Key investment points:
The bio pharmaceutical industry is booming, opening the ceiling for the growth of domestic equipment and consumables enterprises. China's scale reached 345.7 billion yuan in 2020 and maintained a rapid growth of 19-20% from 2016 to 2019. The rise of new therapies such as mRNA vaccine, cell therapy and gene therapy has further brought about the expansion of the industry. After 2018, the number of biopharmaceutical products under research in China has entered the stage of blowout development. The number of phase 3 and commercialized projects has increased significantly, and the corresponding relevant fermentation capacity has increased significantly. From 2017 to 2020, the global production capacity of biological drugs increased from 167194 million liters to 173809 million liters, an increase of 3.96%. Over the same period, China's biological drug production capacity increased from 868200 liters to 1848600 liters, doubling the production capacity increment, contributing 70% of the global production capacity increment during the period, driving a significant increase in the demand for corresponding equipment consumables, cultivating domestic biological equipment consumables products, and realizing from scratch.
Fermentation production brings new demand for equipment and consumables, and China's production capacity breeds a 100 billion market. The production process of small molecule drugs is more similar to the chemical production mode. The intermediate process can be disassembled and multiple intermediates are generated in the middle. Biological drugs are produced by fermentation. The whole process is continuous, and the equipment and consumables used in the process are completely different. The production process involves three links: upstream fermentation, downstream purification and preparation filling, including bioreactor, chromatography system, filtration system and other equipment, as well as culture medium, disposable reaction bag, filtration consumables, chromatography filler and other consumables. According to estimates, the market space of China's biopharmaceutical industry chain is 70.1 billion yuan, with a total of 38.3 billion yuan for the four major consumables, including 75 disposable bags, 17.2 billion medium, 16 filter consumables and 12 billion filler.
Covid-19 epidemic has created an opportunity for domestic substitution. In the long run, China is expected to produce platform enterprises. Cytiva, an overseas leading enterprise, has gone deep into the filler field. After many mergers and acquisitions, cytiva has improved its product matrix and created a closed-loop product. After being incorporated into Danaher, cytiva has formed a synergy with Pall and further enhanced its global competitiveness. With the ability of disposable bioreactor and filtration consumables, sedolis has gradually enhanced its ability in the fields of culture medium and moved forward to a platform company. The performance of Chinese products can not be compared with that of foreign products. During the epidemic period, the global supply chain was tight, coupled with the run effect of covid-19 vaccine, the supply cycle of import manufacturers was prolonged, which created an opportunity for domestic substitution, improved customer recognition and opened the process of domestic substitution.
The product capacity is gradually improved, and the domestic penetration rate is expected to be gradually improved. In the long run, China is expected to have a platform enterprise. During 20172020, China built large-scale new fermentation capacity, attracted global equipment and consumables enterprises to focus on China, cultivated localized talents, and helped Chinese enterprises realize the transformation of products from scratch; During the epidemic period, driven by the global supply chain tension and supply chain security, the exposure of domestic products increased, providing an opportunity for domestic substitution; With the continuous improvement of the penetration rate of domestic enterprises, it is expected to gradually improve the quality of domestic products in the next few years.
Investment strategy: in the long run, China's product capacity will gradually develop and continue to deepen the product capacity of equipment and consumables, which is expected to breed platform enterprises. In the medium and short term, the base effect of covid-19 vaccine has not disturbed the order trend of listed companies. The enterprise orders are in good condition, the new demand of the industry is enough to drive the growth in the next few years, and the prosperity of the industry can be maintained. On the investment target, it is suggested to pay attention to Tofflon Science And Technology Group Co.Ltd(300171) , Truking Technology Limited(300358) , Sensong international, etc. with the production capacity of small molecule pharmaceutical equipment and the layout of biological drug production equipment and consumables. At the same time, breakthroughs have been made in the field of chromatographic fillers, and protein A fillers have Suzhou Nanomicro Technology Co.Ltd(688690) and other commercial applications.
Risk tip: the industry demand is less than expected; Risk of decreasing demand for consumables caused by technical iteration; The development of listed companies is less than expected.
