical sector was 28.87 times (TTM, excluding negative values in the overall method). For all A-Shares (excluding finance), the valuation premium rate was 33.60%, which was 56.68% lower than the historical average. Recently, the A-share market fluctuated greatly, and the biomedical sector was also impacted. After early adjustment, the valuation of some sectors is too low. In March, the annual report quarter of 2021 is officially opened. At this time point, we suggest paying attention to enterprises with strong certainty of performance growth or significant improvement in performance month on month growth. Among them, the CXO sector with large decline in the early stage has strong performance certainty, and still has good growth in the future. Some high-quality enterprises in the traditional Chinese medicine sector have stable fundamentals and high valuation cost performance. At this point, it is still worthy of attention.
Investment strategy: Main Line 1: create Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) chain, including innovative drugs (machinery) and CXO. CDE’s new deal accelerates the evolution of China’s innovation “new ecology”, and the industry is facing “re differentiation”. We should pay attention to companies with clinical Oriented Innovation Ability and license out ability. It is suggested to pay attention to: Jiangsu Hengrui Medicine Co.Ltd(600276) , Baiji Shenzhou, Xinda biology, Corning Jerry, Shenzhen Chipscreen Biosciences Co.Ltd(688321) . In terms of CXO, we prefer cdmo and macromolecular CXO track in combination with valuation, policy and capital factors. It is suggested to pay attention to: Asymchem Laboratories (Tianjin) Co.Ltd(002821) , Porton Pharma Solutions Ltd(300363) , Pharmablock Sciences (Nanjing) Inc(300725) . Main line 2: products go to sea. The overseas market is a huge incremental market, there is a high threshold for the export of preparations, and the export of medical devices to the sea has also become a new growth driving force of the industry. It is suggested to pay attention to: Nanjing King-Friend Biochemical Pharmaceutical Co.Ltd(603707) , Hainan Poly Pharm.Co.Ltd(300630) , Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) , etc. Main line 3: consumer healthcare. With the growth of per capita disposable income, the demand for consumer medical care continues to increase. At the same time, consumer medical products are self funded products, with independent pricing power and immunization fee control policy. It is suggested to pay attention to: Topchoice Medical Co.Inc(600763) , Aier Eye Hospital Group Co.Ltd(300015) , Yantai Zhenghai Bio-Tech Co.Ltd(300653) , etc. Main line 4: the traditional Chinese medicine sector has been in the adjustment stage for a long time, and the overall valuation is low. Enterprises with steady performance growth in the sector have high cost performance and prominent layout advantages. Moreover, the export of traditional Chinese medicine products is small and the internal circulation attribute is obvious, so it will not be disturbed by foreign policies towards China. Some traditional Chinese medicine products are more inclined to health care products with stronger consumption attributes, which can be benchmarked with some food enterprises. On this premise, we believe that the subject matter with sufficient adjustment and low valuation deserves special attention. Among them, enterprises with a larger proportion of OTC drugs in the fee control policy of immune medical insurance, better room for price increase of products and a smaller proportion of traditional Chinese medicine injections have greater flexibility. It is suggested to pay attention to: Henan Lingrui Pharmaceutical Co.Ltd(600285) , Kpc Pharmaceuticals Inc(600422) , etc. In addition to the above three main lines, there are also some other tracks with high prosperity and high barriers: including characteristic API and nuclear medicine. 35.
Industry highlights: 1) the effectiveness of Novavax covid-19 vaccine nvx-cov2373 in phase 3 clinical trial in the UK was 82.5%; 2) Honghanlin rituximab injection combined with methotrexate for RA indications was approved for marketing; 3) Legendary biology / Johnson & Johnson multiple myeloma drug carvykti (sidakiolensea) was approved in the United States; 4) FDA granted Pfizer rsvpref breakthrough therapy.
Market review: the A-share pharmaceutical sector rose 0.18% last week, while the Shanghai and Shenzhen 300 index fell 1.68% in the same period. The pharmaceutical industry ranked eighth among 28 industries. Last week, the H-share pharmaceutical sector fell 6.21%, the Hang Seng Composite Index fell 4.01% in the same period, and the pharmaceutical industry ranked 10th among 11 industries.
Risk tips: 1) policy risk: policies such as medical insurance fee control and drug price reduction have a great negative impact on the industry; 2) R & D risk: pharmaceutical R & D investment is large and difficult, and there is the possibility of R & D failure or slow progress; 3) Corporate risk: the company’s operation does not meet expectations.
