Pharmaceutical and biological industry: Wuxi Apptec Co.Ltd(603259) released monthly operation data, and the industry fundamentals are stable

Events

On March 9, Wuxi Apptec Co.Ltd(603259) released monthly operating data, indicating that from January 2022 to February 2022, the year-on-year growth rate of orders and revenue of the company exceeded 65%, reaching a record high. Meanwhile, Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) also disclosed the monthly operating data. From January to February, the company’s revenue and net profit increased by 16% and 20% year-on-year respectively.

On August 8, Sichuan Provincial Health Commission replied to netizens’ questions on the “leadership message board”, saying that it would learn from the practices of some provinces and cities and actively include common assisted reproductive technology projects into the scope of medical insurance reimbursement.

Key investment points

Leading companies disclose monthly operating data, and the industry fundamentals are still stable Wuxi Apptec Co.Ltd(603259) integrated crdmo (contract research, development and production) and ctdmo (contract testing, R & D and production) business models continue to make efforts. The company expects the revenue growth in the first quarter to reach 65% to 68% year-on-year, and the annual revenue growth in 2022 is expected to reach 65% to 70% year-on-year. Meanwhile, due to the industrial chain transfer of covid-19 small molecule drugs, Chinese cdmo enterprises will benefit from it and increase certainty and flexibility for short-term performance. From a fundamental point of view, in 2021, the global financing amount of the medical and health industry exceeded 120 billion US dollars, the highest over the years. Recently, the Hong Kong stock market generally performed poorly, the 18a issuance was cold, and the unprofitable biotechnology enterprises generally made significant adjustments, which made investors worried about the prosperity of CXO track. We believe that some cdmo leading enterprises can be selected in the future. The projects they master are more high-quality and mature, and the order stability is strong. With covid-19 small molecule drug catalysis, they are expected to take the lead in recovery.

In the direction of some policy incentives, we can also focus on them in the future. Previously, the Beijing Medical Insurance Bureau announced that 16 assisted reproductive technology projects involving a wide population, necessary diagnosis and treatment, mature technology, safety and reliability, such as intrauterine insemination, embryo transfer and sperm optimal treatment, which are commonly used in outpatient clinics, were included in the category a reimbursement scope of medical insurance, which is the first time that assisted reproductive projects have been included in the reimbursement scope of medical insurance. We believe that due to the decline of China’s fertility rate, the government is expected to further introduce policies to stimulate fertility, especially to encourage elderly couples of childbearing age, and the elderly have a stronger demand for assisted reproduction.

The overall adjustment of the pharmaceutical industry is relatively sufficient, and the leading cost performance is obvious. Since this year, the pharmaceutical biological index (Shenwan) has fallen by 19.33%, ranking 27 among 31 Shenwan level industries. Since March, it has fallen by 8.78%, and the industrial risks have been further released. At present, the overall valuation of the industry index is 27.01, which is at the quantile of 2.73% in five years. From the position data of public funds, the allocation position of public funds to the pharmaceutical industry has also decreased to a low point in recent years, and the congestion has been greatly alleviated. We believe that the pharmaceutical industry is at the bottom of the long-term layout.

Investment suggestion: the valuation of the pharmaceutical industry has been fully adjusted, but it is internally facing the pressure of medical insurance fee control and centralized mining and expansion. Externally, facing the possible blockade of the biotechnology industry in the United States, we believe that the industry will show some differentiation in the future, focusing on consumer medicine, cdmo, upstream preparation equipment and other industries.

Risk factors: product sales are less than expected; Policy changes; Business risk

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