Market performance
Last week, the Shanghai and Shenzhen 300 index closed up 0.39%, and the performance of social services, national defense and military industry, comprehensive and other sectors was eye-catching. The pharmaceutical and biological sector closed up 3.16% for the whole week, ranking 10th among the 28 sub industries of Shenwan. The six pharmaceutical sub sectors ushered in a general rise, of which the pharmaceutical business increased the most, up 7.66%; Biological products sector rose slightly, up 0.16%.
Industry perspective
Key events this week include the addition of a drug import port by the General Administration of Customs of nmpa in Zhongshan City and the formal implementation of the new medical insurance catalogue.
On December 30, the General Administration of Customs of nmpa announced that according to the drug administration law of the people’s Republic of China and with the approval of the State Council, it was agreed to add Zhongshan port shore of Zhongshan City as the drug import port. We believe that the addition of a drug import port in Zhongshan will promote Zhongshan to give priority to the core key elements of the development technology and products of the biomedical industry, shorten the drug logistics cycle in Zhongshan, reduce the drug import cost, enhance the enthusiasm of pharmaceutical enterprises in Zhongshan to import drugs, and suggest investors to pay attention to the investment opportunities of pharmaceutical and biological enterprises in Zhongshan.
On January 1, 2022, the new medical insurance catalogue in 2021 was officially implemented. In the adjustment of the medical insurance catalogue in 2021, the average price reduction of 67 drugs entered through negotiation was 61.7%, the price reduction of tumor drugs was 64.88%, and the maximum price reduction was 93.97%. As an important catalyst for drug volume, medical insurance negotiation is an important link connecting the R & D and commercialization of innovative drugs. Although the cost of being included in medical insurance is to make a substantial profit, in the volume price game, drugs can often enjoy the bonus of drugs entering the hospital and the increase in the number of new patients, and finally bring incremental contributions to varieties by exchanging volume for price. 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. In this regard, first, we emphasize enterprises that pay attention to transition and innovation. Such enterprises have the characteristics of low valuation, stable profit and top R & D. It is recommended to pay attention to Huadong Medicine Co.Ltd(000963) , Sichuan Kelun Pharmaceutical Co.Ltd(002422) , Zhejiang Medicine Co.Ltd(600216) , etc. 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) Innovation Medical Management Co.Ltd(002173) devices: the continuous promotion of consumption upgrading on the demand side drives the rapid expansion and development of the medical device industry. Independent research and development and import substitution accelerate the rise of domestic products and break the monopoly position of imported enterprises in the high-end field. We recommend three main logical lines: (1) upstream equipment and consumables enterprises with good competition pattern, such as Tofflon Science And Technology Group Co.Ltd(300171) , Truking Technology Limited(300358) ; (2) The characteristic enterprises with strong innovation strength and product differentiation in the segment track are expected to enjoy innovation dividends for a long time, such as Micro-Tech (Nanjing) Co.Ltd(688029) , Sansure Biotech Inc(688289) ; (3) Layout of downstream equipment leaders in overseas markets, such as Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) .
(3) Traditional Chinese medicine: catalyzed 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 volume procurement directly refers to the varieties of Chinese patent medicines with large consumption and high amount. It is expected that the state’s price regulation of Chinese patent medicines will be gradually strengthened in the future. For, we suggest investors 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.
(4) CXO industry: in recent years, thanks to the transfer of global industrial chain, bonus of Chinese engineers, cost advantage, acceleration of drug examination reform and upgrading of drug innovation, China’s CXO industry has shown an ultra-high prosperity. For the CXO sector, it is recommended to focus on five main investment lines, including the number of enterprise orders, the number of overseas customers, enterprise core capacity, enterprise technical barriers and enterprise transformation expectations. However, considering the general rise of CXO plate in 2020 and 2021, the current plate valuation is high, so we must be vigilant against the correction and differentiation of CXO plate in the future. It is recommended to pay attention to Asymchem Laboratories (Tianjin) Co.Ltd(002821) , Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) , Pharmaron Beijing Co.Ltd(300759) , etc.
(5) Vaccine: Omicron mat 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) .
News comments
(1) The Joint Conference Office of centralized procurement of drugs and medical consumables in Jiangxi Province issued the publicity on the scores of economic and technical bid, commercial bid and the results of comprehensive evaluation of drug with quantity procurement by the alliance of Jiangxi, Guangdong, Henan and Hubei provinces.
Comments: Jiangxi took the lead in the centralized drug purchase of the four provincial alliance, including 10 major varieties, including oxacillin, propofol, nalmefene, etc. The selected enterprises involve Suzhou Erye pharmaceutical, Guangdong Jincheng Jinsu Pharmaceutical Co., Ltd., Ruiyang Pharmaceutical Co., Ltd., Shandong Luoxin Pharmaceuticals Group Stock Co.Ltd(002793) , Beijing Sl Pharmaceutical Co.Ltd(002038) and many other well-known pharmaceutical enterprises.
From the perspective of trend, the number of provincial alliance procurement with volume shows an upward trend this year, and the procurement varieties extend from chemical medicine to Chinese patent medicine. Compared with the volume procurement in a single region, the scale of alliance procurement is larger. Under the background of “price for volume”, alliance procurement makes enterprises more motivated to reduce prices. Therefore, investors are advised to be vigilant against the investment risk caused by excessive price reduction of drugs.
(2) On the evening of December 27, the office of the leading group for centralized procurement of inter provincial alliance of Chinese patent medicines issued the announcement on centralized procurement of inter provincial alliance of Chinese patent medicines (No. 4), and the selection results of centralized procurement of inter provincial alliance of Chinese patent medicines in Hubei Province were officially announced. 182 products from 157 enterprises participated in the quotation of Hubei 19 provincial Chinese patent medicine alliance, with a procurement scale of nearly 10 billion yuan. 97 enterprises and 111 products were selected, with a selection rate of 62%. The average price of the selected products decreased by 42.27% and the maximum decreased by 82.63%.
Comments: 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.
Risk statement
Policy implementation is not as expected, drug price reduction risk and drug R & D risk
